WASHINGTON — Some of the biggest names in the oil industry managed to avoid paying any taxes last year under the new tax code that President Donald Trump and congressional Republicans passed in 2017.

Despite earning billions of dollars in profits, companies such as the California oil major Chevron, the Houston independent oil companies Occidental Petroleum and EOG Resources, and the Houston oil field services company Halliburton were able to claim tens of millions in tax rebates, according to a study earlier this month by the Institute on Taxation and Economic Policy.

They were among 60 of the biggest names in corporate America, including Amazon, General Motors, IBM and Netflix, who collectively received a rebate of $4.3 billion on earnings of $79 billion.

Oil companies have long used favorable terms within the federal tax code to reduce their liability. But critics say the tax cuts two years ago have allowed oil and other sectors to reduce their tax bills even further, causing tax revenues to plummet despite Trump’s promise the cuts would not increase the budget deficit.

“It is a big windfall for oil companies, as it is for all kinds of large corporations,” said Seth Hanlon, who served as special assistant for economic policy to former President Barack Obama and is now a senior fellow at the Washington think tank Center for American Progress. “The tax cuts add to the debt and they further increase economic inequality and make the most powerful corporations richer and even more powerful.”

Trump championed the new tax code as a means to boost the economy and grow American jobs. And with the national unemployment rate at 3.8 percent, the administration has cited the tax cuts as a driving force.

Getting a check

“Those lower taxes is money going back into the economy, and that’s why we have the economic growth we do,” Treasury Secretary Steve Mnuchin said in an interview with CNBC earlier this year.

Under the new corporate tax rate of 21 percent — down from 35 percent under the previous tax code — the 60 companies cited in the study were expected to pay $16.4 billion in taxes. But those companies were able to use a variety of tax breaks to not only avoid their bills, but even get rebates.

For instance, Chevron and Halliburton were able to deduct the full cost of their capital investments in 2018, rather than doing it piecemeal as the investments depreciated over the years, as was required under the former tax code.

“Chevron reported $290 million of depreciation-related tax breaks in 2018, and Halliburton reduced its taxes by $320 million,” the study read. “Companies profiled in this report appear to be using a diverse array of legal tax breaks to zero out their federal income taxes.”

Oil companies cited in the study either declined to comment or did not respond to requests for comment.

The tax reform championed by Republicans in 2017 was supposed to get rid of many of the tax breaks that corporations and wealthy individuals use to reduce their tax bills, simplifying the tax code while reducing overall tax rates. And while some of the loopholes were eliminated, many have stayed in place, including those that benefit the oil sector, said Tyson Slocum, energy program director at the activist group Public Citizen.

“The oil industry really showed its muscle in Congress because it got its reduced rate while still retaining a lot of its exemptions,” he said.

For instance, Pioneer Natural Resources in Irving, which paid zero taxes, and Occidental in Houston, which received a $23 million tax rebate, were able to use oil-sector specific tax breaks such as depreciation and percentage depletion to reduce their liability. Across the energy sector, companies benefited from the tax cuts.

Breaks for renewables

Wind and solar farms also provided power companies ample tax shelter. North Carolina-based Duke Energy claimed $129 million in renewable energy production tax credits last year, while Minneapolis-based Xcel Energy claimed $75 million in wind productions credits.

But with the budget deficit growing to $234 billion in February, the highest monthly shortfall in American history, many economists are wondering how long Trump’s tax cuts can be maintained before driving the national debt to unsustainable levels.

Despite the growing economy, overall tax revenues have not increased since last year, even as Congress has increased spending. The Treasury Department reported revenues from corporate taxes, which historically make up about 10 percent of overall tax revenues, were down 31 percent in 2018.

“This was a more precipitous decline than in any year of normal economic growth in U.S. history,” the study read.

james.osborne@chron.com

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