How did the oil well blowout in the Gulf of Mexico affect your business? You may think you had no economic impact. According to the attorneys representing BP, they believe you could have been impacted and, using their calculations, they will repay you for your losses calculated by their formulas.
A brief history lesson is needed. In April 2010, BP’s Macondo rig blew out in the Gulf of Mexico. The subsequent oil spill impacted the seafood industry from Texas to Florida. Not only was the seafood industry hurt but tourism suffered a blow as many people cancelled their beach vacations. When the people in these industries were jobless, that affected their spending with all other businesses from restaurants, auto garages, retail shops, doctors, lawyers and accountants. Everyone living in the coastal counties suffered economically. The harm did not stop with the counties touching the salt water. The ripple effect was felt many miles inland.
The attorneys advising BP recognized the potential for hundreds of thousands of individual lawsuits the company could be forced to defend. The BP attorneys and attorneys representing potential claimants agreed upon a class action settlement agreement which contained a set of qualifications and mathematical formulas that would determine the amount of losses BP would reimburse. Their calculations were based on multipliers that decreased the further you were away from the coastline. The court approved the class action settlement agreement.
Subsequently the lawyers for BP appear to have buyers’ remorse. They do not want to honor the agreement evidently because it could cost them more than they originally estimated. For whatever their reasons, the BP lawyers have appealed the court’s decision. The courts have practically denied every appeal. Not to be deterred, BP appealed to the United States 5Th Circuit Court of Appeals which refused to hear their complaint and ordered that BP must start paying the claims received. Again, not to be deterred, BP appealed to the US Supreme Court. SCOTUS has not decided if they will hear the appeal but did order BP to begin paying the claims.
To be eligible to file a claim your business must have operated in the geographic area. The entire state of Mississippi is located in the Zone D and meets this test. Certain businesses and industries are excluded from the claim. Next you must demonstrate that for any three consecutive month period from May – December 2010, your average revenue was a 10% below the same three consecutive month period in 2011. Additionally, the 2010 period must be 8.5% below the same three consecutive month period in 2009, 2009 and 2008 averaged or 2009, 2008, and 2007 averaged. If you pass these formulas, the calculation for actual damages is determined by formulas that exclude certain fixed business expenses and allow some variable expenses. There are two more tests which are more difficult to meet but could increase the amount of your ultimate claim.
The first step is to see if you qualify for a claim. The second step is calculating the amount of the claim which generally means gathering the monthly financial statement for 2007 – 2011, income tax returns, sales tax returns and other documents.
Because the calculation involves comparing the best three month period against other years and averages it is not possible to look at annual financial statements to determine eligibility. Each period must be entered individually to know if you qualify. If you want us to check your eligibility and discuss if you qualify contact us at our Meridian office 601-693-4444.
David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.