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Today's announcement by the U.S. Department of Justice of a proposed $20.8 billion out-of-court settlement with BP to resolve charges related to the Gulf Oil spill allows the corporation to write off $15.3 billion of the total payment as an ordinary cost of doing business tax deduction. The majority of the settlement is comprised of tax deductible natural resource damages payments, restoration, and reimbursement to government, with just $5.5 billion explicitly labeled a non-tax-deductible Clean Water Act penalty. This proposed settlement would allow BP to claim $5.35 billion as a tax windfall, significantly decreasing the public value of the agreement, and nearly offsetting the cost of the non-deductible penalty.
"BP was found to be grossly negligent in the Deepwater Horizon case, and yet the vast majority of what they are paying to make up for their gross negligence is legally considered just business as usual under the tax code unless the DOJ explicitly prohibits a write-off," said Michelle Surka, program associate with US Public Interest Research Group. "This not only sends the wrong message, but it also hurts taxpayers by forcing us to shoulder the burden of BP's tax windfall in the form of higher taxes, cuts to public programs, and more national debt."
Under U.S. tax code, restitution, reimbursement, and compensatory payments made to damaged parties in a settlement can be claimed as ordinary cost of doing business tax deductions unless otherwise stated in the agreement. Penalties, by contrast, are almost always considered tax deductible. In this proposed consent decree, the 80% of the civil penalty portion of the payment is, as per the RESTORE Act, to be spent on "environmental restoration, economic recovery projects, and tourism and seafood promotion in the five Gulf states". If the Department of Justice had not been explicit about deny deductions for this portion, BP could have interpreted that portion of the penalty as tax deductible restitution and compensation.
"Being explicit about denying deductions for the Clean Water Act penalty is certainly a step in the right direction, but it's a small one considering that the remaining $15.3 billion is wide open for deductions. The Department of Justice should go further and make sure that the entirety of the settlement is non-deductible, regardless of how the money is spent." said Surka.
BP has already written off the cost of its $32 billion cleanup effort after the spill, earning a tax windfall of $10 billion. Federal agencies did not attempt to prevent this giveback through the tax system. By contrast, the Department of Justice reached a criminal settlement with BP over its role in the deaths of 11 workers who were aboard the oil rig when it exploded. That $4 billion criminal settlement specified that it was not tax-deductible.
Along with the agreement with the Department of Justice, BP has also come to settlement agreements with the five Gulf states, worth $5.9 billion in total.
U.S. PIRG has called on the Department of Justice to deny tax deductions for BP's misconduct in the past. The proposed consent decree is now open to public comment for two months, and after that period the involved parties will decide whether to seek court approval of the consent decree.
You can read U.S. PIRG's research report on settlement deductions here (link).
U.S. PIRG, the federation of state Public Interest Research Groups (PIRGs), stands up to powerful special interests on behalf of the American public, working to win concrete results for our health and our well-being. With a strong network of researchers, advocates, organizers and students in state capitols across the country, we take on the special interests on issues, such as product safety,political corruption, prescription drugs and voting rights,where these interests stand in the way of reform and progress.
"House Republicans are trying to slash lifelines for middle-class families on behalf of rich special interests," said a White House spokesperson.
The White House on Saturday condemned a newly introduced Republican bill that would repeal the Inflation Reduction Act, a law that includes a number of changes aimed at lowering costs for Medicare recipients.
Unveiled Thursday by freshman Rep. Andy Ogles (R-Tenn.), the bill has 20 original co-sponsors and is endorsed by several right-wing groups, including the Koch-funded organization Americans for Prosperity.
The Biden White House argued that rolling back the Inflation Reduction Act, which also contains major climate investments, would represent "one of the biggest Medicare benefit cuts in American history" as well as a "handout to Big Pharma." According to Politico, which first reported the White House's response to the GOP bill, the administration is planning to release "state-by-state data indicating how this would affect constituents in different areas."
"House Republicans are trying to slash lifelines for middle-class families on behalf of rich special interests," White House spokesperson Andrew Bates said in a statement. "Who on earth thinks that welfare for Big Pharma is worth selling out over a million seniors in their home state?”
The Inflation Reduction Act authorized a $35-per-month cap on insulin copayments for Medicare recipients, as well as an annual $2,000 total limit on out-of-pocket drug costs.
The bill will also, among other long-overdue changes, allow Medicare to begin negotiating the prices of a subset of the most expensive prescription drugs directly with pharmaceutical companies, which fiercely opposed the law and are working with Republicans to sabotage it. The newly negotiated prices are set to take effect in 2026.
Ogles, whose two-page bill would eliminate the above reforms, repeatedly attacked Medicare, Medicaid, and other federal programs and protections during his 2022 campaign for the U.S. House.
\u201cNEW @Campbell4TN ad in TN-5: \u201cExtreme Andy Ogles in his own words \u2014 a SUPERCUT\u201d\n\nWatch @AndyOgles back a no exceptions abortion ban, cutting Medicare & Medicaid, eliminating Dept of Ed, impeaching Biden, deny the election was legit, etc\u2026 do better, TN-5.\nhttps://t.co/YhCRGXIPsU\u201d— The Tennessee Holler (@The Tennessee Holler) 1667748662
The White House's critique of Ogles' bill comes as Biden is facing pressure from advocates and physicians to cancel a Medicare privatization scheme that his administration inherited from its right-wing predecessor and rebranded.
It also comes as the White House is locked in a standoff with House Republicans over the debt ceiling. Republican lawmakers have pushed for deeply unpopular cuts to Medicare, Social Security, and other critical federal programs as a necessary condition for any deal to raise the country's borrowing limit and avert a catastrophic default.
"In less than a month, MAGA extremists have threatened to drive the economy into a recession by defaulting on our debt, promised to bring up a bill to impose a 30% national sales tax, and now have introduced legislation to repeal the Inflation Reduction Act," Patrick Gaspard, president and CEO of the Democratic Party-aligned Center for American Progress said in a statement. "This will cut taxes for corporations who earn billions in profit while empowering Big Pharma and Big Oil to continue ripping off the American people."
"It is vital that all Americans understand what is at risk if MAGA extremists succeed in passing their latest dangerous idea: millions of lost jobs, millions more without health insurance, and higher costs for lifesaving insulin, utilities, and more," Gaspard added.
One election expert called the decision an "electoral coup."
Guatemala's Supreme Electoral Tribunal ruled earlier this week that a leftist presidential ticket headed by Indigenous human rights defender Thelma Cabrera should be barred from the June ballot, prompting fury and vows of mass protests from Cabrera's supporters.
Thursday's ruling—which Cabrera's young political party, the Movement for the Liberation of the Peoples (MLP), is vowing to appeal to the Supreme Court of Justice—stems from Guatemala electoral authorities' refusal to certify the candidacy of Cabrera's running mate, former human rights ombudsman Jordán Rodas.
Reporting indicates that election officials have justified stonewalling Rodas—a longtime target of Guatemala's right-wing political establishment—by citing supposed "anomalies during the collection of compensation" upon his departure from the ombudsman post last year.
But Cabrera and Rodas contend that the electoral tribunal's decision is a politically motivated attempt to keep a left-wing party—whose base is largely rural—off the ballot, which is set to include the daughter of Gen. Efraín Ríos Montt, the former U.S.-backed Guatemalan dictator who was convicted of genocide and crimes against humanity in 2013.
Montt's victims were largely Indigenous peasants.
Last month, the same electoral body that deemed Cabrera and Rodas disqualified from the June ballot ruled that Zury Ríos can participate, despite a constitutional provision barring the relatives of coup leaders from serving as Guatemala's president. Ríos was blocked from the 2019 presidential ballot on those grounds.
That year, as Nick Burns of Americas Quarterly recently reported, Cabrera "gave the Guatemalan political establishment a shock" by winning 10% of the vote in the presidential election.
"It was the most successful presidential run by an indigenous person in Guatemala’s modern history—the only other was by Nobel Prize winner Rigoberta Menchú in 2007, who won 3% of the vote," Burns noted. "Cabrera’s biography is striking. She grew up in a Maya Mam family of poor laborers on a coffee plantation on Guatemala's Pacific coast and was married at 15. She described in a book how she and her sister Vilma went to school through the sixth grade because their mother—who could not read or write—saw education as crucial."
Cabrera's supporters have vowed to "paralyze the country" with large-scale demonstrations if the electoral body's decision isn't reversed.
"If they do not do it, we are going to take over the international airport, the three ports of the country, the Supreme Electoral Tribunal, and all state institutions," said one MLP supporter. "We are Indigenous, we are Maya, and we can be out here for a month!"
\u201c#EUElecciones2023 Manifestantes amenazan con tomar el Aeropuerto Internacional La Aurora, los tres puertos del pa\u00eds y el TSE si no se inscribe al binomio presidencial del MLP | V\u00eda @noel_solis \n\n\ud83d\uddf3\ufe0f\ud83c\uddec\ud83c\uddf9 #Elecciones2023 #EleccionesGT #GUATEVOTA2023\u201d— Emisoras Unidas (@Emisoras Unidas) 1675357690
Daniel Zovatto, a political scientist and expert in Latin American elections, said the tribunal's ruling against the MLP presidential ticket amounts to an "electoral coup" that "vitiates the integrity and credibility" of the upcoming contest.
Rodas, a human rights champion, lamented in response to the decision that "democracy in Guatemala has taken another step back."
"They are afraid of the people and their sovereign decisions," he said.