II

104TH CONGRESS

2D SESSION S. 1542

To amend the Internal Revenue Code of 1986 to provide for the expensing

of environmental remediation costs in empowerment zones and enterprise

communities.

IN THE SENATE OF THE UNITED STATES

JANUARY 26, 1996

Mr. ABRAHAM (for himself and Mr. LIEBERMAN) 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 provide

for the expensing of environmental remediation costs in

empowerment zones and enterprise communities.

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

3 SECTION 1. EXPENSING OF ENVIRONMENTAL REMEDI4 ATION COSTS.

5 (a) IN GENERAL.—Part II of subchapter V of chap6 ter 1 of the Internal Revenue Code of 1986 is amended

7 by adding at the end the following new section:
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1 ‘‘SEC. 1395. EXPENSING OF ENVIRONMENTAL REMEDIATION

2 COSTS.

3 ‘‘(a) TREATMENT AS EXPENSE.—A taxpayer may

4 elect to treat any environmental remediation cost as an

5 expense which is not chargeable to capital account. Any

6 cost so treated shall be allowable as a deduction for the

7 taxable year in which the cost is paid or incurred.

8 ‘‘(b) ENVIRONMENTAL REMEDIATION COST.—For

9 purposes of this section—

10 ‘‘(1) IN GENERAL.—The term ‘environmental

11 remediation cost’ means any cost which—

12 ‘‘(A) is chargeable to capital account,

13 ‘‘(B) is paid or incurred in connection with

14 the abatement or control of environmental con15 taminants at a site located within an

16 empowerment zone or enterprise community,

17 and

18 ‘‘(C) is certified by the applicable Federal

19 or State authority as being required by, and in

20 compliance with, applicable Federal and State

21 laws governing abatement and control of envi22 ronmental contaminants.

23 ‘‘(2) EXCEPTIONS.—Such term shall not in24 clude any amount paid or incurred—

25 ‘‘(A) for equipment which is used in the

26 environmental remediation and which is of a
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1 character subject to an allowance for deprecia2 tion or amortization, or

3 ‘‘(B) in connection with a site which is on

4 the national priorities list under section

5 105(a)(8)(B) of the Comprehensive Environ6 mental Response, Compensation, and Liability

7 Act of 1980 (42 U.S.C. 9605(a)(8)(B).

8 ‘‘(c) SPECIAL RULES.—For purposes of this sec9 tion—

10 ‘‘(1) LIMITATION BASED ON INCOME FROM

11 TRADE OR BUSINESS.—The amount allowed as a de12 duction under subsection (a) for any taxable year

13 shall not exceed the aggregate amount of taxable in14 come of the taxpayer for such taxable year which is

15 derived from the active conduct by the taxpayer of

16 any trade or business during such taxable year. For

17 purposes of this paragraph, rules similar to the rules

18 of subparagraphs (B) and (C) of section 179(b)(3)

19 shall apply. In the case of a partnership, S corpora20 tion, trust or other pass thru entity, this paragraph

21 shall be applied at both the entity and owner levels.

22 ‘‘(2) RECAPTURE RULES.—

23 ‘‘(A) PROPERTY NOT USED IN TRADE OR

24 BUSINESS.—The Secretary shall, by regulations,

25 provide for recapturing the benefit of any de-
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1 duction allowable under subsection (a) with re2 spect to any property not used predominantly in

3 a trade or business at any time.

4 ‘‘(B) TREATMENT OF GAIN AS ORDINARY

5 INCOME.—For purposes of section 1245—

6 ‘‘(i) the deduction allowable under

7 subsection (a) shall be treated as a deduc8 tion allowable to the taxpayer for deprecia9 tion or amortization; and

10 ‘‘(ii) property (other than section

11 1245 property) to which the deduction

12 would otherwise have been chargeable shall

13 be treated as section 1245 property solely

14 for purposes of applying section 1245 to

15 such deduction.’’

16 (b) CONFORMING AMENDMENTS.—The table of sec17 tions for part II of subchapter U of chapter 1 of such

18 Code is amended—

19 (1) by striking ‘‘TAX-EXEMPT FACILITY

20 BONDS’’ in the heading for part II and inserting

21 ‘‘TAX-INCENTIVES’’, and

22 (2) by adding at the end the following new

23 item:

‘‘Sec. 1395. Expensing of environmental remediation costs.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to amounts paid or incurred after

3 the date of the enactment of this Act.

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