A U.S. senator from Florida called for a congressional inquiry into BP Plc’s plan to use losses from the Gulf of Mexico oil spill to reap $10 billion in tax benefits.
Senator Bill Nelson said Wednesday he wants a probe into whether BP, which announced Tuesday a $32 billion charge linked to the clean-up, will be deducting legal expenses related to nondeductible fines and penalties, and whether BP should deduct the full cost of its $20 billion clean-up fund.
Such costs and legal expenses are generally deductible, tax experts have said.
BP said on Tuesday it was abiding by all U.S. tax laws.
But Nelson urged a congressional leader to start a probe of the federal tax treatment of costs incurred by BP as a result of the worst oil spill in U.S. history.
“I was appalled upon learning that BP intends to shift nearly $10 billion of the costs related to the Gulf oil spill to the backs of American taxpayers, including the very taxpayers whose lives have been devastated by the spill,” Nelson, a Democratic member of the tax-writing Senate Finance Committee, wrote to the panel’s chairman, Max Baucus.
Fines and penalties imposed by the government are usually not tax deductible.
“Legal fees, and deductions for things to keep them in business are most likely deductible,” as well as other costs that can be labeled as business expenses, said Karen Brown, a tax law professor at George Washington University.
“In this case, there is a lot of public shame,” she said. “It would still be unusual for them to agree to (not take the tax benefit).”
Nelson mentioned the decision by Boeing Co., under pressure from lawmakers, to forgo tax benefits from a $615 million settlement of an ethics probe in 2006.
He also said that Goldman Sachs Group Inc. is electing not to deduct its $550 million settlement recently announced with the U.S. Securities and Exchange Commission.
Goldman, another company dogged with public relations woes, said in a regulatory filing that it had agreed with the SEC to not apply for a tax deduction or credit as part of its settlement.
(Reporting by Kim Dixon; editing by Andre Grenon and Tim Dobbyn)
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