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house Bill H.R. 6658

Should Oil Companies Be Prohibited From Getting Tax Deductions for Spill Settlements?

Argument in favor

Corporations shouldn’t be allowed to pass the costs of environmental disasters on to taxpayers by deducting such costs from their tax bills. Taxpayers already pay much of the cost to clean up oil spills — they shouldn’t pay again by subsidizing corporate taxes for companies responsible for these environmental disasters.

Deirdre 's Opinion
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10/17/2018
Why are they getting our tax dollars when they created the mess. They need to pay for their mess
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Roger's Opinion
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10/17/2018
Corporations should absolutely be held financially responsible for their actions... especially in regard to environmental disasters.
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Marc's Opinion
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10/17/2018
Holy crap, I had no idea they benefitted from a spill
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Argument opposed

The IRS and agencies that settle with companies already have the authority to determine what is and isn’t tax-deductible in settlements, so there’s no need for this legislation. It would be simpler to require the IRS and agencies to clearly state tax-deductible versus non-tax-deductible parts of settlements when they’re made with corporations.

Eugene's Opinion
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10/17/2018
The bill has some shortcomings, as I understand the bill. First, it only applies to water spills. Those types make the news and garner public attention, but what about the land spills from rail transport, drilling, oil pipelines, etc?? Just keep it business as usual? Second, the bill, as I see it, is not just for the oil companies, but also applies to persons that are connected to the company. So, if a person simply own stock in Risky Oil Venture, and they have a spill, how is that individual being protected? Third, it applies to spills in US navigable waters. I’ve looked it up, the BP spill was 40 miles from the coast, outside of our territorial waters , so initial spill was not applicable as the bill is written. Granted the oil did move to US waters, but the spill itself may have been in international waters. I do commend the bill for being written broader than just addressing oil spills. Nevertheless, the bill needs to be amended to fix its problems before it can be seriously considered.
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Quentin's Opinion
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10/17/2018
If you provide a deduction percent for preparedness or mitigation measures; then we are properly focusing or leading the shape of their vision or goals. If it’s more profitable to prevent accidents then to clean them up, businesses will focus on the profit, because that is why they went into business.
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Fg's Opinion
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10/17/2018
Business expenses are business expenses why 1) why call it a tax reduction. 2) why signal out the oil industry Furthermore oil is the only mineral mined from the ground which is taxed in the first place. Talk about discrimination
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Ways and Means
    IntroducedAugust 7th, 2018

What is House Bill H.R. 6658?

This bill — known as the Offending Oil Polluters Act — would amend the Internal Revenue Code to deny certain tax credits or deductions related to business expenses for settlements, legal fees, penalties, or restitution paid by an “offending oil polluter”. Offending oil polluter would be defined as any person or corporation responsible for a vessel or facility from which oil or a hazardous substance is discharged, as well as any person who is a member of the same expanded affiliated group as the offending oil polluter.

Specifically, it would deny deductions or credits for:

  • Amounts paid or incurred in connection with a discharge of oil or a hazardous substance;

  • Attorney fees and court costs in connection with legal actions involving such discharge;

  • As payment or restitution for oil or hazardous substance discharge; and

  • Costs or penalties certified in a settlement by a federal court, or required by federal law or regulations.

The Treasury Dept. would be required to report to Congress on: 1) the revenue loss as a result of tax deductions allowed for cleaning up oil discharged after April 19, 2010, and 2) the amount of revenue savings resulting from this bill.

Impact

Oil companies; polluters; Treasury Department; and the Internal Revenue Code.

Cost of House Bill H.R. 6658

A CBO cost estimate is unavailable.

More Information

In-Depth: Rep. Eliot Engel (D-NY) introduced this bill to prevent companies from deducting losses that result from spilling oil or hazardous substances:

“BP made an absolute mess in the Gulf, and the idea that they can somehow pawn the bill off on the American taxpayer is disgusting. Those who do significant harm to our environment need to be held accountable to the public for their actions, not the other way around. The current laws provide too many escape hatches for polluters to use in order to avoid paying for the damage they’ve done. This needs to end, which is why we are introducing this piece of legislation to protect the American taxpayer from financial liability.”

Robert Willens, a tax and accounting expert, calls the current system in which corporations frequently deduct settlement costs and other expenses associated with oil spills and other forms of corporate wrongdoing, “a little misleading,” as “in reality [these settlements are] not costing (companies) the headline amount.

Ryan Pierannunzi, a tax and budget expert with U.S. Public Interest Research Group (U.S. PIRG) adds that there are budgetary consequences, as well:

“When corporations treat the financial payments they must make as a result of their wrongdoing as ordinary costs of doing business, they force taxpayers to pick up the tab. While debate rages over how to address our deficit, we can ill-afford to subsidize the misdeeds of corporations like BP and UBS… The tax treatment of settlements has a very real impact on peoples’ lives. Every dollar that doesn’t get paid to the Treasury means another dollar in debt, cutbacks, or higher taxes that the rest of us must bear.”

This legislation has been introduced in the House with the support of one cosponsor, who is also a Democrat.


Of NoteCongressional interest in oil spill legislation has been on the upswing in the wake of recent oil spills, most notably BP’s Deepwater Horizon spill in the Gulf of Mexico.

Currently, federal tax law prevents companies from deducting penalties paid for breaking the law from their corporate taxes. But money classified as something other than a penalty — including restitution, reimbursement, or compensatory payments to damaged parties — is deductible as an ordinary cost of doing business. As an example of this, 75% of the $20.8 billion settlement BP reached with the Justice Department for damages caused by the 2010 Deepwater Horizon spill was tax-deductible, meaning about $5 billion was deducted from BP’s tax bill.

Additionally, unless the Justice Dept. clearly spells out that settlements like BP’s cannot be deducted, companies that pay such fines and penalties typically deduct them as ordinary business expenses. According to the Government Accountability Office (GAO), corporations often deduct settlement payments even when regulations suggest they shouldn’t, and the issue isn’t pursued by government agencies because they believe tax issues surrounding settlements should be left to the IRS. Meanwhile, the IRS has stated that it’s up to government agencies to determine whether a settlement is or isn’t tax-deductible. This confusion has created a regulatory no-man’s-land where corporations can saddle American taxpayers with part of the costs of their wrongdoing.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / michaelbwatkins)

AKA

Offending Oil Polluters Act

Official Title

To amend the Internal Revenue Code of 1986 to deny certain tax benefits to persons responsible for the discharge of oil or other hazardous substances into navigable waters of the United States.

    Why are they getting our tax dollars when they created the mess. They need to pay for their mess
    Like (183)
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    The bill has some shortcomings, as I understand the bill. First, it only applies to water spills. Those types make the news and garner public attention, but what about the land spills from rail transport, drilling, oil pipelines, etc?? Just keep it business as usual? Second, the bill, as I see it, is not just for the oil companies, but also applies to persons that are connected to the company. So, if a person simply own stock in Risky Oil Venture, and they have a spill, how is that individual being protected? Third, it applies to spills in US navigable waters. I’ve looked it up, the BP spill was 40 miles from the coast, outside of our territorial waters , so initial spill was not applicable as the bill is written. Granted the oil did move to US waters, but the spill itself may have been in international waters. I do commend the bill for being written broader than just addressing oil spills. Nevertheless, the bill needs to be amended to fix its problems before it can be seriously considered.
    Like (79)
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    Corporations should absolutely be held financially responsible for their actions... especially in regard to environmental disasters.
    Like (90)
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    Here’s an idea. Tax them at a higher rate based on their environmental and social performance. This might give them an incentive to behave better.
    Like (80)
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    Holy crap, I had no idea they benefitted from a spill
    Like (44)
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    Folks corporates / cartels / conglomerates get these benefits through corrupt politicians who YOU elect but legislate in their favor and against YOU! So think before you vote. Look at their performance. Educate yourselves. Ultimately YOU bear the responsibility AND will bear the burden!
    Like (34)
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    Corporations shouldn’t be able to pass the costs of their own failures on to taxpayers by deducting such costs from their tax bills. Just as my employer holds me accountable for my mistakes, corporations should have to pay the price of their own failures.
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    There should be no benefit for companies responsible for oil spills.
    Like (22)
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    Why be reimbursed/paid for your mistakes 🤷🏾‍♀️❓
    Like (12)
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    No tax breaks for polluters!
    Like (12)
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    Oil companies are never fined enough to make them work harder at preventing catastrophic spills. Not only should they be prevented from receiving tax deductions they should also be fined very heavily, so heavily in fact they will want to prevent oil spills from occuring in the first place.
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    North American citizens already have to pay for the mistakes of big oil companies by bearing the burden of their pollutants in our day-to-day activities. We shouldn't be fiscally burdened on top of it.
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    Yes. They’re responsible. They should pay the cost.
    Like (6)
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    Why shouldn’t they pay complete for their mistakes? No tax deduction
    Like (6)
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    Why should they get money back for fixing their mess.
    Like (5)
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    If you provide a deduction percent for preparedness or mitigation measures; then we are properly focusing or leading the shape of their vision or goals. If it’s more profitable to prevent accidents then to clean them up, businesses will focus on the profit, because that is why they went into business.
    Like (5)
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    Oil spills must not be a source of more government subsidies for oil companies. Make oil companies pay for their environmental disasters.
    Like (4)
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    That fact these companies not only aren't being punished for spills but are being actively rewarded for poisonous mistakes is horrifying to me. This needs to be amended immediately!
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    I am for this bill, rewarding a company for doing bad is just well, bad.
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    Of course.
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