Gulf Oil Spill Claim Payments are Taxable

The IRS confirmed yesterday that payments for lost wages, profits, and business income resulting from the oil spill are indeed taxable. Hope all those who were affected by the spill saved some of those payments…

Nola.com reports:

The IRS said, it's important that people, if possible, budget for the tax liability on their payments from the claims fund.

Payments made in 2010 are payable from 2010 taxes, which are due April 18. Tax filings are normally due April 15, but because that is a Washington D.C. holiday -- Emancipation Day -- so everyone across the country is being given an extra three days for the tax filing deadline.

Payments from the Gulf Claim Fund made in 2011 would be paid on 2011 taxes, which are due in April 2012.

Dee Harris Stepter, spokeswoman for New Orleans IRS office, said the agency is encouraging people to check with their tax preparers in detail about the effect of compensation from the BP oil fund.

For those struggling with payment and collection issues, she suggested paying as much as possible by the April 18 deadline to minimize penalties and interest. For unpaid balances, Stepter said people can work out payment plans with IRS. People with questions can contact a Gulf oil spill tax assistance line: 1.866.562.5227.

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BP Oil Spill To Cost U.S. Taxpayer Almost $10 Billion

From Reuters.com:

Oil giant BP said it plans to offset the entire cost of its Gulf of Mexico oil spill against its tax bill, reducing future contributions to U.S. tax coffers by almost $10 billion.

BP took a pretax provision of $32.2 billion in its accounts for the period, for the cost of capping the well, cleaning up the spill, compensating victims and paying government fines.

However, the net impact on BP's bottom line will only be $22 billion, with the company recording a $10 billion tax credit, most of which will be borne by the U.S. taxpayer, a spokesman said.

BP's UK tax bill will also be reduced, BP added.

Analysts said BP could prompt more public and political anger in the United States by deducting all the costs, and especially the expected fines BP will face.

In 2006, Boeing Co decided to forego seeking a tax deduction for any of a $615 million settlement with the government in 2006 over ethics charges, under pressure from lawmakers.

IRS: Opening Times, Addresses for July 17 Special Assistance Day for Oil Spill Victims

In a new press release, the IRS announced the opening times and locations of taxpayer assistance centers in 7 Gulf cities for Gulf oil spill victims, on July 17th.

The following locations will be open from 9 a.m. to 2 p.m. Central Time:

• 1110 Montlimar Drive, Mobile, Ala.
• 651-F West 14th St., Panama City, Fla.
• 7180 9th Ave. North, Pensacola, Fla.
• 2600 Citiplace Centre, Baton Rouge, La.
• 423 Lafayette St., Houma, La.
• 1555 Poydras Street, New Orleans, La.
• 11309 Old Highway 49, Gulfport, Miss.

Individuals who have questions about the tax treatment of BP claims payments or who are experiencing filing or payment hardships because of the oil spill will be able to work directly with IRS personnel at any of these locations on Saturday.

Last week, the IRS announced the opening of a dedicated phone line for victims of the Gulf oil spill –– 866-562-5227. This special toll-free line is open weekdays from 7 a.m. to 10 p.m. and will also be open to callers on Saturday, July 17 from 9 a.m. to 2 p.m. Central Time.

IRS Opens Dedicated Phone Line for Gulf Oil Spill Victims

According to their newest press release, the IRS has opened a special telephone line for taxpayers affected by the Gulf oil spill.

Individuals who have questions about the BP payments or who are experiencing filing or payment hardships because of the oil spill should contact the IRS at 866-562-5227.

The special services phone line will operate weekdays from 7 a.m. to 10 p.m. local time.

In certain cases, the IRS can assist oil spill victims by suspending collection and examination actions. Taxpayers who need this assistance must request it. Others may decide to continue making payments because interest will continue to accrue on outstanding balances, even if some penalties are abated.

In addition to postponing collection actions, the IRS continues to have a number of other ways to help taxpayers deal with oil spill issues or other economic hardships, including:

Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals.

Consideration of a taxpayer’s current income and potential for future income when negotiating an offer in compromise.

Accelerated levy releases.

Assistance of the Taxpayer Advocate Service for those experiencing economic harm and seeking help resolving tax problems that have not been resolved through normal channels.

New Drill Ban as Oil Still Spews

BP is facing a slew of lawsuits and a criminal investigation as oil still gushes from their ruptured well in the Gulf of Mexico. Top Obama administration officials are also telling lawmakers in Washington that initial findings are showing definite “reckless conduct” leading up to the initial April 20th explosion.

Reuters.com reports the latest lawsuit will most likely be by investors, specifically the New York State pension fund—these investors are angry about the drop of the BP stock price. All the while, scientists estimate the oil leak is spewing up to 60,000 barrels a day!

According to reuters.com, Interior Secretary Ken Salazar said he would soon issue a new ban on deepwater drilling off the U.S. coast that would be more flexible than the suspension overturned a day earlier by a federal judge. He would like the new ban to include: when the ban would end and that it might allow oil companies to drill in certain low-risk areas. However there was no word on when Salazar would reissue this ban.

Let me know your thoughts. Follow me on Twitter @ronideutch or find me on Facebook.

Senate: Oil and Gas Industry Tax Breaks Remain

As you know, anti-oil company sentiment is at its peak right now. A recent poll showed that 75% of Americans blame BP “a great deal” for the spill. So, it was no real surprise when the Senate failed to say no to $35 billion worth of tax breaks for the oil and gas industry. Senator Bernie Sanders (I-VT) introduced a provision that would have limited write offs for drilling expenses, eliminated a tax deduction for the capital costs of oil and gas wells and repealed a tax deduction for domestic production of oil and gas. He needed 59 additional votes. He got 34.

Why should such companies receive additional forms of tax relief when the average taxpayer enjoys hardly any at all. Let’s us not forget that we are in a deficit of $13 trillion dollars…yes, that’s with a “T”. So, with such a deficit, a stagnant national unemployment rate and a lingering recession, why are we looking to give tax breaks to oil companies? Especially when over the last decade, the five largest oil companies (Exxon Mobil, Chevron, ConocoPhillips, BP and Shell) made more than $750 billion in profits. This is a no-brainer; these companies simply don’t deserve tax relief.

What are your thoughts? Let me know @ronideutch on Twitter or on Facebook.

BP to Set Up $20 Billion Cleanup Fund

From MSNMoney.com:

Stocks ended the day basically flat after BP (BP) agreed to put $20 billion into an escrow account to pay claims related to the Gulf of Mexico oil spill.

The commitment came with a BP decision to suspend its dividend for the rest of 2010, saving about $5 billion. BP shares rallied on the news and were up 1.4% to $31.85 in New York.

The announcement came after President Barack Obama met with BP Chairman Carl-Henric Svanberg and CEO Tony Hayward at the White House today to discuss the spill.

After the meeting with the president, Svanberg apologized "to the American people" for the disaster and said that BP would "look after the people affected, and we will repair the damage to this region and the economy."

BP's cleanup fund will be independently run by Ken Feinberg, the mediator who oversaw the Sept. 11, 2001, victims' compensation fund, news reports said. The $20 billion does not represent a cap for BP. The company and the administration were negotiating final terms.

BP also agreed to set aside $100 million to compensate oil field workers who have been idled by the moratorium on deepwater drilling.

134-year-old oyster company stops shucking

Whether you like them, sautéd, fried, barbequed, or the traditional half shell—If you like oysters, you’ll be sad to learn they may start to be in short supply due to the BP oil spill. According to CNNmoney.com, 67% of the nation’s total production of oysters comes from the Gulf region—Oyster shucking is big business in the Gulf area. However, due to the oil spill, one Oyster shucking company had to close up shop recently. It’s very sad, because P & J Oyster of New Orleans, Louisiana had been in business for 134 years! The problem? There simply aren’t any oysters to shuck when the waters are filled with oil. There is a lot that is unknown regarding the spill and how the market will react. With the spill and the length of time oysters take to grow to full size to be harvested, the next spawning season is in jeopardy. The president and co-owner, Al Sunseri , doesn't know what is next for his oyster business. He states that it takes oysters between 18 and 24 months to grow to full size to be harvested, and the next spawning season is in jeopardy. "There is a lot of unknown and it has everything to do with so much that we have never seen happen before."

Read the article here and tell me your thoughts.

The Tax Implications of the Gulf Oil Spill Catastrophe

Oil has been spewing into the Gulf since April 20^th and although the media is reportedly limited in their ability to report on the spill, many of us are well aware of the severe environmental implications. With oil washing up onto the American coast, and reports of massive underwater plumes, it is hard to imagine things could get any worse. However, the oil spill will have a long-term financial affect on the oil industry, businesses and millions of taxpayers.

Obama and Oil Taxes

President Obama has attempted to increase taxes on oil companies several times without success. In Obama’s first budget proposal he recommended a $31 billion tax on oil and gas companies, but Congress never enacted any legislation with the tax. Last year, the House of Representatives did pass cap and trade legislation designed to limit pollutant emissions and auction allowances to polluters, but the bill has stalled in the Senate for months. However, due to the strong public reaction to the BP oil leak Obama may finally make it happen.

Barrel Tax

Congress has been reluctant to pass any legislation to increase taxes on oil companies, but last week the House of Representatives passed a bill that would increase the current per barrel tax on oil from 8 cents to 34 cents. The Senate is now considering similar legislation, and there are rumors that the tax could be as high as 41 cents per barrel. These new taxes could potentially raise more than $12 billion in federal revenue over the next decade.

Drilling, a “Short-Term Bridge” to Clean Energy

Although he proposed tax increases on oil and gas companies, President Obama also supported continued offshore drilling during an address in March. Since the Gulf explosion the President has pulled back on some of those plans; clarify that drilling should only be used as a “short-term bridge” to clean energy.

Fisher Frustrations

When BP announced they would help reimburse Louisiana fishers for lost income due to the oil spill, taxpayers were glad to see the multinational corporation helping out smaller businesses. However, many fishers are becoming frustrated by the hoops they must jump through to collect payments from BP, while their own bills pile up. In order to receive assistance, each fisher must turn over three years of tax records, which is presenting a problem for some. In small town communities, it is fairly common for temporary workers to get paid in cash, moving from one fishing boat to the next when work is available, and some of the local small businesses are struggling to get the records needed for relief from BP.

Cleanup Efforts and Job Creation

Many fishing jobs were lost due to the oil spill, but the cleanup efforts have resulted in a significant number of new jobs in related industries. BP reportedly has over 25,000 workers and independent contractors working on the Gulf cleanup project. In addition to this direct job creation, many local businesses are also seeing related economic boosts. Hotels that are usually only half full during this season are hanging up “No Vacancy” signs, and other businesses such as restaurants are also seeing sizable customer increases from all the cleanup personnel.

State Oil Taxes

Plenty of states – including Alaska – already tax oil companies; and those states that do not are working to enact taxes on oil companies while public opinion is still strong. My home state of California is a prime example. The state Assembly has already put together a proposal to raise an estimated $1.2 billion per year in new oil company taxes. However, this is a very controversial issue as many assert doing business in California is already difficult because of all the additional taxes levied on businesses and corporations.

Short and Long Term Effect on Consumers

If taxes are indeed raised on oil companies, many experts assume this tax will be passed on to consumers. Several politicians are adamantly denying this prediction, but large oil and gas companies will undoubtedly find a way to pay these additional taxes without affecting their profit margins. Additionally, the oil leak will likely have an impact on the long-term supply of available usable oil, which could lead to even higher prices on consumers.

Long Term Financial Predictions

There is no way to predict the exact implications the Gulf oil catastrophe will have on American taxpayers, as no one knows how long it will take BP to stop the leak. On one hand, the temporary increase in cleanup-related jobs is helping many people financially. On the other hand, the environmental devastation will likely hurt the Gulf for years, if not decades, to come. With a pivotal midterm election in November, the future of any oil company tax increases could be in question. Oil taxes are very controversial, and public opinion will play a major role in how Congress decides.

BP's Open Wallet

After BP announced they had spent more than $1 billion on efforts related to gulf oil spill, many Americans have begun asking where all that money has gone. To help confused consumers CNN Money has put together a slideshow describing how BP has spent their $1 billion. Check out the full article and accompanying slides here.

Local advertising campaigns

Gulf States are doing all they can to bolster their tourism industries, which have been hammered by the oil spill -- and BP is footing the bill.

In Panama City, Fla., for example, the tourism development board is getting about $1.1 million from BP to spend on television and digital billboard advertising to assure the public that its local beaches remain pristine.

"The campaign's focus is on getting the word out that the Panama City beach hasn't been impacted by the oil spill, that our beaches are clean and the water is clear," said Dan Rowe, president and CEO of Panama City Beach Convention and Visitors Bureau.

Rowe said that the Bureau requested $2.2 million, but has so far received half. The remaining distribution hinges on the other clean-up needs of the state.

Never Let a Good Oil Spill Go to Waste

Perhaps some good can come out of the devastating, and ongoing, oil spill in the Gulf of Mexico. CNNMoney.com reports that White House Chief of Staff, Rahm Emmanuel , believes this is just the disaster needed to motivate Washington to push for a responsible energy policy. Americans are being confronted with one of the biggest problems with deep water drilling, and our over-reliance on oil as a whole. This should get the ball rolling, right?

Not necessarily, politicians have been talking about “energy policy” for decades, but have not been able to make any meaningful changes. The energy policy favored by many Democrats in Congress and most renewable energy advocates, involves making fossil fuels more expensive either by adding some type of tax or putting a price on carbon emissions. That's designed to both reduce greenhouse gas emission by cutting the use of fossil fuels, and to make alternative forms of energy more competitive. The policy also involves requirements that utilities buy more clean energy, as well as lots of money for energy conservation. A bill doing all of these things was passed by the House of Representatives last year, and is awaiting a vote by the Senate.

Unfortunately, without more bipartisan support, this sweeping bill has a slim chance of passing. Experts say the Gulf oil spill is part of the problem. President Obama planned to give Republicans more offshore drilling in exchange for a tax on fossil fuels. In the wake of the spill, however, Democrats are removing their support for drilling.

To find out more about the Gulf spill’s impact on energy initiatives, read the full article at CNNMoney.com.

The Fishermen and the Tax Man

From LA Times.com:

BP's request for tax records poses a problem for some residents of fishing communities in southeastern Louisiana — the nonconformists who haven't kept records or reported their cash income.

The first step for a commercial fisherman or coastal business seeking compensation for losses suffered in the oil spill seems simple enough: Submit copies of a commercial fishing license, proof of residence and tax statements.

But the request for tax records poses a serious challenge to some residents of close-knit fishing communities on the swampy edges of southeastern Louisiana, which for generations have harbored self-reliant nonconformists who don't pay much heed to everyday rules and regulations.

In other words, they often get paid in cash — and don't always report it.

"I worked for an uncle last year who paid me in cash," said a crab fisherman who asked to remain anonymous. "The BP guy wanted my tax statements, but how can I pay taxes if everything I earned was in cash?"

Many people involved in the seasonal harvesting of shrimp, crabs, oysters and fish — boat washers, fishermen, crab cookers, deckhands, dockworkers — said they felt caught by a pincer of environmental devastation and an assistance program that could expose them to the tax man.

At Risk: The Gulf's $234 Billion Economy

In addition to the devastating affect on their delicate ecosystems, states near the Gulf of Mexico will likely take a huge financial hit because of the massive oil leak. The total cost of the damage cannot be determined just yet, as oil continues to spew into the ocean, but as this article on CNN.com explains, some experts are predicting it could surpass $200 billion.

The numbers being batted around when it comes to how much the oil spill will ultimately cost BP and the local Gulf of Mexico economies are huge. $3 billion? $14 billion? One politician put it at over $100 billion.

The range is so big because two important questions remain unanswered: When will the leak be sealed, and will most of the oil wash ashore? Until those questions are answered no one will know the exact price tag of the damages. However, there have been studies done looking at what's broadly at stake and the number is quite large indeed.

The four biggest industries in the Gulf of Mexico are oil, tourism, fishing and shipping, and they account for some $234 billion in economic activity each year, according to a 2007 study done by regional scholars and published by Texas A&M University Press.

Two thirds of that amount is in the United States, with the other third in Mexico.