BP preparing to take a $ 10 billion tax credit

Facing a $ 17 billion second quarter loss and $ 32 billion in spill cleanup costs, BP has decided to take a $ 10 billion tax credit. Cash until payday loan advanced like this are given to companies that are in a lot of trouble. It is still argued how legal this tax credit really is. The government is going to end up paying more for the oil spill cleanup than they intended with tax credits like this. Article source – 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 accessible 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. BP stock falling is where most of this loss comes from. BP is easily losing profit although borrowing money hasn’t been a question so far.

Economic effect of BP tax credit

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 said they’d pay at least $ 20 billion for the oil spill. If the government gives BP $ 10 billion, then the government basically paid half of that bill.

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 thing that compares is when Goldman Sachs tried to write off the $ 535 million penalty fee they paid to the SEC. Nobody has ever tried to do this before, where they take out loans till payday but then writing the loans off.

Reasons BP deserves the tax credit

Although it appears the tax credit shouldn’t be given, there may be some reasons to consider giving BP this credit. BP is expected to pay for every little thing involved in the oil spill cleanup. Unless BP can stay solvent, then getting the quick money loan needed for the cleanup might be practically difficult. If BP can’t discover a way to keep in business without the $ 10 billion, then they’d likely go out of business and be unable to pay for any of the expenses of the oil spill cleanup. The IRS will choose if that is the case or not though.

Additional 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