I 

108TH CONGRESS 

1ST SESSION H. R. 3527

To amend the Internal Revenue Code of 1986 to exclude from unrelated 

business taxable income the gain or loss on the sale or exchange of 

certain brownfield sites, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 19, 2003

Mrs. JOHNSON of Connecticut (for herself, Mr. BECERRA, Mr. HOUGHTON, 

Mr. WELLER, Mr. CARDIN, and Mr. NEAL of Massachusetts) introduced 

the following bill; which was referred to the Committee on Ways and 

Means 

A BILL

To amend the Internal Revenue Code of 1986 to exclude 

from unrelated business taxable income the gain or loss 

on the sale or exchange of certain brownfield sites, and 

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
2

•HR 3527 IH 

1 SECTION 1. EXCLUSION OF GAIN OR LOSS ON SALE OR EX2 CHANGE OF CERTAIN BROWNFIELD SITES 

3 FROM UNRELATED BUSINESS TAXABLE IN4 COME. 

5 (a) IN GENERAL.—Subsection (b) of section 512 of 

6 the Internal Revenue Code of 1986 (relating to unrelated 

7 business taxable income) is amended by adding at the end 

8 the following new paragraph: 

9 ‘‘(18) TREATMENT OF GAIN OR LOSS ON SALE

10 OR EXCHANGE OF CERTAIN BROWNFIELD SITES.—

11 ‘‘(A) IN GENERAL.—Notwithstanding para12 graph (5)(B), there shall be excluded any gain 

13 or loss from the qualified sale, exchange, or 

14 other disposition of any qualifying brownfield 

15 property by an eligible taxpayer. 

16 ‘‘(B) ELIGIBLE TAXPAYER.—For purposes 

17 of this paragraph—

18 ‘‘(i) IN GENERAL.—The term ‘eligible 

19 taxpayer’ means, with respect to a prop20 erty, any organization exempt from tax 

21 under section 501(a) which—

22 ‘‘(I) acquires from an unrelated 

23 person a qualifying brownfield prop24 erty, and 

25 ‘‘(II) pays or incurs eligible re26 mediation expenditures with respect to 
3

•HR 3527 IH 

1 such property in an amount which ex2 ceeds the greater of $550,000 or 12 

3 percent of the fair market value of the 

4 property at the time such property 

5 was acquired by the eligible taxpayer, 

6 determined as if there was not a pres7 ence of a hazardous substance, pollut8 ant, or contaminant on the property 

9 which is complicating the expansion, 

10 redevelopment, or reuse of the prop11 erty. 

12 ‘‘(ii) EXCEPTION.—Such term shall 

13 not include any organization which is—

14 ‘‘(I) potentially liable under sec15 tion 107 of the Comprehensive Envi16 ronmental Response, Compensation, 

17 and Liability Act of 1980 with respect 

18 to the qualifying brownfield property, 

19 ‘‘(II) affiliated with any other 

20 person which is so potentially liable 

21 through any direct or indirect familial 

22 relationship or any contractual, cor23 porate, or financial relationship (other 

24 than a contractual, corporate, or fi25 nancial relationship which is created 
4

•HR 3527 IH 

1 by the instruments by which title to 

2 any qualifying brownfield property is 

3 conveyed or financed or by a contract 

4 of sale of goods or services), or 

5 ‘‘(III) the result of a reorganiza6 tion of a business entity which was so 

7 potentially liable. 

8 ‘‘(C) QUALIFYING BROWNFIELD PROP9 ERTY.—For purposes of this paragraph—

10 ‘‘(i) IN GENERAL.—The term ‘quali11 fying brownfield property’ means any real 

12 property which is certified, before the tax13 payer incurs any eligible remediation ex14 penditures (other than to obtain a Phase I 

15 environmental site assessment), by an ap16 propriate State agency (within the mean17 ing of section 198(c)(4)) in the State in 

18 which such property is located as a 

19 brownfield site within the meaning of sec20 tion 101(39) of the Comprehensive Envi21 ronmental Response, Compensation, and 

22 Liability Act of 1980 (as in effect on the 

23 date of the enactment of this paragraph). 

24 ‘‘(ii) REQUEST FOR CERTIFICATION.—

25 Any request by an eligible taxpayer for a 
5

•HR 3527 IH 

1 certification described in clause (i) shall in2 clude a sworn statement by the eligible 

3 taxpayer and supporting documentation of 

4 the presence of a hazardous substance, pol5 lutant, or contaminant on the property 

6 which is complicating the expansion, rede7 velopment, or reuse of the property given 

8 the property’s reasonably anticipated fu9 ture land uses or capacity for uses of the 

10 property (including a Phase I environ11 mental site assessment and, if applicable, 

12 evidence of the property’s presence on a 

13 local, State, or Federal list of brownfields 

14 or contaminated property) and other envi15 ronmental assessments prepared or ob16 tained by the taxpayer. 

17 ‘‘(D) QUALIFIED SALE, EXCHANGE, OR

18 OTHER DISPOSITION.—For purposes of this 

19 paragraph—

20 ‘‘(i) IN GENERAL.—A sale, exchange, 

21 or other disposition of property shall be 

22 considered as qualified if—

23 ‘‘(I) such property is transferred 

24 by the eligible taxpayer to an unre25 lated person, and 
6

•HR 3527 IH 

1 ‘‘(II) within 1 year of such trans2 fer the eligible taxpayer has received a 

3 certification from the Environmental 

4 Protection Agency or an appropriate 

5 State agency (within the meaning of 

6 section 198(c)(4)) in the State in 

7 which such property is located that, as 

8 a result of the eligible taxpayer’s re9 mediation actions, such property 

10 would not be treated as a qualifying 

11 brownfield property in the hands of 

12 the transferee. 

13 ‘‘(ii) REQUEST FOR CERTIFICATION.—

14 Any request by an eligible taxpayer for a 

15 certification described in clause (i) shall be 

16 made not later than the date of the trans17 fer and shall include a sworn statement by 

18 the eligible taxpayer certifying the fol19 lowing: 

20 ‘‘(I) Remedial actions which com21 ply with all applicable or relevant and 

22 appropriate requirements (consistent 

23 with section 121(d) of the Com24 prehensive Environmental Response, 

25 Compensation, and Liability Act of 
7

•HR 3527 IH 

1 1980) have been substantially com2 pleted, such that there are no haz3 ardous substances, pollutants, or con4 taminants which complicate the ex5 pansion, redevelopment, or reuse of 

6 the property given the property’s rea7 sonably anticipated future land uses 

8 or capacity for uses of the property. 

9 ‘‘(II) The reasonably anticipated 

10 future land uses or capacity for uses 

11 of the property are more economically 

12 productive or environmentally bene13 ficial than the uses of the property in 

14 existence on the date of the certifi15 cation described in subparagraph 

16 (C)(i). For purposes of the preceding 

17 sentence, use of property as a landfill 

18 or other hazardous waste facility shall 

19 not be considered more economically 

20 productive or environmentally bene21 ficial. 

22 ‘‘(III) A remediation plan has 

23 been implemented to bring the prop24 erty into compliance with all applica25 ble local, State, and Federal environ-
8

•HR 3527 IH 

1 mental laws, regulations, and stand2 ards and to ensure that the remedi3 ation protects human health and the 

4 environment. 

5 ‘‘(IV) The remediation plan de6 scribed in subclause (III), including 

7 any physical improvements required to 

8 remediate the property, is either com9 plete or substantially complete, and, if 

10 substantially complete, sufficient mon11 itoring, funding, institutional controls, 

12 and financial assurances have been 

13 put in place to ensure the complete 

14 remediation of the property in accord15 ance with the remediation plan as 

16 soon as is reasonably practicable after 

17 the sale, exchange, or other disposi18 tion of such property. 

19 ‘‘(V) Public notice that such re20 quest for certification would be made 

21 was completed before the date of such 

22 request. Such notice shall be in the 

23 same form and manner as required 

24 for public participation required under 

25 section 117(a) of the Comprehensive 
9

•HR 3527 IH 

1 Environmental Response, Compensa2 tion, and Liability Act of 1980 (as in 

3 effect on the date of the enactment of 

4 this paragraph). 

5 ‘‘(iii) ATTACHMENT TO TAX RE6 TURNS.—A copy of each of the requests 

7 for certification described in clause (ii) of 

8 subparagraph (C) and this subparagraph 

9 shall be included in the tax return of the 

10 eligible taxpayer (and, where applicable, of 

11 the qualifying partnership) for the taxable 

12 year during which the transfer occurs. 

13 ‘‘(E) ELIGIBLE REMEDIATION EXPENDI14 TURES.—For purposes of this paragraph—

15 ‘‘(i) IN GENERAL.—The term ‘eligible 

16 remediation expenditures’ means, with re17 spect to any qualifying brownfield prop18 erty, any amount paid or incurred by the 

19 eligible taxpayer to an unrelated third per20 son to obtain a Phase I environmental site 

21 assessment of the property, and any 

22 amount so paid or incurred after the date 

23 of the certification described in subpara24 graph (C)(i) for goods and services nec25 essary to obtain a certification described in 
10

•HR 3527 IH 

1 subparagraph (D)(i) with respect to such 

2 property, including expenditures—

3 ‘‘(I) to manage, remove, control, 

4 contain, abate, or otherwise remediate 

5 a hazardous substance, pollutant, or 

6 contaminant on the property, 

7 ‘‘(II) to obtain a Phase II envi8 ronmental site assessment of the 

9 property, including any expenditure to 

10 monitor, sample, study, assess, or oth11 erwise evaluate the release, threat of 

12 release, or presence of a hazardous 

13 substance, pollutant, or contaminant 

14 on the property, 

15 ‘‘(III) to obtain environmental 

16 regulatory certifications and approvals 

17 required to manage the remediation 

18 and monitoring of the hazardous sub19 stance, pollutant, or contaminant on 

20 the property, and 

21 ‘‘(IV) regardless of whether it is 

22 necessary to obtain a certification de23 scribed in subparagraph (D)(i)(II), to 

24 obtain remediation cost-cap or stop25 loss coverage, re-opener or regulatory 
11

•HR 3527 IH 

1 action coverage, or similar coverage 

2 under environmental insurance poli3 cies, or financial guarantees required 

4 to manage such remediation and mon5 itoring. 

6 ‘‘(ii) EXCEPTIONS.—Such term shall 

7 not include—

8 ‘‘(I) any portion of the purchase 

9 price paid or incurred by the eligible 

10 taxpayer to acquire the qualifying 

11 brownfield property, 

12 ‘‘(II) environmental insurance 

13 costs paid or incurred to obtain legal 

14 defense coverage, owner/operator li15 ability coverage, lender liability cov16 erage, professional liability coverage, 

17 or similar types of coverage, 

18 ‘‘(III) any amount paid or in19 curred to the extent such amount is 

20 reimbursed, funded, or otherwise sub21 sidized by grants provided by the 

22 United States, a State, or a political 

23 subdivision of a State for use in con24 nection with the property, proceeds of 

25 an issue of State or local government 
12

•HR 3527 IH 

1 obligations used to provide financing 

2 for the property the interest of which 

3 is exempt from tax under section 103, 

4 or subsidized financing provided (di5 rectly or indirectly) under a Federal, 

6 State, or local program provided in 

7 connection with the property, or 

8 ‘‘(IV) any expenditure paid or in9 curred before the date of the enact10 ment of this paragraph. 

11 For purposes of subclause (III), the Sec12 retary may issue guidance regarding the 

13 treatment of government-provided funds 

14 for purposes of determining eligible reme15 diation expenditures. 

16 ‘‘(F) DETERMINATION OF GAIN OR

17 LOSS.—For purposes of this paragraph, the de18 termination of gain or loss shall not include an 

19 amount treated as gain which is ordinary in20 come with respect to section 1245 or section 

21 1250 property, including amounts deducted as 

22 section 198 expenses which are subject to the 

23 recapture rules of section 198(e), if the tax24 payer had deducted such amounts in the com-
13

•HR 3527 IH 

1 putation of its unrelated business taxable in2 come. 

3 ‘‘(G) SPECIAL RULES FOR PARTNER4 SHIPS.—

5 ‘‘(i) IN GENERAL.—In the case of an 

6 eligible taxpayer which is a partner of a 

7 qualifying partnership which acquires, re8 mediates, and sells, exchanges, or other9 wise disposes of a qualifying brownfield 

10 property, this paragraph shall apply to the 

11 eligible taxpayer’s distributive share of the 

12 qualifying partnership’s gain or loss from 

13 the sale, exchange, or other disposition of 

14 such property. 

15 ‘‘(ii) QUALIFYING PARTNERSHIP.—

16 The term ‘qualifying partnership’ means a 

17 partnership which—

18 ‘‘(I) has a partnership agreement 

19 which satisfies the requirements of 

20 section 514(c)(9)(B)(vi) at all times 

21 beginning on the date of the first cer22 tification received by the partnership 

23 under subparagraph (C)(i), 

24 ‘‘(II) satisfies the requirements 

25 of subparagraphs (B)(i), (C), (D), and 
14

•HR 3527 IH 

1 (E), if ‘qualified partnership’ is sub2 stituted for ‘eligible taxpayer’ each 

3 place it appears therein (except sub4 paragraph (D)(iii)), and 

5 ‘‘(III) is not an organization 

6 which would be prevented from consti7 tuting an eligible taxpayer by reason 

8 of subparagraph (B)(ii). 

9 ‘‘(iii) REQUIREMENT THAT TAX-EX10 EMPT PARTNER BE A PARTNER SINCE

11 FIRST CERTIFICATION.—This paragraph 

12 shall apply with respect to any eligible tax13 payer which is a partner of a partnership 

14 which acquires, remediates, and sells, ex15 changes, or otherwise disposes of a quali16 fying brownfield property only if such eligi17 ble taxpayer was a partner of the quali18 fying partnership at all times beginning on 

19 the date of the first certification received 

20 by the partnership under subparagraph 

21 (C)(i) and ending on the date of the sale, 

22 exchange, or other disposition of the prop23 erty by the partnership. 

24 ‘‘(iv) REGULATIONS.—The Secretary 

25 shall prescribe such regulations as are nec-
15

•HR 3527 IH 

1 essary to prevent abuse of the require2 ments of this subparagraph, including 

3 abuse through—

4 ‘‘(I) the use of special allocations 

5 of gains or losses, or 

6 ‘‘(II) changes in ownership of 

7 partnership interests held by eligible 

8 taxpayers. 

9 ‘‘(H) SPECIAL RULES FOR MULTIPLE

10 PROPERTIES.—

11 ‘‘(i) IN GENERAL.—An eligible tax12 payer or a qualifying partnership of which 

13 the eligible taxpayer is a partner may 

14 make a 1-time election to apply this para15 graph to more than 1 qualifying brownfield 

16 property by averaging the eligible remedi17 ation expenditures for all such properties 

18 acquired during the election period. If the 

19 eligible taxpayer or qualifying partnership 

20 makes such an election, the election shall 

21 apply to all qualified sales, exchanges, or 

22 other dispositions of qualifying brownfield 

23 properties the acquisition and transfer of 

24 which occur during the period for which 

25 the election remains in effect. 
16

•HR 3527 IH 

1 ‘‘(ii) ELECTION.—An election under 

2 clause (i) shall be made with the eligible 

3 taxpayer’s or qualifying partnership’s time4 ly filed tax return (including extensions) 

5 for the first taxable year for which the tax6 payer or qualifying partnership intends to 

7 have the election apply. An election under 

8 clause (i) is effective for the period—

9 ‘‘(I) beginning on the date which 

10 is the first day of the taxable year of 

11 the return in which the election is in12 cluded or a later day in such taxable 

13 year selected by the eligible taxpayer 

14 or qualifying partnership, and 

15 ‘‘(II) ending on the date which is 

16 the earliest of a date of revocation se17 lected by the eligible taxpayer or 

18 qualifying partnership, the date which 

19 is 8 years after the date described in 

20 subclause (I), or, in the case of an 

21 election by a qualifying partnership of 

22 which the eligible taxpayer is a part23 ner, the date of the termination of the 

24 qualifying partnership. 
17

•HR 3527 IH 

1 ‘‘(iii) REVOCATION.—An eligible tax2 payer or qualifying partnership may revoke 

3 an election under clause (i)(II) by filing a 

4 statement of revocation with a timely filed 

5 tax return (including extensions). A rev6 ocation is effective as of the first day of 

7 the taxable year of the return in which the 

8 revocation is included or a later day in 

9 such taxable year selected by the eligible 

10 taxpayer or qualifying partnership. Once 

11 an eligible taxpayer or qualifying partner12 ship revokes the election, the eligible tax13 payer or qualifying partnership is ineligible 

14 to make another election under clause (i) 

15 with respect to any qualifying brownfield 

16 property subject to the revoked election. 

17 ‘‘(I) RECAPTURE.—If an eligible taxpayer 

18 excludes gain or loss from a sale, exchange, or 

19 other disposition of property to which an elec20 tion under subparagraph (H) applies, and such 

21 property fails to satisfy the requirements of this 

22 paragraph, the unrelated business taxable in23 come of the eligible taxpayer for the taxable 

24 year in which such failure occurs shall be deter25 mined by including any previously excluded gain 
18

•HR 3527 IH 

1 or loss from such sale, exchange, or other dis2 position allocable to such taxpayer, and interest 

3 shall be determined at the overpayment rate es4 tablished under section 6621 on any resulting 

5 tax for the period beginning with the due date 

6 of the return for the taxable year during which 

7 such sale, exchange, or other disposition oc8 curred, and ending on the date of payment of 

9 the tax. 

10 ‘‘(J) RELATED PERSONS.—For purposes of 

11 this paragraph, a person shall be treated as re12 lated to another person if—

13 ‘‘(i) such person bears a relationship 

14 to such other person described in section 

15 267(b) (determined without regard to 

16 paragraph (9) thereof), or section 

17 707(b)(1), determined by substituting ‘25 

18 percent’ for ‘50 percent’ each place it ap19 pears therein, and 

20 ‘‘(ii) in the case such other person is 

21 a nonprofit organization, if such person 

22 controls directly or indirectly more than 25 

23 percent of the governing body of such or24 ganization.’’. 
19

•HR 3527 IH 

1 (b) EXCLUSION FROM DEFINITION OF DEBT-FI2 NANCED PROPERTY.—Section 514(b)(1) of the Internal 

3 Revenue Code of 1986 (defining debt-financed property) 

4 is amended by striking ‘‘or’’ at the end of subparagraph 

5 (C), by striking the period at the end of subparagraph (D) 

6 and inserting ‘‘; or’’, and by inserting after subparagraph 

7 (D) the following new subparagraph: 

8 ‘‘(E) any property the gain or loss from 

9 the sale, exchange, or other disposition of which 

10 would be excluded by reason of the provisions 

11 of section 512(b)(18) in computing the gross 

12 income of any unrelated trade or business.’’. 

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to any gain or loss on the sale, 

15 exchange, or other disposition of any property acquired by 

16 the taxpayer after the date of the enactment of this Act.

Æ