As we enter the 18th year of the Exxon Valdez oil spill, many of us are still wondering when Exxon will be required to pay what they owe. The good news is the distribution of the punitive damage award -- now likely based on $2.5 billion, plus interest -- could come as early as the end of year. According to legal analysts, Exxon’s appeal for a full-court hearing by the Ninth Circuit will likely be turned down. The Supreme Court also likely will turn down Exxon’s expected appeal -- as early as October when the high court convenes after its summer recess.
This fast track scenario means the case could be over and the punitive damage award distributed as early as October. It behooves all residents of oiled communities to start planning for this early possibility.
This award will affect more than “just” thousands of fishermen, Natives and other plaintiffs in the Exxon Valdez case. Because of formal legal agreements and federal law changes, the award could potentially benefit members of traditional tribal villages, Native corporation shareholders and nonprofit organizations throughout the oiled region.
In other words, this punitive damage award could benefit not only individual plaintiffs, but entire communities in the oiled region. To maximize benefits to your community, tribe or corporation, one needs to understand a little history and plan ahead.
In 1996, Congress passed a law making punitive damages taxable retro to the Exxon Valdez case with its jury award of $5 billion. This means plaintiffs will be in the highest income tax bracket for one year, the year the case is over -- quite possibly this year.
It also means that up to 35 percent of an individual’s award could go to the IRS. It could be substantially more than 35 percent if the recipient is a resident of a state with state income tax, unless those taxes can be reduced by using financial strategies such as special trust fund arrangements or charitable giving.
Village or tribal councils will receive a share of the award from individual subsistence claimants. Some Native corporations are planning to return a portion of their award to shareholders as dividends. This means that, if you are a member of a Native council or corporation, you could receive a share of the punitive damage award whether or not you are a plaintiff.
The point of all this is: proper planning well in advance of any award distribution will reduce individual recipient’s tax burden and maximize benefits to your community -- town, tribal council or corporation.
The Oiled Regions of Alaska (ORA) Foundation is a community foundation with the capacity to help people reduce their tax burden by giving to their own communities. The ORA Foundation was started in 2001 by people from oiled communities to help our areas rebuild and recover from the spill by creating a permanent way to give back to communities year after year.
For the last six years, the foundation has been conducting free financial planning workshops for plaintiffs and nonprofit organizations throughout the oiled regions. ORA has been able to offer this no cost, no obligation service through our partner Joni Whitmore at Merrill Lynch.
Many of you have attended the seminars and understand the tax-saving value of a good financial plan. A good financial plan is a professional work product like a business plan for individuals done by a reputable and trusted financial planner. Punitive damage awards have the potential and reputation for being short-term windfall bonanzas. We offer this financial planning service to help ensure that the punitive damage awards will benefit recipients, communities and generations to come.
We encourage people to plan ahead. If you are a plaintiff, member of a village council or Native corporation, member or staff of a nonprofit organization in the oiled region, visit the ORA Foundation Web site at www.orafoundation.org, come to our community workshops (schedule posted on Web site), share this information with your favorite charity and-or talk with your Native organizations.
The Exxon Valdez spill has hurt too many for too long. Now is the time to plan ways to rebuild the communities and the lives of those most affected.
Chuck McCallum (Alaska Peninsula) is on the executive committee of the ORA Foundation (www.orafoundation.org).
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