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BP’s Allowable Tax Deduction…I’m scratching my head!

October 15, 2010

I think we all have an emotional reaction to what has happened in the Gulf re the oil spill. In my recent reading I came across this article that I’m still scratching my head about.

In an 8/11/2010 report titled “Tax Deductible Expenses: The BP Case,” the Congressional Research Service concluded that BP’s $10 billion reduction in tax liability for oil spill cleanup and related expenses (reported on its second quarter earnings statement) is the “result of standard business expense deductions and the general ability of taxpayers to claim federal funds for previously paid taxes when realizing a net operating loss (NOL) or carry the loss forward to offset future tax liabilities.”

 While it has been suggested that BP should not claim a tax deduction for oil spill cleanup and related expenses, the report notes that forgoing legitimate tax deductions could violate BP’s obligations to its shareholders.

How could something so wrong illicit a deduction and be okay? There are many, many, shareholders that had nothing to do with this…these results can impact their returns; does everyone get punished? Yep still scratching my head….

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