ABSTRACT

Tax Issues and the Gulf of Mexico Oil Spill: Legal Analysis of Payments and Tax Relief Policy Options [July 15, 2010]   [open pdf - 202KB]

"The explosion of the Deepwater Horizon oil rig and subsequent oil spill into the Gulf of Mexico has led to substantial damages, particularly in the form of lost wages and income. BP has begun to make interim payments to compensate for lost income resulting from the oil spill. Given the magnitude of the economic disruption resulting from the spill, however, policymakers may consider exploring alternative mechanisms for providing relief to the affected region. One option is to provide relief through the tax code by adopting measures similar to those employed following past major disasters. BP is currently making interim payments to claimants 'who are not receiving their ordinary income or profit' during the cleanup phase. The IRS [Internal Revenue Service] has released guidance regarding the tax treatment of these payments in an effort to help taxpayers understand the tax implications of receiving claims payments from BP. This report provides a legal analysis of the tax status of payments received from BP by Gulf Coast victims under current law, and discusses potential legal distinctions between payments received for lost income versus those that may be received to compensate for property loss and physical injuries. Further, this report comments on the tax implications in the event a federal disaster declaration is issued with respect to this incident."

Report Number:
CRS Report for Congress, R41323
Author:
Publisher:
Date:
2010-07-15
Series:
Copyright:
Public Domain
Retrieved From:
Via E-mail
Format:
pdf
Media Type:
application/pdf
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