BP has paid $ 32 billion in cleanup costs and also lost $ 17 billion in the second quarter, so it plans on getting a $ 10 billion tax credit. Cash till payday advanced like this are given to companies that are in a lot of trouble. The legality of the BP tax credit is under debate. The government is going to end up paying more for the cleanup of the oil spill than they intended with tax credits like this. Source for this article – BP planning to take a $ 10 billion tax credit by Personal Money Store.
Losses that spurred the BP tax credit
Tax credits like these are available to all companies that are in some severe financial trouble. In just the second quarter of this year, BP has reported losses of over $ 17 billion. Most of this loss is from the falling prices of BP stock. BP is quickly losing profit although borrowing money hasn’t been a question so far.
Effect of the BP tax credit
The government will end up paying half the expenditures for the oil spill with a $ 10 billion tax credit being taken by BP. BP said they’d pay at least $ 20 billion for the oil spill. The government will almost be paying half of cleanup costs when considering $ 10 billion is half that account.
Those against the BP tax credit
Press Secretary Robert Gibbs, in a press briefing, commented on the BP tax credit by saying “I do not think anybody would prefer that [BP] do that.”. The only even slightly comparable situation is where Goldman Sachs agreed to not write off the $ 535 million penalty paid to the SEC. No other company has ever tried applying for loans till payday and then trying to write those loans off like this.
Arguments for the BP tax credit
There might actually be a reason to give BP this tax credit. All cleanup bills for the cleanup will be paid by BP. Payday cash will be the only BP can pay for the cleanup unless they find a way to stay solvent. If BP were to the point that the $ 10 billion tax credit made the difference between staying in business and continuing to make enough money to pay for cleanup, it may be defensible. The IRS will be the deciding factor on whether BP really needs the money or not.
Further reading
Daily Finance
dailyfinance.com/story/taxes/bp-claiming-9-9b-tax-credit-on-gulf-clean-up-costs/19571518/
Market Watch
miamiherald.com/2010/07/28/1749344/bp-eyes-10b-tax-credit-over-gulf.html#ixzz0uyReljAI
