Murkowski pushes bill to ease tax on Exxon oil spill payout

WASHINGTON — As Alaskans await the U.S. Supreme Court's decision in the Exxon Valdez case, U.S. Sen. Lisa Murkowski is working on easing their tax burden, should they land a windfall in punitive damages.

The Alaska Republican doesn't have much time. The court is expected to announce its decision Thursday or Monday, before the justices pack up for the summer. The Supreme Court will be ruling on whether Exxon Mobil Corp. must pay out $2.5 billion in punitive damages stemming from the March 1989 spill of 11 million gallons of crude oil in Prince William Sound.

The 32,677 plaintiffs in the case have been waiting for the money since 1994, when a jury in Anchorage returned a $5 billion punitive-damages award against Exxon. The company has been appealing the verdict since then. Exxon's biggest victory came in 2006, when the 9th U.S. Circuit Court of Appeals cut the award in half. Exxon appealed that decision to the Supreme Court.

Murkowski's bill would let the plaintiffs in the case pay taxes on the punitive damages award over three years, rather than just in one tax year. It's similar to tax codes that let fishermen average their income over three years.

If plaintiffs receive a windfall, they also would be allowed to put up to $100,000 of the money into retirement accounts to defer taxes. Under Murkowski's proposal, plaintiffs would be exempt from payroll or self-employment taxes on any payouts from Exxon.

Murkowski's legislation could be attached to a tax bill that the Senate is expected to vote on today. The main proposal extends tax credits in a number of different areas, including for research and development and, potentially, for renewable energy proposals.

Murkowski has tried unsuccessfully to attach the Exxon proposal to other legislation, including the Farm Bill earlier this year. Murkowski said she hoped it could be attached to the tax bill. There's some urgency in trying to get it done before the Supreme Court rules, the senator said last week.

"We know that there's going to be a lag time," she said. "But the concern is, once those checks get cut, trying to do anything retroactively, particularly when you're dealing with the IRS, is so very difficult. I don't think it's impossible, but I think it becomes much more complicated."

Although the justices are not required to issue an opinion before they recess for the summer, they almost always do. The only exception would be if the court decided to rehear a case, a rare event.