Exxon Valdez provision allows individual plaintiffs to income-average

JOY LANDALUCE

October 02, 2008 at 8:50AM AKST

Alaska’s U.S. Sens. Lisa Murkowski and Ted Stevens, on Sept. 23, won Senate approval of legislation that would give plaintiffs in the Exxon Valdez oil spill case the ability to increase retirement contributions and provide tax relief through income-averaging over a three-year period.

The measure was part of a package which included continuing tax breaks which were set to expire, provide incentives for energy conservation and renewable energy and another one-year fix to keep the alternative minimum tax from raising taxes on millions more Americans.

“While I am extremely disappointed in the Supreme Court’s decision to reduce the punitive damage award to the victims of the Exxon Valdez oil spill, this legislation will help lessen the tax burden and allow the 30,000 plaintiffs to keep more of the compensation they receive,” Sen. Murkowski said.

Cordova’s Mayor Tim Joyce was happy to see that the U.S. Senate passed the Exxon Valdez tax legislation allowing for income averaging and IRA deposits from the punitive damage award. “Even though the Supreme Court sided with big business in this case, the Senate seems to understand that the 35,000 victims of the oil spill suffered greatly and deserve more.

Providing the victims with this tax break is greatly appreciated,” Joyce said. “However, we now must wait for the House of Representatives to follow suit so the president can sign the bill into law. Hopefully, the House will see fit to do the right thing too.”

Rochelle van den Broek, Cordova’s District Fishermen United executive director, is encouraging letters of support be written and stated that this has to be done to move this bill through the House. “Washington residents need to contact House Rep. (Jim) McDermott to show their support and desire for this bill to pass. This is a critical point for the passageway of the bill, and without the support of McDermott, the hard work completed by Murkowski and staff over the past year could be for nothing,” van den Broek said.

“If you don’t live in Washington, but know someone who does, get on the phone and rally up their support. We are extremely thankful for the efforts of Sen. Murkowski, her fisheries advisor, Arnie Fuglvog and Frank Mullen and company of the Oiled Fisherman Fund out of Homer,” she added. “This was a long, difficult process and through persistence, determination and through a combined effort this passed in the Senate.”

The Exxon Valdez provision allows individual plaintiffs to income-average settlement payouts over a three year period of time. Currently, fishermen can average their income over three years because of the volatile nature of the industry.

In spite of the fact that any income from this case is essentially lost income for fishermen and others whose livelihoods were negatively impacted by the spill, under current law, punitive damage or settlement-related income from litigation cannot be averaged over three years.

The provision permits individual plaintiffs to contribute up to $100,000 to a traditional IRA, Roth IRA, SEP (Simplified Employee Pension) IRA and other retirement plans, such as 401(k) plans, 403(b) plans and 457 plans. 

It also exempts plaintiffs from having to pay self-employment taxes or payroll taxes on any payouts from this case.

Joy Landaluce can be reached at 907-424-7181.