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credits, and intangible drilling costs, or, alternatively,
current business expense deductions would be claimed therefor.
Exxon’s Accrual of Estimated Future PBU DRR Costs
On Financial Statements Tax Treatment
On Income Statements
As Depreciation Current Expense Would Now Capitalize
On Balance Expense & On BalanceOn Tax Returns & Claim Depreciation,
Sheets Sheets As Addition ToAs Filed ITC, & IDC, Or
As Fixed Reserved Liability With Respondent Current Expense
For Liability (Millions) (Thousands) (Millions)
1977 --- $2.5 -0- $ 6.9
1978 --- 4.2 $15,040 11.4
1979 --- 6.1 -0- 11.8
1980 --- 4.1 -0- 12.4
1981 --- 5.2 -0- 13.7
1982 --- 6.0 -0- 18.8
In the 1980's, a Tax Court decision allowed, for Federal
income tax purposes, the accrual of estimated future strip-
mining land reclamation costs relating to underground mines.
See Ohio River Collieries Co. v. Commissioner, 77 T.C. 1369
(1981). As a result, in the late 1980's, the PBU and the
partners in PBU including Exxon raised in these pending cases
with respondent via timely claims for refund the DRR cost
accrual issue relating to estimated Prudhoe Bay DRR costs, as
well as the accrual of estimated DRR costs for other projects
throughout the world.
As a result of such claims, with regard to oil company
estimated DRR costs relating to underground mines, oil shale
projects, and TAPS, respondent has allowed Exxon and other oil
companies the tax accrual of estimated DRR costs.
For the years in issue, with regard to estimated DRR
costs relating to foreign offshore oil drilling platforms and
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