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The rating agency Standard & Poor’s, which was accused of helping to cause the financial crisis with its inflated assessments of investments, is eligible to deduct half of the $1.37 billion settlement with state and federal prosecutors it agreed to this week, according to the U.S. Public Interest Research Group, a consumer-oriented nonprofit. The result would be a roughly $245 million reduction in its tax bill, the research group calculated.
Which payments are deductible and which are not is often a mystery to the public. The overwhelming majority of cases, whether with a government agency or private individuals, are settled, enabling companies to hide just how much of the agreement’s sticker price is eligible for a write-off.
At least 80 percent of the more than $42 billion that BP has paid out because of the that killed 11 people and spewed oil into the Gulf of Mexico qualifies for a tax deduction, according to U.S. PIRG. That has saved an estimated $10 billion to $14 billion for the company. The exact amount is uncertain because of the lack of transparency, the group complained.
Brandon Garrett, a law professor at the University of Virginia and author of “Too Big to Jail,” said that BP was “asking taxpayers, in effect, to pay for the victim compensation fund it agreed to set up.”
“Any future penalties should not permit massive hidden tax write-offs,” he said.
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