Cyberattack on the Colonial Pipeline: What Commercial Real Estate Investors Should Know

On Sunday, May 9th, the Federal Motor Carrier Safety Administration issued a regional emergency statement for Washington, DC and 17 states in response to a cyberattack on one of the largest fuel pipelines, the Colonial Pipeline. The emergency declaration offers regulatory relief in accordance with 49 CFR Parts 300-399.

Colonial Pipeline administrators learned of the cyber attack on Friday May 7th and took some of their systems offline. In response to the recent attack, President Biden also signed an executive order to improve the country’s cybersecurity and protect the federal government’s network.

The system failure panicked many as they anticipated a possible gas shortage. The Colonial Pipeline, with a pipeline of 5,500 miles, delivers more than 100 million gallons of gas daily. This means that many companies and individuals have been affected by the cyber attack.

A cyber attack means a regional gas shortage

In particular, commercial real estate investors who own gas stations have been hardest hit by the recent cyberattacks. Many gas stations in Virginia, Georgia, and North Carolina have experienced severe gas shortages. To keep track of gas supplies in your area, the GasBuddy location can be used to monitor this crisis. The red coded sections are the spots where the gas is completely sold out.

As a result of the gas shortage, three states have declared a state of emergency: Virginia, Georgia and North Carolina. Commercial real estate investors in these states should closely monitor their state government’s website for updated information on the state of emergency.

Declaration on the major disaster

While three states have declared a state of emergency, the White House has declared events a major disaster.

When the White House declares a major disaster, a wide range of federal aid can be given to individuals and the public infrastructure. So far, the Biden administration has issued an executive ordinance outlining the administration’s plan for a federal agency-wide response.

Disaster relief

In addition to the administrative response, individuals and companies can receive relief in the event of a declared disaster during the tax season.

The IRS has not yet issued specific guidance for those affected by the Colonial Pipeline cyberattack. In general, taxpayers (such as individuals, companies, sole proprietorships and shareholders of S-companies) can qualify for disaster relief in a disaster area declared by the federal government.

To qualify for disaster relief, the taxpayer does not have to be physically in the disaster area, but rather must be affected by the disaster. To receive disaster relief, it is always best to work with your tax advisor to make sure you are getting the most up-to-date tax guidelines.

The bottom line of Millionacres

While FEMA has not yet listed the regions affected by the Colonial Pipeline cyberattacks as being affected by a federally declared disaster, the White House has already described the attacks as a major disaster. Affected taxpayers should keep an eye on both FEMA and the IRS websites for information on available relief and / or remedial action for the 2020 and 2021 tax years.