Anadarko Thwarted in Bid to Deduct Deepwater Settlement in Texas

Anadarko Petroleum Corp. can’t get a Texas franchise tax break on a $4 billion settlement it paid BP Plc after the 2010 Deepwater Horizon disaster, a state appeals court ruled Thursday.

Anadarko sought to deduct the payment—which BP used to pay people injured by the incident—as costs of goods sold. The Texas 13th Court of Appeals agreed with the state that the payments covered tort liabilities, not general expenses for the cleanup.

“Tort liability payments are not ‘direct costs of acquiring or producing’ goods, as required for COGS deduction,” Justice Clarissa Silva wrote for the court.

BP and Anadarko had ...