Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

propublica.org

Post reply on HN
Print view View original

41–50 of 59 posts

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#41

Post by dr_orpheus »

skywal_l wrote: post #15
dundarious wrote: post #13

Earlier quoted context omitted.

Part of the 'giving up $600 million dollars' equation here was creating an environmental disaster. I don't understand the relevance of your point.

His point is that fines are tax deductible. It's logical from an accountant point of view, but indeed absurd from a human point of view.

The article points out that fines are not tax deductible and gives the other example of BP and Deepwater Horizon

> But such write-offs are legal, qualifying as “ordinary and necessary” business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill because much of it went to address the environmental calamity, rather than to penalties for wrongdoing.

And the other points in the article are the trust that was set up and the expenses for cleaning up the spill were what was deducted on taxes but they seemingly did not actually do anything to clean it up.

> In 2012, the Coast Guard finally ordered Taylor to install a dome to contain the leak, but three years later, when Taylor Energy settled a lawsuit that forced it to start publicly disclosing more about its efforts, the company had not even finished the design.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#42

Post by dundarious »

hogFeast wrote: post #40
dundarious wrote: post #23

Earlier quoted context omitted.

I think everyone, including the writer of the article, understands the mechanism at play. The point is that you can't justify something by just stating the mechanism. The article already states very clearly what is going on. > That’s in significant measure because she was able to transform money her company was compelled to spend cleaning up the oil spill into a perfectly legal nine-figure tax write-off for herself.…

> I think everyone, including the writer of the article, understands the mechanism at play. That is the most interesting aspect of these articles. They are optimised for the title, not the content. Ignore the oil spill: if you lose $100m, you won't pay tax on that..."Billionaire pays no tax" is a better headline than "Billionaire loses lots of money". If you think that a wealth tax is a good idea, fine just say that.…

The articles spends the majority of its time going over:

- the mechanism for the tax write-off, by paying costs for cleanup rather than a fine

- how wealthy the players involved really are

- another mechanism for avoiding tax (transferal of property to a spouse on death avoids capital gains -- I'm not really interested in this one, but the article goes into it)

- yet another mechanism (possibly unilaterally inflating company valuation after the transferal, then selling "for a loss" that perhaps is illegitimate -- remember the damaged rig was not part of the sale)

- how sole-proprietership means the first write-off is a personal tax write-off too (I have no real objection to this)

- how the company has dragged its feet tremendously in actually doing the cleanup (ample detail in the article)

- how the estimate on the extent of the spill was perhaps 20 times too small (according to a government law suit)

- how the Coast Guard had to hire its own contractor to finally install the protective dome

The article definitely has some "look how wealthy these people are, they're not like us" aspects to it, especially in the first quarter or so, but the substance of it is about the triangulation of fire to "push for settlement with a trust for costs (tax write-off), push for that settlement to be based on an estimate that underestimates the true cost, push back on doing any of the actual work". (That being said, and maybe I missed it, but I don't think the article does a good job of explaining how that last part improves their bottom line -- do they get to recoup unspent funds from the trust?)

But I don't see how you're getting to (paraphrasing) "just say you want a wealth tax, instead of this misleading bullshit". Seems like a reasonably good article on "doing bad things and largely getting away with it".

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#43

Post by dr_orpheus »

ChrisLomont wrote: post #20
titusjohnson wrote: post #6

Earlier quoted context omitted.

Because if there's a company (in this case a sole proprietorship) that reports business expenses exceeding income, what is there to tax? The objection is to the idea that you can fuck up the world for everyone else and somehow mischaracterize the cleanup of that fuckup as a "normal business expense". The cleanup of an oil spill should come from post-tax profits, the burden should 100% be on the company. They made the…

> mischaracterize the cleanup of that fuckup as a "normal business expense" An alternative is to go out of business and leave the total cleanup costs to society instead of paid for out of future profits. Which is better? >If the company cannot afford to perform the cleanup it should be nationalized and sold off until the cleanup can be funded. That mindset adds SuperFund sites - destroy the actor without being able t…

> An alternative is to go out of business and leave the total cleanup costs to society instead of paid for out of future profits.

I know I'm reading between the lines here a bit, but it seems like that would've been better in this case.

"In 2012, the Coast Guard finally ordered Taylor to install a dome to contain the leak, but three years later, when Taylor Energy settled a lawsuit that forced it to start publicly disclosing more about its efforts, the company had not even finished the design... protective dome, finally installed by a contractor the Coast Guard hired after losing faith in Taylor, contains the leak."

The expenditure ended up being from the Coast Guard hiring another contractor anyways to stop the oil leak. Part of the complaints here are that this trust was set up for the explicit purpose of stopping the oil leak but didn't seem to actually do anything about it. This is less a question of the tax code part of the conversation but more of fraud of whether those business expenses of the trust were actually going towards the oil spill.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#44

Post by skywal_l »

dr_orpheus wrote: post #41
skywal_l wrote: post #15

Earlier quoted context omitted.

His point is that fines are tax deductible. It's logical from an accountant point of view, but indeed absurd from a human point of view.

The article points out that fines are not tax deductible and gives the other example of BP and Deepwater Horizon > But such write-offs are legal, qualifying as “ordinary and necessary” business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill because much of it went to address the envir…

They are damages so, indeed, it is unfair to compare them to fines, as all damages are tax deductible. I stand corrected.

I am not trying to claim that the situation is illegal, merely that it is immoral (thus the human part). Putting aside the laws and codes, paying to fix a situation that you created through negligence should not be a normal business expense IMHO.

I resent the idea that you can pay you way out of almost all situations unless the victim is richer than you.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#45

Post by dundarious »

vorpalhex wrote: post #39
dundarious wrote: post #35

Earlier quoted context omitted.

Have you read the article slowly, out loud, or otherwise? > It may be surprising that the costs of cleaning up an environmental disaster are tax-deductible. But such write-offs are legal, qualifying as “ordinary and necessary” business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill be…

Sure, so let's address the other point about cleanup not being a fine. If you go spill a bunch of oil, you'll get a fine (a punishment) and you will have to do your best to fix the damage (as much as it can be fixed). That cleanup is not a fine. It's distinct and separate. It is not the punishment. Cleanup is also not a determinate amount. There is no inspector you can fly out who can eyeball the damage and give you…

That is finally an actual argument.

The problem with treating such environmental cleanup as just another cost, is that it's just another cost. It may be economical to just do the damage, or at least to cut corners such that there's an "unreasonable" risk of doing the damage. After the fact, you can always push for low-ball cost estimates, try to cap your max payout to that level, push back on actually doing the work and paying out (though as I've said in another comment, the article does a poor job of explaining if that's really happening). It's a case where "it's easier to ask forgiveness" has huge problems.

I think tax write-offs should be for "legitimate costs of doing business". If the damage was foreseeable (which is not really dealt with in the article, except very obliquely below) and the company is not cooperative in cleanup, there's an argument that it should not be deemed a "legitimate cost of doing business", as to do so only encourages repeat events. It isn't second punishment.

> It took years for the extent of the spill to become known. Taylor disclosed almost nothing about the accident and fought public records requests. The reality unspooled thanks to the persistence of environmental groups, investigative reporting, and revelations from a dizzying array of suits and countersuits.

> According to a later review by the Coast Guard, Taylor Energy was “obstinate, difficult to deal with and verbally combative,” and preferred “to employ stall tactics over cooperation with an intention to confuse, delay or misdirect” the government.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#46

Post by the_optimist »

quantified wrote: post #24
the_optimist wrote: post #21

This is a PR piece for politicians, yellow-journalism for uneducated people. Lots of adjacent color cultivating reader biases and eliding basic economics and accounting. But thumbs up, great journalism! Reminds me of how the same US pols that fundamentally drive infrastructure policy with the tax code chided companies for “not paying taxes” based on the very incentives they had designed.

Can you enumerate some of the accounting issues? Also, “they” is not accurate. I suspect you already realize that lawmakers and the population governed by their laws have very different incentives and outcomes.

Yes. They’ve conflated the idea of the tax basis on transfer with the tax losses due to remediation. They’ve also mixed in remediation costs vs penalties. We also lack meaning attached to the word “income” used right up front. If it’s not taxable income, it’s not taxable income. Many of these concepts are not only entirely economically distinct, but also potentially functionally causal. For example, depending on when the environmental liability was introduced and to what responsible party, the woman may well have had an asset worth more than 1.2B, then has to sell it for less because of the very liability they decry. Is this an article about the tax consequences of direct environmental remediation? About the tax basis of inheritance? Of the environmental remediation reserves? Of the tax codes relationship to the continuation of the leak? Since they enlisted an expert tax consult, why didn’t the author let him explain what this article is supposed to be about, instead of writing about wall paper and Horatio Nelson. Perhaps only an excellent example of the Talebian perspective that one should not read journalism; when conveyed through the minds of non-experts, it often produces a sense of knowledge while failing to deliver understanding.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#47

Post by hogFeast »

dundarious wrote: post #42
hogFeast wrote: post #40

Earlier quoted context omitted.

> I think everyone, including the writer of the article, understands the mechanism at play. That is the most interesting aspect of these articles. They are optimised for the title, not the content. Ignore the oil spill: if you lose $100m, you won't pay tax on that..."Billionaire pays no tax" is a better headline than "Billionaire loses lots of money". If you think that a wealth tax is a good idea, fine just say that.…

The articles spends the majority of its time going over: - the mechanism for the tax write-off, by paying costs for cleanup rather than a fine - how wealthy the players involved really are - another mechanism for avoiding tax (transferal of property to a spouse on death avoids capital gains -- I'm not really interested in this one, but the article goes into it) - yet another mechanism (possibly unilaterally inflating…

So you are saying that they attempted to write off taxes and also attempted to minimise the estimate...you should not go into finance my friend.

And yes, your response is the kind of misconception that I think the journalists banked on.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#48

Post by the_optimist »

quantified wrote: post #24
the_optimist wrote: post #21

This is a PR piece for politicians, yellow-journalism for uneducated people. Lots of adjacent color cultivating reader biases and eliding basic economics and accounting. But thumbs up, great journalism! Reminds me of how the same US pols that fundamentally drive infrastructure policy with the tax code chided companies for “not paying taxes” based on the very incentives they had designed.

Can you enumerate some of the accounting issues? Also, “they” is not accurate. I suspect you already realize that lawmakers and the population governed by their laws have very different incentives and outcomes.

“They” above was intended to reference individual politicians designing legislation but publicly castigating citizens who follow the very intent of the same code.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#49

Post by dundarious »

hogFeast wrote: post #47
dundarious wrote: post #42

Earlier quoted context omitted.

The articles spends the majority of its time going over: - the mechanism for the tax write-off, by paying costs for cleanup rather than a fine - how wealthy the players involved really are - another mechanism for avoiding tax (transferal of property to a spouse on death avoids capital gains -- I'm not really interested in this one, but the article goes into it) - yet another mechanism (possibly unilaterally inflating…

So you are saying that they attempted to write off taxes and also attempted to minimise the estimate...you should not go into finance my friend. And yes, your response is the kind of misconception that I think the journalists banked on.

I spent the last 10 years of my engineering career working at a well-known prop trading firm, on the low-level and algorithmic side. Stonewalling, fucking the dog (pretending to work, but really doing nothing), being sued into some kind of compliance, and having your counterparty forced to hire contractors to do the work you "promised ;)" to do is not merely an honest attempt to minimise costs.

Re: An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

#50

Post by vorpalhex »

dundarious wrote: post #45
vorpalhex wrote: post #39

Earlier quoted context omitted.

Sure, so let's address the other point about cleanup not being a fine. If you go spill a bunch of oil, you'll get a fine (a punishment) and you will have to do your best to fix the damage (as much as it can be fixed). That cleanup is not a fine. It's distinct and separate. It is not the punishment. Cleanup is also not a determinate amount. There is no inspector you can fly out who can eyeball the damage and give you…

That is finally an actual argument. The problem with treating such environmental cleanup as just another cost, is that it's just another cost. It may be economical to just do the damage, or at least to cut corners such that there's an "unreasonable" risk of doing the damage. After the fact, you can always push for low-ball cost estimates, try to cap your max payout to that level, push back on actually doing the work…

All businesses that transport chemicals will have a spill.

Until we transition entirely off of oil, oil spills are a part of life. We can reduce them, we can limit the damage but we can't prevent them.

Yes, companies can be less than ideal at fixing spills. We have tools like auditors and other third parties as a control.

Tax write offs are for anything that costs you money as a business. Your accountant needs a chair and a laptop, your hairdresser has different needs like scissor sharpening. There is no standards body fit to determine what constitutes a "real business expense" outside of the IRS auditors who do so post-facto.

That the oil company wasn't cooperative might mean we should fine them more but doesn't affect their tax code.

Tax code is not moralistic.

Post reply on HN