II

103D CONGRESS

1ST SESSION S. 1140

To amend the Internal Revenue Code of 1986 to allow a deduction for

fees for sewer and water services to the extent such fees exceed 1

percent of adjusted gross income, and to offset the cost of such deduction

by disallowing the deduction for amounts paid pursuant to settlements

and for compensatory damages under certain environmental laws.

IN THE SENATE OF THE UNITED STATES

JUNE 22, 1993

Mr. KERRY (for himself and Mr. KENNEDY) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to allow a

deduction for fees for sewer and water services to the

extent such fees exceed 1 percent of adjusted gross income, and to offset the cost of such deduction by disallowing the deduction for amounts paid pursuant to

settlements and for compensatory damages under certain

environmental laws.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Sewer and Water Fee

5 Deductibility Act of 1993’’.
2

•S 1140 IS

1 SEC. 2. DEDUCTION FOR LOCAL SEWER AND WATER FEES.

2 (a) IN GENERAL.—Subsections (b) of section 164 of

3 the Internal Revenue Code of 1986 is amended by redesig4 nating paragraphs (3) and (4) as paragraphs (4) and (5),

5 respectively, and by inserting after paragraph (2) the fol6 lowing new paragraph:

7 ‘‘(3) DEDUCTION ALLOWED FOR LOCAL SEWER

8 AND WATER FEES.—

9 ‘‘(A) IN GENERAL.—To the extent that the

10 amount of local sewer and water fees paid or

11 accrued during any taxable year exceeds 1 per12 cent of adjusted gross income, such fees shall

13 be allowed as a deduction under subsection (a)

14 in the same manner as local real property taxes.

15 ‘‘(B) DEFINITION.—For purposes of sub16 paragraph (A), the term ‘local sewer and water

17 fees’ means any amount imposed by a local gov18 ernment, State government (or any agency or

19 instrumentality thereof), or by the District of

20 Columbia as a charge for sewer or water serv21 ice. Such term shall not include any amount al22 lowable as a deduction without regard to this

23 paragraph.’’.

24 (b) EFFECTIVE DATE.—The amendment made by

25 subsection (a) shall apply to taxable years beginning after

26 December 31, 1993.
3

•S 1140 IS

1 SEC. 3. DENIAL OF DEDUCTION FOR PAYMENTS UNDER

2 SETTLEMENT AGREEMENTS AND FOR COM3 PENSATORY DAMAGES UNDER CERTAIN EN4 VIRONMENTAL LAWS.

5 (a) GENERAL RULE.—Part IX of subchapter B of the

6 Internal Revenue Code of 1986 (relating to certain items

7 not deductible) is amended by adding at the end thereof

8 the following new section:

9 ‘‘SEC. 280I. DISALLOWANCE OF PAYMENTS UNDER SETTLE10 MENT AGREEMENTS AND FOR COMPEN11 SATORY DAMAGES UNDER CERTAIN ENVI12 RONMENTAL LAWS.

13 ‘‘(a) GENERAL RULE.—No deduction shall be allowed

14 for amounts paid—

15 ‘‘(1) to any agency of the United States pursu16 ant to any environmental settlement,

17 ‘‘(2) for costs of activities carried out pursuant

18 to any environmental settlement, or

19 ‘‘(3) to any person or government as a payment

20 in the nature of compensatory damages relating to

21 a violation or potential violation under any applica22 ble environmental law.

23 ‘‘(b) DEFINITIONS.—For purposes of this section—

24 ‘‘(1) ENVIRONMENTAL SETTLEMENT.—The

25 term ‘environmental settlement’ means any settle26 ment of a claim (or potential claim) of a violation of
4

•S 1140 IS

1 any provision of an applicable environmental law if

2 the payment of any fine or penalty for such violation

3 would not be allowed as a deduction under this

4 chapter.

5 ‘‘(2) APPLICABLE ENVIRONMENTAL LAW.—The

6 term ‘applicable environmental law’ means—

7 ‘‘(A) the Oil Pollution Act of 1990,

8 ‘‘(B) the Federal Water Pollution Control

9 Act,

10 ‘‘(C) the Comprehensive Environmental

11 Response, Compensation, and Liability Act of

12 1980,

13 ‘‘(D) the Solid Waste Disposal Act,

14 ‘‘(E) the Marine Protection, Research and

15 Sanctuaries Act,

16 ‘‘(F) the Clean Air Act,

17 ‘‘(G) the Emergency Planning and Com18 munity Right-To-Know Act, and

19 ‘‘(H) the Toxic Substances Control Act.

20 ‘‘(3) SETTLEMENT.—The term ‘settlement’ in21 cludes any consent degree and any contractual un22 derstanding.’’.

23 (b) PROHIBITION AGAINST OFFSET BY NET OPERAT24 ING LOSS DEDUCTION.—Section 172 of such Code is

25 amended by redesignating subsection (i) as subsection (j)
5

•S 1140 IS

1 and by inserting after subsection (h) the following new

2 subsection:

3 ‘‘(i) LIMITATION ON USE TO OFFSET DEDUCTIONS

4 DISALLOWED UNDER SECTION 280I.—The deduction al5 lowed under this section shall not reduce taxable income

6 for any taxable year to an amount less than the amount

7 disallowed under section 280I for such taxable year. Ap8 propriate adjustments in the application of subsection

9 (b)(2) shall be made to take into account the provisions

10 of this subsection.’’.

11 (c) CLERICAL AMENDMENT.—The table of sections

12 for part IX of subchapter B of chapter 1 of such Code

13 is amended by adding at the end thereof the following new

14 item:

‘‘Sec. 280I. Disallowance of payments under settlement agreements and for compensatory damages under certain

environmental laws.’’.

15 (d) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to amounts paid after the date of

17 the enactment of this Act.

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