To amend the Internal Revenue Code of 1986 to encourage the cleanup of contaminated brownfield sites.

Summary: Amends the Internal Revenue Code to permit the expensing for tax deduction purposes of certain environmental remediation costs.

SECTION 1. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``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(1) in the 
                hands of the taxpayer, and
                    ``(B) which contains (or potentially contains) any 
                hazardous substance.
            ``(2) Taxpayer must receive statement from state 
        environmental agency.--An area shall be treated as a qualified 
        contaminated site by reason of a substance described in 
        subparagraph (A), (B), or (C) of subsection (d)(1) 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 requirements of subparagraph (B) of paragraph (1) of this 
        subsection.
            ``(3) Appropriate state agency.-- For purposes of paragraph 
        (2), the appropriate agency of a State is the agency designated 
        by the Administrator of the Environmental Protection Agency for 
        purposes of this section. If no agency of a State is designated 
        under the preceding sentence, the appropriate agency for such 
        State shall be 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,
                    ``(C) any extremely hazardous substance under the 
                Emergency Planning and Community Right to Know Act of 
                1986,
                    ``(D) asbestos (whether friable or nonfriable),
                    ``(E) radon,
                    ``(F) lead paint, and
                    ``(G) any petroleum product.
            ``(2) Exception.--Such term shall not include any substance 
        described in subparagraph (A), (B), (C), or (G) of paragraph 
        (1) with respect to which a removal or remedial action is not 
        permitted under section 104 of the Comprehensive Environmental 
        Response, Compensation, and Liability Act of 1980 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.''
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of such Code is amended by adding at the end 
the following new item:

                              ``Sec. 198. Expensing of environmental 
                                        remediation costs.''
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred after the date of the enactment 
of this Act, in taxable years ending after such date.