Tampa, Florida


Email Tom Young Tom Young on LinkedIn Tom Young on Twitter Tom Young on Facebook Tom Young on Avvo
Tom Young
Tom Young
Attorney • (813) 251-9706

BP Business Economic Loss Claim Appeal 2016-613: Donation to non profit is revenue (decision affirmed)


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.

This Claimant is a 501(c)(3), non-profit museum which is located in the city of Largo, Florida (Zone C). Over the years, its founder amassed a large collection of historical military memorabilia, including fully restored, fully operational jeeps, tanks, half-tracks and armor in addition to aircraft, firearms and ordnance of many vintages, all of which it showcases and displays to the public. Its Business Economic Loss claim was denied by the Claims Administrator for failure to satisfy the Settlement Agreement Exhibit 4B causation tests. On appeal, Claimant argues that it would have passed those tests had not the Claims Administrator excluded from its revenue certain grants and contributions it received from its donors.

The claims analyst’s Calculation Notes record the following with respect to this issue:

In May 2008, July 2008, and August 2008 the Claimant received $183,982.28, $120,808.98, and $264,247.28 respectively, to fund renovation and pre-opening costs of a facility. The Claimant stated that Contributions received were given without restriction to the museum general operating fund. However, the Claimant also stated that the months in question (May 2008, July 2008, August 2008) contain revenue amounts that are specifically for the purpose of capital improvements. Therefore, Accounting Review used contra and adjustment accounts to exclude these capital contributions in accordance with Policy 328 v.2.

Claimant states that it commenced operations in August, 2008 in a building which it developed during 2007 and a major portion of 2008. Prior to opening, it received contributions from various sources which were used to fund renovations and improvements to the property. Subsequent to its opening, it incurred significant start-up losses that were funded by a limited operating income stream and contributions from various supporters. Those funds were used to pay its operating expenses and cover those losses. In arguing that the contributions in question should not have been excluded, Claimant points to CAO Approved Policy 307 v. 2. According to that policy, income from grants “shall typically be treated as revenue” for the purpose of calculating BEL claims of non-profit entities. Claimant also cites prior Appeal Panel Decisions which upheld inclusion of such grants as revenue in like circumstances.

To the contrary, BP argues that Policy 328 v. 2 governs this issue because it states that “capital assessments” “shall not be typically treated as ‘revenue’ for purposes of the various calculations to be performed under the terms of the Settlement Agreement with regard to entities asserting BEL claims.” According to BP, the reason for that is “straightforward and compelling” since the policy declares that “these items are not typically earned as revenue under the normal course of operations in an arms length transaction.” Donations used to acquire capital assets simply are not revenues “earned . . . under the normal course of operations,” according to that policy.

At the outset, this panelist has difficulty equating the kinds of donations at issue in this appeal with the “capital assessments” referenced in Policy 328 v. 2. Such assessments are commonly required to be paid by tenants of commercial buildings and condominium owners in keeping with contractual obligations assumed by them. As Claimant correctly notes, these donations and contributions were freely given, were deposited into its general operating account and used to pay a variety of operating expenses. More importantly, as another, distinguished panelist held in an identical appeal:

In promulgating Policy 307 v.2, the Claims Administrator provided a needed clarification of the Settlement Agreement with regard to non-profit entities whose income is often derived from non-traditional sources such as grants. But the Administrator is not the only authority on the subject. As early as December 12, 2012, the District Court likewise held that grant monies received by nonprofit entities should, in fact, be included in the calculations required under the Settlement Agreement.

If there was any reasonable doubt, it was laid to rest by the Fifth Circuit which specifically upheld the December 12, 2012 ruling, confirming that grant income of non-profits must be treated as revenue. The Fifth Circuit made it abundantly clear that non-profit entities do not earn grant funds. Further, Policy 307 v. 2 makes no distinction regarding the purpose for which grant funds are utilized. As endorsed by the courts, such income must typically be treated as revenue. There is therefore no authority supporting BP’s argument that grant funds utilized for capital purposes must be excluded from revenue.

Policy 302 v. 2 is a decision of the court which is binding upon the parties, the Settlement Program, the Claims Administrator and all Appeal Panelists. The donations and contributions at issue here should not have been excluded from Claimant’s revenue. This Claimant appeal is sustained and the claim is therefore remanded to the Claims Administrator for further processing in keeping with this opinion.

[Editor’s Note: The above decision was affirmed on Discretionary Review by Judge Barbier – “The Appeal Panel’s decision is consistent with prior decisions of this Court and the Fifth Circuit Court of Appeals. The non-profit revenue at issue was properly considered under the facts of this claim. The decision of the Appeal
Panel is AFFIRMED.”]

Leave a Comment

Have an opinion? Please leave a comment using the box below.

For information on acceptable commenting practices, please visit Lifehacker's guide to weblog comments. Comments containing spam or profanity will be filtered or deleted.