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. This credit is intended as a money now advance for companies in trouble. The BP tax credit legality is debated amongst many people nevertheless, and there is no answer yet. The government is going to end up paying more for the oil spill cleanup than they intended with tax credits like this. Resource for this article – BP preparing to take a $ 10 billion tax credit by Personal Money Store.
Qualifying BP for a tax credit
The way current IRS law is written, a company that is in severe financial trouble can take an extensive tax credit. This year’s second quarter cost BP $ 17 billion. BP stock falling is where most of this loss comes from. Though BP has not needed to borrow money fast to keep their operations going, they’re facing heavy losses.
BP tax credit effecting things
With a $ 10 billion tax credit, the government will end up paying of BP’s bill when it comes to the oil spill cleanup. BP agreed to put $ 20 billion in an escrow account to pay for oil spill cleanup costs. If the U.S. Government gets $ 10 billion less in taxes, though, then the net effect is halving BP’s cost of the cleanup.
Those against the BP tax credit
”I don’t think anybody would prefer that [BP] do that,” is what Press Secretary Robert Gibbs said about the BP tax credit. The SEC accepted $ 535 million from Goldman Sachs while Goldman Sachs tried to write it off on their taxes, which is the only thing this situation even compares to. It is an especially difficult situation because no other company has ever been in a situation like this — promising loans until payday to the U.S. Government, and then writing off those exact same loans.
Reasons BP deserves the tax credit
There might really be a reason to give BP this tax credit. BP has promised to pay all cleanup costs of the spill — which will prove to be costly. BP needs to stay solvent or else there can be no way for them to pay for the cleanup without instant cash loans. BP makes the argument that without the $ 10 billion, they cannot stay in business and won’t be able to pay for any of the cleanup. The IRS will determine if that is the case or not though.
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
