Big Oil Companies Pay Just A 11.7 Percent Tax Rate, Report Finds

Big oil companies pay 23.3 percentage points less in tax than the rate typically imposed on corporations, according to a new report.

The report, published by Taxpayers for Common Sense, found the U.S.’s 20 largest oil and gas companies paid 11.7 percent in taxes from 2009 to 2013. That’s significantly less than the statutory corporate tax rate of 35 percent, which is typically what corporations pay if they make more than $18.3 million in a year. And the smaller oil firms — those smaller than major firms like ExxonMobil or Chevron — paid even less tax — 3.7 percent, according to the report.

The companies achieved this low rate largely due to “special provisions” in the tax code that allow them to defer large amounts of their taxes. In many cases, the companies were able to defer “more of their federal income taxes than they actually paid during the last five years,” the report stated.

“If an independent oil and gas company constructs an asset like an oil rig, for example, it can claim a tax deduction for all of its intangible drilling costs (IDC), which include the costs of designing and fabricating drilling platforms,” the report explained. “This allows the company to immediately deduct all of these costs from its taxable income.”

Many of these provisions that allow the oil and gas companies to defer their taxes aren’t available to other U.S. taxpayers. Therefore, these provisions give the companies “a significant tax advantage.”

“In effect, these companies are financing significant parts of their business with interest-free loans from U.S. taxpayers,” the report reads.

Some companies even got back money from the government. Pioneer Natural Resources Company, which centers its work largely in West Texas, deferred all of its oil taxes and ended up getting $6 million back from the federal government. These findings contradict the language that oil companies typically use when talking about their tax burden, the report notes: the American Petroleum Institute, for instance, claims the oil industry pays an effective tax rate of 44.3 percent.

“The oil and gas industry gets no subsidies, zero, nothing,” API President Jack Gerard said last year. “We get cost-recovery benefits, much like other industries. You can go down the road of allowing economic activity, generating hundreds of billions to the government, or you can take the alternative route by trying to extract new revenue from industry by increasing their cost to do business.”

The report comes as some U.S. oil companies report surging profits. Last week, ExxonMobilreported that profits had jumped 28 percent in the second quarter and had increased 4.6 percent over the same period last year, beating predictions on Wall Street. Exxon was the company responsible for an oil pipeline rupture in Mayflower, Arkansas last year that sent210,000 gallons of oil gushing into a neighborhood, coating sidewalks and lawns.

Last year, the five largest oil companies — a group that includes companies based outside of the U.S. — earned, on average, $177,000 every minute.

Original Article
Source: thinkprogress.org/
Author: BY KATIE VALENTINE