II 

110TH CONGRESS 

1ST SESSION S. 552 

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

the litigation concerning the Exxon Valdez oil spill and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 12, 2007 

Ms. MURKOWSKI (for herself and Mr. STEVENS) 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 and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Exxon Valdez Oil Spill 

5 Tax Treatment Act’’. 

6 SEC. 2. TAX TREATMENT OF INCOME RECEIVED IN CON7 NECTION WITH THE EXXON VALDEZ LITIGA8 TION. 

9 (a) INCOME AVERAGING OF AMOUNTS RECEIVED

10 FROM THE EXXON VALDEZ LITIGATION.— 


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

2 taxpayer who receives qualified settlement income 

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

4 of the Internal Revenue Code of 1986 for such tax5 able year shall be equal to the sum of— 

6 (A) the tax which would be imposed under 

7 such chapter if— 

8 (i) no amount of elected qualified set9 tlement income were included in gross in10 come for such year, and 

11 (ii) no deduction were allowed for 

12 such year for expenses (otherwise allowable 

13 as a deduction to the taxpayer for such 

14 year) attributable to such elected qualified 

15 settlement income, plus 

16 (B) the increase in tax under such chapter 

17 which would result if taxable income for each of 

18 the years in the applicable period were in19 creased by an amount equal to the applicable 

20 fraction of the elected qualified settlement in21 come reduced by any expenses (otherwise allow22 able as a deduction to the taxpayer) attrib23 utable to such elected qualified settlement in24 come. 


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1 Any adjustment under this section for any taxable 

2 year shall be taken into account in applying this sec3 tion for any subsequent taxable year. 

4 (2) COORDINATION WITH FARM INCOME AVER5 AGING.—If a qualified taxpayer makes an election 

6 with respect to any qualified settlement income 

7 under paragraph (1) for any taxable year, such tax8 payer may not elect to treat such amount as elected 

9 farm income under section 1301 of the Internal Rev10 enue Code of 1986. 

11 (3) DEFINITIONS.—For purposes of this sub12 section— 

13 (A) APPLICABLE PERIOD.—The term ‘‘ap14 plicable period’’ means the period beginning on 

15 January 1, 1994, and ending on December 31 

16 of the year in which the elected qualified settle17 ment income is received. 

18 (B) APPLICABLE FRACTION.—The term 

19 ‘‘applicable fraction’’ means the fraction the nu20 merator of which is one and the denominator of 

21 which is the number of years in the applicable 

22 period. 

23 (C) ELECTED QUALIFIED SETTLEMENT IN24 COME.—The term ‘‘elected qualified settlement 


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1 income’’ means so much of the taxable income 

2 for the taxable year which is— 

3 (i) qualified settlement income, and 

4 (ii) specified under the election under 

5 paragraph (1). 

6 (b) CONTRIBUTIONS OF AMOUNTS RECEIVED TO RE7 TIREMENT ACCOUNTS.— 

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

9 receives qualified settlement income during the tax10 able year may, at any time before the end of the tax11 able year in which such income was received, make 

12 one or more contributions to an eligible retirement 

13 plan of which such qualified taxpayer is a bene14 ficiary in an aggregate amount not to exceed the 

15 amount of qualified settlement income received dur16 ing such year. 

17 (2) TIME WHEN CONTRIBUTIONS DEEMED

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

19 taxpayer shall be deemed to have made a contribu20 tion to an eligible retirement plan on the last day of 

21 the taxable year in which such income is received if 

22 the contribution is made on account of such taxable 

23 year and is made not later than the time prescribed 

24 by law for filing the return for such taxable year 

25 (not including extensions thereof). 


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1 (3) TREATMENT OF CONTRIBUTIONS TO ELIGI2 BLE RETIREMENT PLANS.—For purposes of the In3 ternal Revenue Code of 1986, if a contribution is 

4 made pursuant to paragraph (1) with respect to 

5 qualified settlement income, then— 

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

7 (i) to the extent of such contribution, 

8 the qualified settlement income shall not 

9 be included in taxable income, and 

10 (ii) for purposes of section 72 of such 

11 Code, such contribution shall not be con12 sidered to be investment in the contract, 

13 and 

14 (B) the qualified taxpayer shall, to the ex15 tent of the amount of the contribution, be treat16 ed— 

17 (i) as having received the qualified 

18 settlement income— 

19 (I) in the case of a contribution 

20 to an individual retirement plan (as 

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

22 such Code), in a distribution described 

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

24 and 


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1 (II) in the case of any other eligi2 ble retirement plan, in an eligible roll3 over distribution (as defined under 

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

5 (ii) as having transferred the amount 

6 to the eligible retirement plan in a direct 

7 trustee to trustee transfer within 60 days 

8 of the distribution. 

9 (4) SPECIAL RULE FOR ROTH IRAS AND ROTH

10 401(k)S.—For purposes of the Internal Revenue 

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

12 paragraph (1) with respect to qualified settlement 

13 income to a Roth IRA (as defined under section 

14 408A(b) of such Code) or as a designated Roth con15 tribution to an applicable retirement plan (within 

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

17 (A) the qualified settlement income shall 

18 be includible in taxable income, and 

19 (B) for purposes of section 72 of such 

20 Code, such contribution shall be considered to 

21 be investment in the contract. 

22 (5) ELIGIBLE RETIREMENT PLAN.—For pur23 pose of this subsection, the term ‘‘eligible retirement 

24 plan’’ has the meaning given such term under secVerDate Aug 31 2005 23:21 Feb 13, 2007 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S552.IS S552

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1 tion 402(c)(8)(B) of the Internal Revenue Code of 

2 1986. 

3 (c) QUALIFIED SETTLEMENT INCOME NOT IN4 CLUDED IN SECA.—For purposes of chapter 2 of the In5 ternal Revenue Code of 1986 and section 211 of the Social 

6 Security Act, no portion of qualified settlement income re7 ceived by a qualified taxpayer shall be treated as self-em8 ployment income. 

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

10 section, the term ‘‘qualified taxpayer’’ means— 

11 (1) any plaintiff in the civil action In re Exxon 

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

13 Alaska); or 

14 (2) any beneficiary of the estate of such a 

15 plaintiff who— 

16 (A) acquired the right to receive qualified 

17 settlement income from that plaintiff; and 

18 (B) was the spouse or an immediate rel19 ative of that plaintiff. 

20 (e) QUALIFIED SETTLEMENT INCOME.—For pur21 poses of this section, the term ‘‘qualified settlement in22 come’’ means income received (whether as lump sums or 

23 periodic payments) in connection with the civil action In 

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


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1 (D. Alaska), including interest (whether pre- or post judg2 ment and whether related to a settlement or judgment). 

Æ 


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