Reports & Data

Effective Tax Rates of Oil & Gas Companies: Cashing in on Special Treatment

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July 30, 2014
Programs: Budget & Tax, Energy

View/Download: TCS_ETR-Report.pdf

Taxpayers for Common Sense Report: Effective Tax Rates for Oil and Gas CompaniesFrom 2009 through 2013, large U.S.-based oil and gas companies paid far less in federal income taxes than the statutory rate of 35 percent. Thanks to a variety of special tax provisions, these companies were also able to defer payment of a significant portion of the federal taxes they accrued during this period.

According to their financial statements, 20 of the largest oil and gas companies reported a total of $133.3 billion in U.S. pre-tax income from 2009 through 2013. These companies reported total federal income taxes during this period of $32.1 billion, giving them a federal effective tax rate (ETR) of 24.0 percent. Special provisions in the U.S. tax code allowed these companies to defer payment of more than half of this tax bill. This group of companies actually paid $15.6 billion in income taxes to the federal government during the last five years, equal to 11.7 percent of their U.S. pre-tax income. This measure, the amount of U.S. income tax paid regularly every tax period (i.e. not deferred), is known as the “current” tax rate.

Four of the companies in this study – ExxonMobil, ConocoPhillips, Occidental, and Chevron – account for 84 percent of all the income and paid 85 percent of all the taxes for the entire group. These four had an ETR of 24.4 percent and a current ETR of only 13.3 percent. The smaller firms paid an even smaller share of their tax liability on a current basis. When the top four companies and those with losses are excluded from the analysis, the remaining companies reported a 28.9 percent ETR on U.S. income, but only a 3.7 percent current rate. They deferred over 87 percent of their tax liability.

Many of the companies deferred more of their federal income taxes than they actually paid during the last five years. Occidental Petroleum reported a total federal income tax bill of $5.4 billion from 2009 to 2013, of which it deferred payment of $4.5 billion, or 83 percent. Continental Resources deferred $1.1 billion of its $1.2 billion in total federal income taxes. As a result, most of the companies accumulated large amounts of deferred tax liabilities during this period. The net deferred tax liability of Devon Energy more than doubled from $1.9 billion in 2009 to $4.8 billion in 2013. Apache Corporation’s net deferred tax liability grew from $2.6 billion to $7.9 billion during the last five years. In some cases, the amount of total deferred tax liabilities grew to equal a significant portion of the company’s entire net worth, as measured by its shareholder equity. At the end of 2013, ConocoPhillips reported total deferred tax liabilities of $22 billion, equal to roughly 42 percent of its total shareholder equity. Denbury Resources reported total deferred tax liabilities of $2.6 billion, equal to roughly half its reported shareholder equity of $5.3 billion in 2013.

The federal income tax of this group of companies is dramatically less than the income taxes they paid to foreign governments during the same period. Foreign income taxes totaled roughly 46.2 percent of their total foreign pre-tax income. And because the tax codes of foreign governments generally do not allow the deferral of tax payments the way the U.S. code does, these companies paid out 99 percent of the entire amount of $254.2 billion in accrued tax liabilities to foreign governments.



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