II 

109TH CONGRESS 

2D SESSION S. 3422 

To provide for the tax treatment of income received in connection with 

the litigation concerning the Exxon Valdez oil spill. 

IN THE SENATE OF THE UNITED STATES 

JUNE 6, 2006 

Ms. MURKOWSKI introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To provide for the tax treatment of income received in connection with the litigation concerning the Exxon Valdez 

oil spill. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. TAX TREATMENT OF INCOME RECEIVED IN 

4 CONNECTION WITH THE EXXON VALDEZ LITI5 GATION. 

6 (a) INCOME AVERAGING OF AMOUNTS RECEIVED

7 FROM THE EXXON VALDEZ LITIGATION.— 

8 (1) IN GENERAL.—At the election of a qualified 

9 taxpayer who receives qualified settlement income 

10 during a taxable year, the tax imposed by chapter 1 


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1 of the Internal Revenue Code of 1986 for such tax2 able year shall be equal to the sum of— 

3 (A) the tax which would be imposed under 

4 such chapter if— 

5 (i) no amount of elected qualified set6 tlement income were included in gross in7 come for such year, and 

8 (ii) no deduction were allowed for 

9 such year for expenses (otherwise allowable 

10 as a deduction to the taxpayer for such 

11 year) attributable to such elected qualified 

12 settlement income, plus 

13 (B) the increase in tax under such chapter 

14 which would result if taxable income for each of 

15 the years in the applicable period were in16 creased by an amount equal to the applicable 

17 fraction of the elected qualified settlement in18 come reduced by any expenses (otherwise allow19 able as a deduction to the taxpayer) attrib20 utable to such elected qualified settlement in21 come. 

22 Any adjustment under this section for any taxable 

23 year shall be taken into account in applying this sec24 tion for any subsequent taxable year. 


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1 (2) COORDINATION WITH FARM INCOME AVER2 AGING.—If a qualified taxpayer makes an election 

3 with respect to any qualified settlement income 

4 under paragraph (1) for any taxable year, such tax5 payer may not elect to treat such amount as elected 

6 farm income under section 1301 of the Internal Rev7 enue Code of 1986. 

8 (3) DEFINITIONS.—For purposes of this sub9 section— 

10 (A) APPLICABLE PERIOD.—The term ‘‘ap11 plicable period’’ means the period beginning on 

12 January 1, 1994, and ending on December 31 

13 of the year in which the elected qualified settle14 ment income is received. 

15 (B) APPLICABLE FRACTION.—The term 

16 ‘‘applicable fraction’’ means the fraction the nu17 merator of which is one and the denominator of 

18 which is the number of years in the applicable 

19 period. 

20 (C) ELECTED QUALIFIED SETTLEMENT IN21 COME.—The term ‘‘elected qualified settlement 

22 income’’ means so much of the taxable income 

23 for the taxable year which is— 

24 (i) qualified settlement income, and 


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1 (ii) specified under the election under 

2 paragraph (1). 

3 (b) CONTRIBUTIONS OF AMOUNTS RECEIVED TO RE4 TIREMENT ACCOUNTS.— 

5 (1) IN GENERAL.—Any qualified taxpayer who 

6 receives qualified settlement income during the tax7 able year may, at any time before the end of the tax8 able year in which such income was received, make 

9 one or more contributions to an eligible retirement 

10 plan of which such qualified taxpayer is a bene11 ficiary in an aggregate amount not to exceed the 

12 amount of qualified settlement income received dur13 ing such year. 

14 (2) TIME WHEN CONTRIBUTIONS DEEMED

15 MADE.—For purposes of paragraph (1), a qualified 

16 taxpayer shall be deemed to have made a contribu17 tion to an eligible retirement plan on the last day of 

18 the taxable year in which such income is received if 

19 the contribution is made on account of such taxable 

20 year and is made not later than the time prescribed 

21 by law for filing the return for such taxable year 

22 (not including extensions thereof). 

23 (3) TREATMENT OF CONTRIBUTIONS TO ELIGI24 BLE RETIREMENT PLANS.—For purposes of the In25 ternal Revenue Code of 1986, if a contribution is 


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1 made pursuant to paragraph (1) with respect to 

2 qualified settlement income, then— 

3 (A) except as provided in paragraph (4)— 

4 (i) to the extent of such contribution, 

5 the qualified settlement income shall not 

6 be included in taxable income, and 

7 (ii) for purposes of section 72 of such 

8 Code, such contribution shall not be con9 sidered to be investment in the contract, 

10 and 

11 (B) the qualified taxpayer shall, to the ex12 tent of the amount of the contribution, be treat13 ed— 

14 (i) as having received the qualified 

15 settlement income— 

16 (I) in the case of a contribution 

17 to an individual retirement plan (as 

18 defined under section 7701(a)(37) of 

19 such Code), in a distribution described 

20 in section 408(d)(3) of such Code, 

21 and 

22 (II) in the case of any other eligi23 ble retirement plan, in an eligible roll24 over distribution (as defined under 

25 section 402(f)(2) of such Code), and 


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1 (ii) as having transferred the amount 

2 to the eligible retirement plan in a direct 

3 trustee to trustee transfer within 60 days 

4 of the distribution. 

5 (4) SPECIAL RULE FOR ROTH IRAS AND ROTH

6 401(k)S.—For purposes of the Internal Revenue 

7 Code of 1986, if a contribution is made pursuant to 

8 paragraph (1) with respect to qualified settlement 

9 income to a Roth IRA (as defined under section 

10 408A(b) of such Code) or as a designated Roth con11 tribution to an applicable retirement plan (within 

12 the meaning of section 402A of such Code), then— 

13 (A) the qualified settlement income shall 

14 be includible in taxable income, and 

15 (B) for purposes of section 72 of such 

16 Code, such contribution shall be considered to 

17 be investment in the contract. 

18 (5) ELIGIBLE RETIREMENT PLAN.—For pur19 pose of this subsection, the term ‘‘eligible retirement 

20 plan’’ has the meaning given such term under sec21 tion 402(c)(8)(B) of the Internal Revenue Code of 

22 1986. 

23 (c) QUALIFIED SETTLEMENT INCOME NOT IN24 CLUDED IN SECA.—For purposes of chapter 2 of the In25 ternal Revenue Code of 1986 and section 211 of the Social 


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1 Security Act, no portion of qualified settlement income 

2 shall be treated as gross income derived from a trade or 

3 business carried on by a qualified taxpayer. 

4 (d) QUALIFIED TAXPAYER.—For purposes of this 

5 section, the term ‘‘qualified taxpayer’’ means any plaintiff 

6 in the civil action In re Exxon Valdez, No. 89–095–CV 

7 (HRH) (Consolidated) (D. Alaska). 

8 (e) QUALIFIED SETTLEMENT INCOME.—For pur9 poses of this section, the term ‘‘qualified settlement in10 come’’ means income received (whether as lump sums or 

11 periodic payments) in connection with the civil action In 

12 re Exxon Valdez, No. 89–095–CV (HRH) (Consolidated) 

13 (D. Alaska). 

Æ 


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