Approximately $1.9 billion in CARES Act tax benefits are being claimed by at least 37 oil companies, service firms, and contractors.
The fossil fuel industry is using tax breaks in the CARES Act meant to help businesses keep workers employed to avoid paying millions of dollars in taxes—and then delivering that money to executives.
The provision in question loosened rules governing how businesses deduct net operating losses, incurred when deductible expenses exceed gross income. For years, companies were able to apply those net operating loss deductions to previous tax returns as well as going forward—but Congress ruled out retroactive relief as part of the 2017 tax-cut law.
Traditionally, the ability to deduct net operating losses is meant to ensure companies get fair tax treatment even amid volatility. So in the stimulus package, Congress gave businesses the chance to carry back all their losses, and claim immediate tax refunds, for five years from 2018, 2019 and 2020. This created a way for oil and gas companies to cash in on big benefits due to their recent extreme losses.
As it headed toward bankruptcy, Diamond Offshore Drilling Inc. took advantage of a little-noticed provision in the stimulus bill Congress passed in March to get a $9.7 million tax refund. Then, it asked a bankruptcy judge to authorize the same amount as bonuses to nine executives.
Diamond’s refund pales in comparison to some of its larger competitors, including $55 million for Denver-based Antero Midstream Corp., $41.2 million for supplier Oil States International Inc., and $96 million for Oklahoma-based producer Devon Energy Corp.
The fossil fuel industry was already in financial trouble before the outbreak, which has effectively crippled Big Oil’s ability to make money—even with the generous subsidies given by the federal government. Access to bailout tax break funding is helping fossil fuel companies prosper, along with other climate-destroying industries like mining companies, which have also reaped millions from coronavirus relief legislation.