Many individuals and businesses in the domestic shrimp industry have already received settlement funds from BP with respect to the Deepwater Horizon oil spill, and many others will be receiving funds in the near future. In order to maximize the benefit you receive from any such settlement, be sure to consult with your accountant or other tax advisor to ensure that you are taking full advantage of the tax planning rules that are available to you. Such options may include:
Contribute to an eligible retirement plan. For individuals and their spouses, this may include contributing to existing IRAs or establishing IRAs. For business owners, this may include the establishment of or contribution to an existing SEP IRA.
Determine whether you are able to utilize the Internal Revenue Codes income averaging rules that are available to farmers and fishermen.
Determine whether you are able to deduct attorneys fees or other court costs associated with the settlement.
Make investments in your fishing vessel under the NMFS’s Capital Construction Fund Program. The CCF Program enables fishermen to construct, reconstruct, or under limited circumstances, acquire fishing vessels with before-tax, rather than after-tax dollars. The program allows fishermen to defer tax on income from the operation of their fishing vessels. Under the CCF Program, the amount accumulated by deferring tax on fishing income, when used to help pay for a vessel project, is, in effect, an interest free loan from the Government.
Other tax planning, for example, pre-paying for certain expenses that you know you will incur in future years.
The Southern Shrimp Alliance has worked hard since the oil spill to ensure that members of our industry are fairly compensated. Now we want to ensure that members of our industry preserve these settlement funds to the greatest extent possible so that funds can be reinvested in our industry. When you receive a check from BP, don’t simply cash it and move on. Consult a tax professional to ensure that you use those funds to strengthen your business and, in turn, strengthen our industry.