I'm Darrin Mish. For 32 years I've practiced federal tax litigation \u2014 routine audits, Tax Court cases, and everything in between. If you're facing an IRS issue, here's what you need to know first.<\/p>\n
Just how much tax do oil companies pay? \u00a0Exxon Mobil says they pay a lot. \u00a0But the Center for American Progress (CAP) says they effectively pay less than half the 35% corporate companies in the US pay; and in fact in 2009, they did not pay any federal income tax at all according to their fillings with the Securities and Exchange Commission.
\nThe difference lies in how you count. \u00a0Exxon Mobil counts every kind of tax \u2013 not just income tax \u2013 namely local property taxes, state taxes, gasoline taxes and payroll taxes. <\/a>\u00a0But the CAP and other analysts count only the company\u2019s federal corporate income tax. \u00a0Yet the CAP contends that Exxon Mobil\u2019s tax rate is less than the average American taxpayer\u2019s. \u00a0The company\u2019s 2010 tax rate was 17.2%.
\nMost Democrats in Congress and the Obama administration want to lessen or end the tax breaks or tax benefits of oil companies. \u00a0These tax benefits have saved substantial amounts of money for the oil giants but have limited the amount of tax revenue the government receives. \u00a0Some of these benefits include a tax break that has trimmed the corporate tax rate for manufacturers since 2004, oil-depletion allowances that all but the biggest firms use to recover drilling costs (sometimes they even make a profit out of those costs) and the expensing of \u201cintangible\u201d drilling costs at a rate higher than that used by most non-oil companies to recover investment costs.
\nAll these benefits have been used to boost the oil industry by increasing investments and resulted in the industry being one of the most profitable in terms of ROI and cash flow. \u00a0The spike in oil prices have added to the bottom line of major oil companies and intensified the debate over whether these tax benefits should be continued.
\nThe petition to limit or abolish the tax benefits for oil companies is not new. \u00a0In 1984, the Reagan administration abolished some of the benefits but they were never passed into law. \u00a0Subsequently, some tax breaks were limited. \u00a0The major oil companies like Exxon Mobil have not qualified for the depletion allowance since the 1970s, but other large oil companies known as independents still do.
\nExxon Mobil declares that it earns only 9 cents on every dollar in sales, a number that is about half (or less) of what companies in pharmaceuticals or computers make, according to Kenneth Cohen, Exxon Mobil Vice President for Public Affairs.
\nTop executives from 5 major oil companies met with a Congressional Committee recently on this issue. \u00a0Results of that discussion have yet to be made public.<\/p>\n