MURKOWSKI AND STEVENS INTRODUCE TAX LEGISLATION
TO ASSIST EXXON VALDEZ OIL SPILL PLAINTIFFS
WASHINGTON, D.C. – Senators Lisa Murkowski and Ted Stevens today introduced tax legislation to give the plaintiffs in the Exxon Valdez oil spill settlement the ability to increase retirement contributions and to provide tax relief through income averaging.
The bill would provide tax relief to all of the individual plaintiffs in the oil spill settlement, 80% of whom are commercial fisherman. It was drafted to cover any possible settlement while the case is in litigation and any amounts received under the judgment if it is upheld. The current level of court-approved punitive damages is $2.5 billion, plus interest.
“This bill provides financial relief to those impacted by the spill when it comes to contributions to retirement plans and averaging of income for tax purposes,” said Senator Murkowski. “It is imperative that we address this important issue to help our fishermen plan for their retirement needs.”
“The Exxon Valdez oil spill occurred nearly 18 years ago, but many Alaskans are still dealing with losses incurred by the disaster,” said Senator Stevens. “Commercial fisherman and others whose livelihoods were adversely impacted by the spill have not been able to plan adequately for retirement. I am pleased to work with Senator Murkowski in introducing legislation to address this important issue.”
The bill includes the following provisions:
Contributions to Retirement Plans
• Increases the caps on deductions and income for traditional IRAs to the extent of the income the individual receives from the settlement or judgment.
• Allows contributions to Roth IRAs to the extent of the income from the settlement or judgment.
• Allows contributions to any other type of qualified retirement plan [e.g., SEPs, 401(k)/Profit Sharing Plans, etc] to the extent of the income received from the settlement or judgment.
The bill gives the plaintiffs until the end of the taxable year in which they receive the settlement to transfer funds to one of the aforementioned retirement plans. In practice, plaintiffs would be able to use settlement funds to contribute to retirement plans until the day before the tax filing deadline for the taxable year when they received the funds.
This bill draft allows a plaintiff to average his or her income between December 31 of the year he or she receives the settlement or judgment payment and January 1, 1994 – the year of the original court decision in Anchorage.
Lump Sum Payments vs. Periodic Payments
There is a possibility that the plaintiffs will receive settlement/judgment funds as periodic payments, instead of a lump sum payment. If the former is the case, this bill is drafted so that the plaintiffs can still take advantage of the provisions in the bill.