ExxonMobil may have used American taxpayer funds to subsidize its foreign oil production, which it does in partnership with a Chinese state-owned company
Washington, DC – U.S. Senators Sheldon Whitehouse (D-RI), Chris Van Hollen (D-MD), and Jeff Merkley (D-OR) sent a letter today to ExxonMobil CEO Darren Woods asking for information on the company’s accounting of its U.S. tax liability as a result of the 2016 Stabroek Block Petroleum Agreement. The letter raises questions about whether American taxpayers are subsidizing ExxonMobil’s foreign oil production in Guyana, which the company carries out in partnership with a Chinese state-owned company.
Current U.S. tax rules offer a loophole for big multinational oil companies drilling in a foreign country to shrink their tax bills. Closing this loophole would save American taxpayers an estimated $71.5 billion over ten years.
“We are concerned about the possibility that American taxpayers may be subsidizing ExxonMobil’s foreign oil production, which they do in partnership with a Chinese state-owned company,” wrote Whitehouse, Van Hollen, and Merkley.
“Payments to a foreign government in exchange for an economic benefit [such as the right to extract oil and gas] are not considered taxes at all and thus cannot qualify for a U.S. foreign tax credit. However special rules allow ‘dual capacity’ taxpayers to divide up such payments into creditable taxes and non-creditable payments. While it is not difficult to distinguish between taxes and payments for economic benefits, current rules allow contracts to be structured in a way that blurs the distinction. This loophole is a particular boon to big multinational oil companies,” added the senators.
According to a 2021 IMF report, U.S. effectively subsidizes Big Oil and the fossil fuel industry to over $600 billion annually. Congressional Republicans added even more subsidies with their Beautiful-for-Billionaires bill, which included a $167 billion tax giveaway to companies like ExxonMobil that ship jobs and profits overseas. In February, Whitehouse and Rep. Lloyd Doggett (D-TX) reintroduced the No Tax Breaks for Outsourcing Act which would reverse the special tax rate for offshore profits that’s half the domestic rate.
Congressional Republicans also included a special $427 million carveout for the oil and gas industry to shirk the Corporate Alternative Minimum tax that Democrats included in the Inflation Reduction Act to prevent companies from lowering their liability by abusing tax loopholes. Whitehouse and other Senate Democrats sent a letter in early September to Treasury Secretary Scott Bessent slamming Treasury’s decision to create new loopholes in the corporate alternative minimum tax for the largest and wealthiest corporations.
The text of the letter is below and a PDF of the letter is available here.
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