HOUSTON -- Marathon Oil Corp. has announced that the U.S. Internal Revenue Service (IRS) has provided a favorable private letter ruling confirming the tax-free status of the planned spinoff of the company's downstream business, Marathon Petroleum Corp. (MPC).
Based on certain facts, assumptions, representations and undertakings set forth in the ruling, for U.S. federal income tax purposes, the distribution of MPC common stock and certain related transactions generally will not be taxable to Marathon Oil or U.S. holders of Marathon Oil common stock, except in respect to [image-nocss] cash received in lieu of fractional share interests, which generally will be taxable to such holders as capital gain.
The Ohio Tax Credit Authority approved a 75%, 15-year job retention tax credit for Marathon Petroleum that will allow it to retain 1,650 employees, added a report by The Toledo Blade. The state also approved a 60%, 10-year job creation tax credit for the company that will help it to create 100 jobs with an average wage of $46.82 an hour.
A statement from the Ohio Department of Development said Marathon Petroleum plans to invest at least $20 million to renovate its 141,557-square-foot building, buy new machinery and equipment and upgrade its infrastructure, said the report.
The job creation tax credit requires Marathon to keep its operations in Findlay for at least 13 years, while the job retention credit requires an 18-year commitment. The incentives were a "major factor" in Marathon's decision to keep its headquarters in Findlay, the state said.
The only remaining regulatory approval required is the completion of a review by the U.S. Securities & Exchange Commission of MPC's Form 10. The spinoff is expected to be effective June 30, 2011.
On January 13, 2011, Marathon's board of directors announced that it had approved moving forward with plans to spin-off the downstream business, creating two independent, highly focused energy companies. MPC, to be based in Findlay, Ohio, is expected to be the fifth largest U.S. refiner with a top-tier downstream portfolio of strategically aligned assets concentrated mainly in the Midwest, Gulf Coast and Southeast regions of the U.S. Marathon Oil, which will remain based in Houston, will be a global exploration and production company with a strong portfolio of assets delivering defined growth leveraged to crude oil production with exploration upside.
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