Energy Today - May 3, 2011
Posted May 3, 2011
ExxonMobil Perspectives: ExxonMobil's U.S. Taxes and U.S. Earnings - Some Relevant Numbers for Washington: During the first quarter of this year, our U.S. operating earnings were $2.6 billion. The rest of our earnings - more than $8 billion - came from operations in more than 100 countries worldwide. Here's a number you won't hear in Washington: During the first quarter, on those U.S. earnings of $2.6 billion, we incurred tax expenses in the United States of $3.1 billion. That's right - our U.S. tax bill was higher than our U.S. earnings. That includes income taxes, sales-based taxes and others such as property taxes. But it doesn't include royalties or lease payments we pay to the government to produce oil and gas on government-controlled lands, which would make the government's take from our operations even bigger. Another number you won't hear in Washington, which also puts our earnings into context, is our earnings relative to our sales. During the quarter, we made about 9 cents for every dollar of sales, which is about average for U.S. industries. We earned $10.7 billion in worldwide earnings on worldwide sales of $114 billion. That's about half (or less) of what companies in pharmaceuticals or computers make, just to name a few. Washington Examiner: About Those Oil Company Subsidies: In the case of oil companies, the tax breaks in question are part of IRS Code Section 199, which allows any business to deduct certain expenses from their tax returns. The maximum allowable deduction is 9% of those expenses, and this is part of the tax code passed in 2004 under the American Jobs Creation Act. The idea at the time was to make it possible for businesses to take some risks and if those risks didn't pan out to get a tax break to reduce the pain and cost. This in theory would encourage businesses to expand and hire more. These tax breaks apply to all businesses, not just oil companies, but the tax code specifically states that oil companies can only get a 6% break, not a 9%. Naturally since this is the tax code it's a bit more complicated than a straight cut in taxes, but that's the basic gist of the law. It's this that the Obama administration, Democrats in congress, and many Republicans are calling to end. It isn't some sinister loophole in the tax code that oil companies benefit from, it isn't some clever trick they are using to get rich, it's just part of the law that any company can take advantage of.
Pittsburgh Post-Gazette: Pennsylvania Revenue Official Says Drillers Pay Big Taxes: Striking back against a report that it says undercuts the amount of taxes paid by gas drillers, the state Department of Revenue on Monday afternoon released its own set of tax figures. That data, dating to 2006, credits the drilling industry with sending more than $219 million to state coffers last year. The total includes two key business taxes -- the corporate net income tax and the capital stock and franchise tax -- as well as sales and employee withholdings that companies submit. An early look at this year's taxes already shows more than $238 million in payments from companies extracting natural gas and their direct suppliers, said Acting Revenue Secretary Daniel Meuser. In an interview, he said the data showed that gas drillers "pay the same level of taxes as any business in the state." "This is certainly a vindication, showing that putting an extra tax on an industry in its infancy could have been problematic," Mr. Meuser said.