Aggressive New Stance by Justice Department on BP Spill Offers Little-Known Benefit for Taxpayers

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Ryan Pierannunzi


“News of the court filing underscores another reason the federal government should stand firm in holding BP fully accountable.  If the Justice Department and BP settle out of court, the oil giant will seek to claim the financial settlement as a tax deduction as it has for other settlements and victim restitution funds. Jury awards and fines are not deductible. BP’s spill and its costs should not be regarded as normal costs of doing business and the Department of Justice should ensure they are not tax-deductible for the oil giant.”

“Congress decided that fines and jury awards should not be tax-deductible like other ordinary costs of doing business. Settlements provide a loophole that corporate wrongdoers have used to shift the cost they create onto the U.S. Treasury. Taxpayers end up picking up the tab.”

“BP has already claimed over $10 billion in tax benefits from restitution funds and other costs related to the spill. That’s not right.”

“When businesses are allowed to shirk financial responsibility for their own wrongdoing, it weakens deterrence to bad behavior in the future.  If BP takes the costs as a tax deduction, taxpayers end up making up for the lost revenue by paying more in taxes or seeing public services cut.  The American public loses twice when it must weather the consequences of corporate wrongdoing and then pick up the tax tab.”

“Even if BP ultimately ends up settling out of court, it is critical that the Justice Department holds firm in negotiating that BP will not be allowed to claim tax-deductibility for the settlement or legal fees it incurs as a result of this lawsuit.”

A 2012 report by U.S. PIRG on the tax deductibility of costs from corporate wrongdoing can be found here.