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Brownfield Expensing Tax Incentive

The Brownfields Expensing Tax Incentive is intended to spur the cleanup and revitalization of brownfield properties by allowing taxpayers to immediately reduce their taxable income by the cost of their eligible cleanup expenses. Under the Tax Incentive, certain environmental cleanup costs at targeted sites may be fully deducted by eligible taxpayers in the year in which they are incurred, rather than having to be capitalized and spread over a period of years.

On October 3, 2008, H.R. 1424 was signed into law by the President. Section 318 of the bill provides for expensing of environmental remediation costs extending the current brownfield tax incentive till December 31, 2009, and is effective for expenditures paid or incurred after December 31, 2007. The tax incentive allows taxpayers to receive a current federal income tax deduction for certain qualifying remediation costs that would otherwise by subject to capitalization. The extension is a timely benefit for companies seeking to acquire or dispose of environmentally impaired properties.

Recommended Steps for Using the Tax Incentive

1. Determine whether you meet the taxpayer requirements.
   1. The property must be ‘held by the taxpayer’; this definition includes outright ownership. However, some long-term lease arrangements may qualify.
   2. The taxpayer must hold the property for business or income generation purposes.
2. Find out whether your property meets eligibility requirements.
   1. The property cannot be listed on the National Priorities List (NPL).
   2. Generally, a property is eligible if it is in an area at or on which there has been:
      1. A release or threat of a release of a hazardous substance, which includes petroleum products.
      2. Disposal of a hazardous substance, which includes petroleum products.
3. Ask your state for a statement that you are eligible for the Tax Incentive.
   1. Before the IRS will accept the deduction, a designated state agency must provide you with a statement that there has been a release, threat of release, or disposal of a hazardous substance at or on the property. The following contact information is applicable for properties location in Ohio.
      
      Mr. Frank Robertson
      Supervisor, Voluntary Action Program
      Ohio Environmental Protection Agency
      Lazarus Government Center
      P.O. Box 104950
      West Town Street, Suite 700
      Columbus , OH 43216-1049
      (614) 644-2306
      frank.robertson@epa.state.oh.us
4. Determine what expenditures are eligible.
   1. Taxpayers should work with their tax counsel or legal counsel on the matter of eligible expenses.
   2. Types of eligible expenses MAY include:
      1. Site Assessment and Investigation
      2. Site Monitoring
      3. Cleanup costs
      4. Operation and Maintenance Costs
      5. State Voluntary Cleanup Program oversight fees
      6. Removal of demolition debris

Additional Resources

• IRS Section 198(a) of the Internal Revenue Code
• USEPA http://www.epa.gov/brownfields/index.html