Run-a-muck American oil industry; they are not only bad citizens; but, apparently, not citizens at all

Big Oil pays little state income tax

Governor says tiny sliver collected from firms justifies gross receipts tax

By STEVEN WALTERS
swalters@journalsentinel.com

Posted: May 28, 2007

Madison - Three giant oil companies - ExxonMobil, BP and Chevron USA - paid $7.3 million in Wisconsin corporate income taxes over a three-year period in which they reported worldwide profits of $165.7 billion, state Department of Revenue records show.

And two other oil companies - Shell and Murphy Oil, which has a Wisconsin refinery - paid no Wisconsin corporate income taxes in 2003, ‘04 and ‘05. Shell reported profits of $55.9 billion in those years; Murphy Oil had profits of $1.8 billion.
Gov. Jim Doyle said some of those profits have come from gouging drivers - including those in Wisconsin - and justify his proposal for a new 2.5% gross receipts tax on oil company sales in Wisconsin. That would bring in an estimated $270 million over the next two years to help pay for transportation programs. Doyle also proposed criminal penalties for any oil company that raises pump prices to cover the tax.
Doyle said oil companies have hit Wisconsin drivers with unjustified price increases in recent weeks and added, “We should be imposing a tax on the big oil companies to have them help us (pay for) a sound transportation system in this state.
“Big oil companies have been reaping huge profits on the backs of middle-class families for years.”
His proposal has generated considerable controversy, prompting the Journal Sentinel to look at how much the oil companies pay in state taxes. The newspaper found that three oil companies that file Wisconsin tax returns paid $7.3 million in corporate income taxes and two paid none from 2003 through ‘05, a period in which they collectively reported worldwide profits of $223.4 billion.
Those numbers might anger Wisconsin drivers, who were paying a record $3.43 statewide for a gallon of unleaded gas Friday. That’s 21 cents more a gallon than the national average, according to AAA Wisconsin.

Industry defended

Oil company officials say they are multinational entities that do little but sell gas to Wisconsin retailers, so they have no significant business presence in the state. And when their subsidiaries do make Wisconsin profits, they pay the same tax rate - 7.9% - as all other businesses, the officials add.
“Comparing ExxonMobil’s corporate profits generated worldwide to the amount of tax paid in Wisconsin is absurd,” said company spokesman Gantt H. Walton.
Doyle “wants to tax money we make in Nigeria, or Alaska?” Walton said. “We just don’t see how that would be good for business.”
Walton said two ExxonMobil companies paid $7 million in Wisconsin taxes - the most of the five oil companies surveyed - from 2003 to ‘05. Over that period, ExxonMobil reported worldwide profits of $82.9 billion.
Scott Dean, a spokesman for BP, said the company “pays its fair share of taxes, no matter how you approach the numbers.”
Revenue Department reports say BP companies paid $27,037 in corporate income taxes from 2003 through 2005, while the company reported worldwide profits of $48.3 billion. Dean said those taxes were paid by one subsidiary, BP Products North America, which has a company-owned gas station in Pleasant Prairie.
Another BP subsidiary, BP Pipeline North America, operates storage terminals and pipelines in Wisconsin.
But BP Pipeline paid no Wisconsin income taxes because it “continues to carry forward a net-operating loss, which is allowed by state tax law,” Dean said. “Under state law, a net operating loss can be carried forward for a period of up to 20 years.”
Dave Podratz, an executive for Murphy Oil, which has a refinery in Superior, said the company had financial losses after Hurricane Katrina damaged its production facilities in the South.
A Wisconsin tax on oil company profits would be an incentive for Murphy Oil to try to sell more of its gas in Minnesota, Podratz said.
Chevron USA paid $310,640 in taxes to Wisconsin over the three years, when it reported profits of $34.5 billion. A company spokesman said the taxes paid reflected the relatively little business the parent company does in the state.
Shell Oil Co. paid no Wisconsin corporate income taxes in the three-year period, when it reported worldwide profits of $55.9 billion.
Shell declined to comment. “It is Shell’s policy to not disclose or discuss proprietary and confidential information,” Shell said in a statement.

Playing within the rules

University of Wisconsin-Madison economist Andrew Reschovsky said the state’s tax laws do not require major oil companies to pay taxes on their worldwide profits.
“Under current law a corporation can - quite legally - reduce its Wisconsin corporate income tax liability by choosing to operate parts of its business as separate out-of-state subsidiaries,” Reschovsky said. “Wisconsin then taxes only the apportioned share of the net income of the parent company, totally ignoring the income earned by the subsidiaries.”
He said that would change if the state adopted “combined reporting,” which treats subsidiaries “as if they were divisions or branches of the parent company.” For years, Republican legislators and businesses have killed all attempts to go to that tax structure.
“The bottom line is that, as long as Wisconsin does not adopt combined reporting, lots of multinational corporations doing business in Wisconsin - obviously, including oil companies - will either avoid paying Wisconsin corporate income taxes or pay substantially less than they would if we adopted combined reporting,” he said.
Reschovsky questioned why Doyle recommended a 2.5% gross receipts tax.
“In my view, if the governor wants to raise more money from oil companies, and other multinational companies, the most effective thing he could do would be to urge the Legislature to adopt combined reporting,” he said.
Erin Roth, executive director of the American Petroleum Institute, said major oil companies have contributed to Wisconsin’s economy.
Looking only at what oil companies paid - or didn’t pay - in Wisconsin corporate income taxes is too narrow an approach, Roth said.
“To be fair, I think you need to look at the whole picture and not just focus on the political angle that these big, bad corporations aren’t paying their fair share of taxes,” Roth said.