Internal Revenue Code:Sec. 198. Expensing of environmental remediation costs

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter B - Computation of Taxable Income
         PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
       

Statute

    Sec. 198. Expensing of environmental remediation costs
 
    (a) In general
      A taxpayer may elect to treat any qualified environmental
    remediation expenditure which is paid or incurred by the taxpayer
    as an expense which is not chargeable to capital account.  Any
    expenditure which is so treated shall be allowed as a deduction for
    the taxable year in which it is paid or incurred.
    (b) Qualified environmental remediation expenditure
      For purposes of this section -
      (1) In general
        The term ''qualified environmental remediation expenditure''
      means any expenditure -
          (A) which is otherwise chargeable to capital account, and
          (B) which is paid or incurred in connection with the
        abatement or control of hazardous substances at a qualified
        contaminated site.
      (2) Special rule for expenditures for depreciable property
        Such term shall not include any expenditure for the acquisition
      of property of a character subject to the allowance for
      depreciation which is used in connection with the abatement or
      control of hazardous substances at a qualified contaminated site;
      except that the portion of the allowance under section 167 for
      such property which is otherwise allocated to such site shall be
      treated as a qualified environmental remediation expenditure.
    (c) Qualified contaminated site
      For purposes of this section -
      (1) In general
        The term ''qualified contaminated site'' means any area -
          (A) which is held by the taxpayer for use in a trade or
        business or for the production of income, or which is property
        described in section 1221(a)(1) in the hands of the taxpayer,
        and
          (B) at or on which there has been a release (or threat of
        release) or disposal of any hazardous substance.
      (2) National priorities listed sites not included
        Such term shall not include any site which is on, or proposed
      for, the national priorities list under section 105(a)(8)(B) of
      the Comprehensive Environmental Response, Compensation, and
      Liability Act of 1980 (as in effect on the date of the enactment
      of this section).
      (3) Taxpayer must receive statement from State environmental
          agency
        An area shall be treated as a qualified contaminated site with
      respect to expenditures paid or incurred during any taxable year
      only if the taxpayer receives a statement from the appropriate
      agency of the State in which such area is located that such area
      meets the requirement of paragraph (1)(B).
      (4) Appropriate State agency
        For purposes of paragraph (3), the chief executive officer of
      each State may, in consultation with the Administrator of the
      Environmental Protection Agency, designate the appropriate State
      environmental agency within 60 days of the date of the enactment
      of this section.  If the chief executive officer of a State has
      not designated an appropriate environmental agency within such
      60-day period, the appropriate environmental agency for such
      State shall be designated by the Administrator of the
      Environmental Protection Agency.
    (d) Hazardous substance
      For purposes of this section -
      (1) In general
        The term ''hazardous substance'' means -
          (A) any substance which is a hazardous substance as defined
        in section 101(14) of the Comprehensive Environmental Response,
        Compensation, and Liability Act of 1980,
          (B) any substance which is designated as a hazardous
        substance under section 102 of such Act, and
          (C) any petroleum product (as defined in section 4612(a)(3))
      (2) Exception
        Such term shall not include any substance with respect to which
      a removal or remedial action is not permitted under section 104
      of such Act by reason of subsection (a)(3) thereof.
    (e) Deduction recaptured as ordinary income on sale, etc.
      Solely for purposes of section 1245, in the case of property to
    which a qualified environmental remediation expenditure would have
    been capitalized but for this section -
        (1) the deduction allowed by this section for such expenditure
      shall be treated as a deduction for depreciation, and
        (2) such property (if not otherwise section 1245 property)
      shall be treated as section 1245 property solely for purposes of
      applying section 1245 to such deduction.
    (f) Coordination with other provisions
      Sections 280B and 468 shall not apply to amounts which are
    treated as expenses under this section.
    (g) Regulations
      The Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of this section.
    (h) Termination
      This section shall not apply to expenditures paid or incurred
    after December 31, 2007.
 

Sources

    (Added Pub. L. 105-34, title IX, Sec. 941(a), Aug. 5, 1997, 111
    Stat. 882; amended Pub. L. 106-170, title V, Sec. 511,
    532(c)(2)(A), Dec. 17, 1999, 113 Stat. 1924, 1930; Pub. L. 106-554,
    Sec. 1(a)(7) (title I, Sec. 162(a), (b)), Dec. 21, 2000, 114 Stat.
    2763, 2763A-625.)
 

References in Text

                             REFERENCES IN TEXT
      The date of the enactment of this section, referred to in subsec.
    (c)(2), (4), is the date of enactment of Pub. L. 105-34, which was
    approved Aug. 5, 1997.
      Sections 101(14), 102, 104, and 105(a)(8)(B) of the Comprehensive
    Environmental Response, Compensation, and Liability Act of 1980,
    referred to in subsecs. (c)(2) and (d), are classified to sections
    9601(14), 9602, 9604, and 9605(a)(8)(B), respectively, of Title 42,
    The Public Health and Welfare.
 

Miscellaneous

                                 AMENDMENTS

2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 109. EXTENSION AND EXPANSION OF EXPENSING OF BROWNFIELDS 
            REMEDIATION COSTS.
    (a) Extension.--Subsection (h) of section 198 is amended by striking 
``2005'' and inserting ``2007''.
    (b) Expansion.--Section 198(d)(1) (defining hazardous substance) is 
amended by striking ``and'' at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting ``, and'', and 
by adding at the end the following new subparagraph:
                    ``(C) any petroleum product (as defined in section 
                4612(a)(3)).''.
    
      2004 - Subsec.308,Pub.L.108-311, amended Sec.198(h) by
    striking "December 31, 2003" and inserting "December 31, 2005".
    Effective Date.--The amendment made by subsection (a) shall 
    apply to expenditures paid or incurred after December 31, 2003.
      2000 - Subsec. (c). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    162(a)), amended subsec. (c) generally.  Prior to amendment,
    subsec. (c) defined the term ''qualified contaminated site'' to
    include certain property described in section 1221(a)(1) of this
    title, within a targeted area, and at which there had been a
    release or disposal of any hazardous substance, provided that an
    area could be treated as a qualified contaminated site only if the
    taxpayer received a certain statement from an appropriate State
    agency, provided for designation of appropriate State agencies, and
    defined targeted area.
      Subsec. (h). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    162(b)), substituted ''2003'' for ''2001''.
      1999 - Subsec. (c)(1)(A)(i). Pub. L. 106-170, Sec. 532(c)(2)(A),
    substituted ''section 1221(a)(1)'' for ''section 1221(1)''.
      Subsec. (h). Pub. L. 106-170, Sec. 511, substituted ''2001'' for
    ''2000''.

                      EFFECTIVE DATE OF 2006 AMENDMENT
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 109. EXTENSION AND EXPANSION OF EXPENSING OF BROWNFIELDS 
            REMEDIATION COSTS.
        (c) <<NOTE: 26 USC 198 note.>> Effective Date.--The amendments made 
by this section shall apply to expenditures paid or incurred after 
December 31, 2005.

                      EFFECTIVE DATE OF 2000 AMENDMENT
      Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec. 162(c)), Dec. 21,
    2000, 114 Stat. 2763, 2763A-625, provided that: ''The amendments
    made by this section (amending this section) shall apply to
    expenditures paid or incurred after the date of the enactment of
    this Act (Dec. 21, 2000).''
                      EFFECTIVE DATE OF 1999 AMENDMENT
      Amendment by section 532(c)(2)(A) of Pub. L. 106-170 applicable
    to any instrument held, acquired, or entered into, any transaction
    entered into, and supplies held or acquired on or after Dec. 17,
    1999, see section 532(d) of Pub. L. 106-170, set out as a note
    under section 170 of this title.
                               EFFECTIVE DATE
      Section 941(c) of Pub. L. 105-34 provided that: ''The amendments
    made by this section (enacting this section) shall apply to
    expenditures paid or incurred after the date of the enactment of
    this Act (Aug. 5, 1997), in taxable years ending after such date.''