BP spill payments are ‘tax-deductible’ for oil giant, Congress angry

Members of Congress sent a letter to Attorney General Loretta Lynch on Wednesday complaining that most of the government’s $20.8 billion oil spill settlement with BP is tax-deductible as a “business expense.”

Only $5.5 billion of the settlement announced in July and confirmed in October is considered a “fine,” making it exempt from tax breaks. The remaining $15.3 billion can be written off as a business expense under the tax code, potentially saving the oil giant more than $5 billion.

U.S. Rep. Raul Grijalva, D-Arizona, wrote the letter to Lynch urging the Justice Department to include language in the final agreement prohibiting BP from claiming any part of the settlement payments as tax-deductible business expenses. Grijalva said American taxpayers are having to essentially foot the bill to make up for tax revenue BP won’t have to pay if it’s allowed the deduction.

But experts, like David Uhlmann, a University of Michigan law professor and former chief of the Justice Department’s Environmental Law Section, told the Los Angeles Times in October that it’s normal for companies to claim environmental damage payments as business expenses.

BP agreed.

“BP follows the U.S. tax code in accounting for expenses related to the accident,” BP spokesman Geoff Morrell said in a statement sent to WWL-TV.

Beyond the fines for violations of the Clean Water Act, the rest of BP’s settlement payments were for damages, including $7.1 billion under the Natural Resources Damage Assessment. Grijalva contends those damages were caused by BP’s “gross negligence,” as ruled by U.S. District Judge Carl Barbier, and the oil giant should not be allowed to “game the tax code” to get a tax break for those costs.

No members of the Louisiana congressional delegation signed Grijalva’s letter.

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