The costs to the foreign oil giant BP for poisoning the Gulf of Mexico will lower the company’s taxes by billions of dollars, and BP “may be able to get a refund for taxes paid in previous years.” If BP’s cleanup costs reach $60 billion, as Merrill Lynch & Co. estimates, the company will be able to deduct almost $20 billion over time. In addition to billions in subsidies, the company has received $10 billion in federal contracts from the American taxpayer in the last ten years. BP spokesman Steve Rinehart told Bloomberg News that BP will deduct the $3.5 billion already spent on cleanup efforts and any future expenses:
Taxes are paid on profits. If our profits are down due to increased expenses such as the cost of responding to this spill, then it follows that our tax bills will be lower as a result.
BP cannot write off future government fines and penalties, including criminal fines, but it can write off punitive damages that are awarded by courts, according to a report by Center for American Progress tax expert Sima Gandhi. Over the opposition of 36 Republicans and Sen. Ben Nelson (D-NE), the Senate passed an amendment to the American Jobs and Closing Tax Loopholes Act of 2010 to eliminate the deduction for punitive damages in June, but the tax reform bill has since been filibustered three times.
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