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

From 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.

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.