House Dems Say BP Shouldn’t Get Tax Write-Off From Oil Spill Settlement

The company could claim up to $15.3 billion as a "business expense."
Gulf states claim economic damages. 
Gulf states claim economic damages. 

WASHINGTON -- House Democrats are urging Attorney General Loretta Lynch to eliminate any chance of oil giant British Petroleum claiming a portion of a $20.8 billion settlement it has agreed to pay as a "business expense" on tax returns.

BP agreed to the settlement after it was found "grossly negligent" in the 2010 Deepwater Horizon rig explosion and oil spill.

"The 'gross negligence' that led to perhaps the worst environmental disaster in US history should not be an opportunity to game the tax code," Rep. Raul Grijalva (D-Ariz.) and 53 other House members wrote Wednesday in a letter to the Department of Justice.

The settlement aims to address violations of the Clean Water Act and the Oil Pollution Act, as well as resolve claims for economic damages from affected Gulf states. 

Details of the settlement have been open for public comment since it was proposed in early October. Lawmakers argue that BP could claim as much as $15.3 billion as a business expense, and reap $5.3 billion in tax relief, unless the settlement includes language explicitly barring it from doing so.

"We ask you to protect both taxpayers and the environment by pursuing a final settlement that clearly specifies no amount of BP’s settlement costs may be treated as a tax deduction," the letter states.

Grijalva, chairman of the House Natural Resources Committee, reasoned that allowing BP to claim a portion of the settlement as tax-deductible expenses would allow the company to "exploit" the public. The IRS, however, has long deemed that recovering claims for restoring the damaged environment are deductible charges. 

"Dumping 210 million gallons of oil into the Gulf of Mexico and permanently damaging the ecosystem -- not to mention the unparalleled damage done to our climate -- should not come with a tax break from the American public," said Athan Manuel, director of the Lands Protection Program at the Sierra Club, which was among several other environmental and consumer groups supporting the letter.

The DOJ is holding a final public comment hearing Wednesday evening in downtown Washington, D.C.

"This is our last chance to let the Department of Justice know whether this is a fair deal," said Michelle Surka, a campaign organizer for consumer rights group U.S. Pirg.