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BP Business Economic Loss Claim Appeal 2016-291: Non-profit grants are revenue


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant is a non-profit that resells building materials in New Orleans, Louisiana, whose claim was denied on the basis that it failed 4B’s causation test when certain grant funds are excluded from revenue. Claimant does not dispute the fact that it fails the test when these grant revenues are excluded, but Claimant asserts on appeal that those grant funds should not have been excluded, and if they were not excluded Claimant would be eligible for an award. That is the single issue in this appeal.

Specifically, what is involved is (1) a $10,000 grant in December used to purchase computers, hardware and backup security; (2) a $19,643 grant in July 2008 used primarily to purchase a pickup truck and trailer, and (3) a $12,000 grant in July 2009 used to purchase a paint filtration system. The Settlement Program found that these grant funds do not qualify as revenue as they are not used in the normal course of Claimant’s operations.

Policy 328 v.2 provides that “capital assessments”… “shall not typically be treated as ‘revenue’ for purposed of the various calculations to be performed under the terms of the Settlement Agreement…” The basis for same being that “these items are not typically earned as revenues under the normal course of operations in an arm’s length transaction.” However, Policy 307 v.2 provides:

“The Claims Administrator shall apply the Settlement Agreement as follows with respect to business economic claims of non-profit entities in the form of grant monies or contributions shall typically be treated as revenue for that entity for purposes of the various required calculations under the terms of the Settlement Agreement.”

There is nothing in the record that indicates that any cash grant issued to the Claimant had restrictions on its use for the purchase of capital assets. There is a distinction in this panelist mind between the direct donation of, for example, a computer, pickup truck or paint filtration system and the donation of cash that may or may not be used to purchase capital assets. The cash donation in the later situation is being used in the normal course of Claimant’s operations. This appeal does not involve receiving a direct donation of equipment or immovable property. Claimant spent cash grant revenues to purchase equipment that allowed it to directly operate its store that sells goods to the public, which is its normal course of business. These are not grants of equipment. These are cash grants that were used by the Claimant to support its revenue making activities. These grants are not “capital assets” because they are used to support Claimant’s general operations, and are not restricted to purchase capital equipment. The denial is overturned.

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