Windfall Profits

Profit that occurs suddenly as a result of an event not controlled by the person or company profiting from the event. For example, oil companies profited in the 1970s from an explosion in the price of oil brought about by the Arab oil embargo and the price increases demanded by the Organization of Petroleum Exporting Countries. See also Windfall Profits Tax.

Earnings of an unexpected nature and generally not due to the efforts and expenditures of the entity that benefits. The Crude Oil Windfall Profits Tax of 1980 placed a tax on such profits on the production and sale of crude oil. The windfall profits figure is derived from complex calculations defined in the code, based on the difference between selling price less state severance taxes and a defined base price.