I

103D CONGRESS

1ST SESSION H. R. 2340

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

cleanup of certain contaminated industrial sites.

IN THE HOUSE OF REPRESENTATIVES

JUNE 8, 1993

Mr. REYNOLDS 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 allow a

credit for the cleanup of certain contaminated industrial

sites.

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

3 SECTION 1. ENVIRONMENTAL REMEDIATION TAX CREDIT.

4 (a) GENERAL RULE.—Part IV of subchapter A of

5 chapter 1 of the Internal Revenue Code of 1986 (relating

6 to credits allowable) is amended by adding at the end

7 thereof the following new subpart:

8 ‘‘Subpart H—Environmental Remediation Credit

‘‘Sec. 54. Amount of environmental remediation credit.

‘‘Sec. 54A. Designation of eligible jurisdictions.

‘‘Sec. 54B. Allocation of credit limits.
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‘‘Sec. 54C. Definitions and special rules.

1 ‘‘SEC. 54. AMOUNT OF ENVIRONMENTAL REMEDIATION

2 CREDIT.

3 ‘‘(a) GENERAL RULE.—For purposes of section 38,

4 the environmental remediation credit determined under

5 this section is 25 percent of the costs—

6 ‘‘(1) which are paid or incurred by the taxpayer

7 for environmental remediation with respect to any

8 qualified contaminated site which is owned by the

9 taxpayer, and

10 ‘‘(2) which are incurred by the taxpayer pursu11 ant to an environmental remediation plan for such

12 site which was approved by the Administrator of the

13 Environmental Protection Agency.

14 ‘‘(b) CREDIT MAY NOT EXCEED ALLOCATION.—The

15 environmental remediation credit determined under this

16 section with respect to any qualified contaminated site

17 shall not exceed the remediation credit amount allocated

18 to the taxpayer under section 54B with respect to such

19 site.

20 ‘‘(c) REMEDIATION PLAN MUST BE COMPLETED.—

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided in paragraph (2)—

23 ‘‘(A) no environmental remediation credit

24 shall be determined under this section with re25 spect to any qualified contaminated site unless
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1 the Administrator of the Environmental Protec2 tion Agency certifies the environmental remedi3 ation plan for such site has been completed,

4 and

5 ‘‘(B) if such Administrator certifies that

6 such plan has been completed, such credit shall

7 be taken into account under subsection (a) rat8 ably over the 5 taxable year period beginning

9 with the taxable year in which such plan was

10 completed.

11 ‘‘(2) SPECIAL RULE WHERE EXTRAORDINARY

12 COST INCREASES.—If—

13 ‘‘(A) the taxpayer determines that due to

14 unforeseen circumstances the cost of completing

15 the remediation plan for any qualified contami16 nated site exceeds 200 percent of the estimated

17 costs of completing such plan, and

18 ‘‘(B) the State or local official administer19 ing the remediation credit program agrees with

20 such determination,

21 the taxpayer may cease the implementation of such

22 plan and shall be entitled to an environmental reme23 diation credit with respect to costs incurred before

24 such cessation. Such credit shall be taken into ac25 count under subsection (a) ratably over the 5-tax-
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1 able-year period beginning with the taxable year in

2 which such cessation occurs.

3 ‘‘(d) CERTAIN PARTIES NOT ELIGIBLE.—A taxpayer

4 shall not be eligible for any credit determined under this

5 section with respect to any qualified contaminated site if—

6 ‘‘(1) at any time on or before the date of the

7 enactment of this subpart such taxpayer was the

8 owner or operator of any business on such site,

9 ‘‘(2) at any time before, on, or after such date

10 of enactment such taxpayer—

11 ‘‘(A) had (by contract, agreement, or oth12 erwise) arranged for the disposal or treatment

13 of any hazardous materials at such site or ar14 ranged with a transporter for transport for dis15 posal or treatment of any hazardous materials

16 at such site, or

17 ‘‘(B) had accepted any hazardous mate18 rials for transport to such site, or

19 ‘‘(3) the taxpayer is related to any taxpayer re20 ferred to in paragraph (1) or (2).

21 ‘‘(e) QUALIFIED CONTAMINATED SITE.—For pur22 poses of this subpart, the term ‘qualified contaminated

23 site’ means any contaminated site if such site is within—
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1 ‘‘(1) any large city or medium-size city des2 ignated under section 54A(a) for participation in the

3 environmental remediation credit program, or

4 ‘‘(2) the portion of any State designated under

5 section 54A(b) for participation in the environmental

6 remediation credit program which is not within the

7 borders of a large city or medium-size city.

8 ‘‘(f) ADMINISTRATION BY STATE OR LOCAL GOVERN9 MENT AGENCIES PERMITTED.—Any reference in this sec10 tion, section 144(d), or section 150(b)(7) to the Adminis11 trator of the Environmental Protection Agency shall in12 clude a reference to the head of any State or local govern13 ment agency designated by the Administrator to carry out

14 the Administrator’s functions under such sections with re15 spect to any site.

16 ‘‘SEC. 54A. DESIGNATION OF ELIGIBLE JURISDICTIONS.

17 ‘‘(a) DESIGNATION OF CITIES.—

18 ‘‘(1) IN GENERAL.—The Secretary of Housing

19 and Urban Development shall—

20 ‘‘(A) designate 4 large cities under this

21 subsection for participation in the environ22 mental remediation credit program, and

23 ‘‘(B) designate 20 medium-size cities under

24 this subsection for participation in such pro25 gram.
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1 All such designations shall be made within the 180-

2 day period beginning on the date of the enactment

3 of this subpart.

4 ‘‘(2) ELIGIBILITY REQUIREMENTS.—No city

5 may be designated under paragraph (1) unless—

6 ‘‘(A) such city has submitted an applica7 tion for such a designation to the Secretary of

8 Housing and Urban Development in such man9 ner as such Secretary may require,

10 ‘‘(B) such city has established an environ11 mental credit remediation program which shall

12 include—

13 ‘‘(i) procedures for the assessment of

14 contaminated sites located within such city

15 for purposes of determining whether such

16 sites are appropriate for participation in

17 the environmental remediation credit pro18 gram,

19 ‘‘(ii) a credit allocation plan which

20 contains the selection criteria required

21 under paragraph (4), and

22 ‘‘(iii) provision for non-Federal con23 tributions to the environmental remedi24 ation of selected sites through grants,

25 loans, property or income tax abatement,
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1 contributions by private parties or non2 Federal governmental sources, or any other

3 direct or indirect financial assistance; and

4 ‘‘(C) such city has designated a city official

5 responsible for the administration of its envi6 ronmental remediation credit program.

7 ‘‘(3) SELECTION CRITERIA.—From among the

8 cities eligible for designation under paragraph (1),

9 the Secretary of Housing and Urban Development

10 shall make designations under paragraph (1) on the

11 basis of the following factors (with the factor speci12 fied in subparagraph (A) weighted at 50 points and

13 the factors specified in subparagraphs (B) and (C)

14 weighted at 25 points each):

15 ‘‘(A) The comparative degree of economic

16 deterioration among cities of the same category,

17 as measured by the city’s manufacturing job

18 loss between 1970 and 1990.

19 ‘‘(B) The strength and quality of the es20 tablished local commitment to remediate con21 taminated sites.

22 ‘‘(C) The percentage of the total Com23 prehensive Environmental Response, and Liabil24 ity Information System sites which are located

25 in such city.
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1 ‘‘(4) SELECTION CRITERIA.—The selection cri2 teria required under this paragraph are the follow3 ing:

4 ‘‘(A) The condition of the contaminated

5 site is such that without participation in the en6 vironmental remediation credit program redevel7 opment is unlikely.

8 ‘‘(B) The contaminated site has not been

9 in productive use for at least 1 year before par10 ticipation in the program.

11 ‘‘(C) There is a strong likelihood of rede12 velopment of the site for industrial or commer13 cial use that will result in creation of jobs and

14 expansion of the tax base.

15 ‘‘(D) Environmental remediation and rede16 velopment are likely to be completed within a

17 reasonable period of time.

18 ‘‘(b) DESIGNATION OF STATES.—

19 ‘‘(1) IN GENERAL.—The Secretary of Agri20 culture shall designate 5 States for participation in

21 the environmental remediation credit program. All

22 such designations shall be made before lll.

23 ‘‘(2) REQUIREMENTS FOR DESIGNATION.—No

24 State may be designated under paragraph (1) unless
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1 such State meets requirements comparable to those

2 required under paragraph (2) of subsection (a).

3 ‘‘(3) SELECTION CRITERIA.—From among the

4 States eligible for designation under paragraph (1),

5 the Secretary of Agriculture shall make designations

6 under paragraph (1) on the basis of the following

7 factors (with the factors specified in subparagraphs

8 (A) and (B) weighted at 25 points each and the fac9 tor specified in subparagraph (C) weighted at 50

10 points):

11 ‘‘(A) The comparative degree of economic

12 deterioration among States as measured by the

13 State’s manufacturing job loss between 1970

14 and 1990.

15 ‘‘(B) The strength and quality of the es16 tablished State or local commitment to remedi17 ate contaminated sites.

18 ‘‘(C) The comparative prevalence of envi19 ronmentally contaminated sites as measured by

20 the ratio of the Comprehensive Environmental

21 Response, Compensation, and Liability Infor22 mation System sites in the State per capita.
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1 ‘‘SEC. 54B. ALLOCATION OF CREDIT LIMITS.

2 ‘‘(a) OVERALL LIMITATION.—For each calendar year

3 after 1993, there shall be an overall credit limitation of

4 $75,000,000 to be allocated as follows:

5 ‘‘(1) One-third of such overall credit limitation

6 shall be allocated equally among the large cities des7 ignated under section 54B(a).

8 ‘‘(2) One-third of such overall credit limitation

9 shall be allocated equally among the medium-size

10 cities designated under section 54B(a).

11 ‘‘(3) One-third of such overall credit limitation

12 shall be allocated equally among the States des13 ignated under section 54B(b).

14 ‘‘(b) METHOD OF MAKING ALLOCATION.—

15 ‘‘(1) IN GENERAL.—Any jurisdiction receiving a

16 portion of the overall credit limitation under sub17 section (a) may use such portion to make allocations

18 of environmental remediation credit amounts to con19 taminated sites selected under the credit allocation

20 plan required under section 54A(a)(2)(B)(ii).

21 ‘‘(2) PERIOD DURING WHICH ALLOCATED

22 AMOUNT MAY BE USED.—Any jurisdiction receiving

23 a portion of the overall credit limitation for any cal24 endar year may use such portion only to make allo25 cations under paragraph (1) during such calendar

26 year or the following calendar year.
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1 ‘‘SEC. 54C. DEFINITIONS AND SPECIAL RULES.

2 ‘‘(a) CONTAMINATED SITE.—For purposes of this

3 subpart—

4 ‘‘(1) IN GENERAL.—The term ‘contaminated

5 site’ means any site if at least 1 of the following en6 vironmental conditions are present on such site:

7 ‘‘(A) A release or threatened release of any

8 hazardous, toxic, or dangerous substance.

9 ‘‘(B) Any storage tanks which contain any

10 hazardous, toxic, or dangerous substance.

11 ‘‘(C) Any illegal disposal of solid waste.

12 ‘‘(2) HAZARDOUS, TOXIC, OR DANGEROUS SUB13 STANCE.—Any substance, waste, or material shall be

14 treated as a hazardous, toxic, or dangerous sub15 stance if it is so treated under—

16 ‘‘(A) the Comprehensive Environmental

17 Response, Compensation, and Liability Act (42

18 U.S.C. 9601 et seq.),

19 ‘‘(B) the Resource Conservation and Re20 covery Act (42 U.S.C. 6901 et seq.), or

21 ‘‘(C) any State or local environmental law

22 or ordinance.

23 The following materials shall in any event be treated

24 as such a substance: petroleum or crude oil or any

25 derivative thereof, friable asbestos or any asbestos
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1 containing material, polychlorinated biphenyls, or

2 urea formaldehyde foam insulation.

3 ‘‘(b) ENVIRONMENTAL REMEDIATION.—For pur4 poses of this subpart, the term ‘environmental remedi5 ation’ means—

6 ‘‘(1) removal or remediation activity in accord7 ance with an approved environmental plan including

8 soil and ground water remediation,

9 ‘‘(2) restoration of natural, historic or cultural

10 resources at the site, or the mitigation of unavoid11 able losses of such resources incurred in connection

12 with the remediation or response activity,

13 ‘‘(3) health assessments or health effects stud14 ies,

15 ‘‘(4) environmental audits,

16 ‘‘(5) remediation of off-site contamination

17 caused by activity on the site, and

18 ‘‘(6) any other costs reasonably required by rea19 son of the environmental conditions of the site in20 cluding demolition of existing contaminated struc21 tures, site security, and permit fees necessary for re22 mediation.

23 ‘‘(c) LARGE CITY.—For purposes of this subpart, the

24 term ‘large city’ means any city with a population of at
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1 least 1,000,000 as determined on the basis of the most

2 recent decennial census.

3 ‘‘(d) MEDIUM SIZE CITY.—For purposes of this sub4 part, the term ‘medium size city’ means any city with a

5 population of at least 250,000 but less than 1,000,000 as

6 determined on the basis of the most recent decennial cen7 sus.

8 ‘‘(e) BASIS REDUCTION.—The basis of any qualified

9 contaminated site shall be reduced by the amount of any

10 credit determined under this subpart with respect to such

11 site.

12 ‘‘(f) RELATED PERSON.—For purposes of this sub13 part, persons shall be treated as related to each other if

14 such persons are treated as a single employer under the

15 regulations prescribed under section 52(b) or such persons

16 bear a relationship to each other specified in section

17 267(b) or 707(b).’’

18 (b) CREDIT MADE PART OF GENERAL BUSINESS

19 CREDIT.—Subsection (b) of section 38 of such Code is

20 amended by striking ‘‘plus’’ at the end of paragraph (7),

21 by striking the period at the end of paragraph (8) and

22 inserting ‘‘, plus’’, and by adding at the end thereof the

23 following new paragraph:

24 ‘‘(9) the environmental remediation credit

25 under section 54(a).’’
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1 (c) LIMITATION ON CARRYBACK.—Subsection (d) of

2 section 39 of such Code is amended by adding at the end

3 thereof the following new paragraph:

4 ‘‘(4) NO CARRYBACK OF ENVIRONMENTAL RE5 MEDIATION CREDIT BEFORE EFFECTIVE DATE.—No

6 portion of the unused business credit for any taxable

7 year which is attributable to the credit under section

8 54 may be carried back to a taxable year ending be9 fore the date of the enactment of section 54.’’

10 (d) DEDUCTION FOR UNUSED CREDIT.—Subsection

11 (c) of section 196 of such Code is amended by striking

12 ‘‘and’’ at the end of paragraph (4), by striking the period

13 at the end of paragraph (5) and inserting ‘‘, and’’, and

14 by adding at the end thereof the following new paragraph:

15 ‘‘(6) the environmental remediation credit de16 termined under section 54.’’

17 (e) CLERICAL AMENDMENT.—The table of subparts

18 for part IV of subchapter A of chapter 1 of such Code

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

20 item:

‘‘Subpart H—Environmental remediation credit.’’

21 (f) EFFECTIVE DATE.—The amendments made by

22 this section shall take effect on the date of the enactment

23 of this Act.
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1 SEC. 2. TAX-EXEMPT FINANCING OF ENVIRONMENTAL RE2 MEDIATION OF QUALIFIED CONTAMINATED

3 SITES.

4 (a) IN GENERAL.—Subsection (e) of section 141 of

5 the Internal Revenue Code of 1986 (defining qualified

6 bond) is amended by striking ‘‘or’’ at the end of subpara7 graph (F), by redesignating subparagraph (G) as subpara8 graph (H), and by inserting after subparagraph (F) the

9 following new subparagraph:

10 ‘‘(G) a qualified contaminated site remedi11 ation bond, or’’.

12 (b) QUALIFIED CONTAMINATED SITE REMEDIATION

13 BOND.—Section 144 of such Code is amended by adding

14 at the end thereof the following new subsection:

15 ‘‘(d) QUALIFIED CONTAMINATED SITE REMEDIATION

16 BOND.—For purposes of this part—

17 ‘‘(1) IN GENERAL.—The term ‘qualified con18 taminated site remediation bond’ means any bond is19 sued as part of an issue 95 percent or more of the

20 proceeds of which are to finance—

21 ‘‘(A) the acquisition of a qualified contami22 nated site, or

23 ‘‘(B) the costs of environmental remedi24 ation (as defined in section 54C(b))—
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1 ‘‘(i) with respect to such a site which

2 is owned by the person incurring such

3 costs, and

4 ‘‘(ii) which are incurred pursuant to

5 an environmental remediation plan for

6 such site which was approved by the Ad7 ministrator of the Environmental Protec8 tion Agency.

9 ‘‘(2) LIMITATIONS.—Such term shall not in10 clude any bond issued to provide financing with re11 spect to a qualified contaminated site if—

12 ‘‘(A) any amount of such financing is pro13 vided directly or indirectly to any person who is

14 not eligible for the credit determined under sec15 tion 54 with respect to such site by reason of

16 section 54(d),

17 ‘‘(B) less than 60 percent of the amount of

18 the financing so provided with respect to such

19 site is for costs described in paragraph (1)(B),

20 or

21 ‘‘(C) the amount of the financing so pro22 vided to acquire such site exceeds the excess

23 of—
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1 ‘‘(i) the fair market value of the site

2 after the completion of the environmental

3 remediation plan, over

4 ‘‘(ii) the amount of the financing so

5 provided with respect to such site for costs

6 described in paragraph (1)(B).

7 ‘‘(3) QUALIFIED CONTAMINATED SITE.—For

8 purposes of this subsection, the term ‘qualified con9 taminated site’ has the meaning given such term by

10 section 54(e).

11 ‘‘(4) RESTRICTION ON LAND ACQUISITION NOT

12 TO APPLY.—Section 147(c) shall not apply to any

13 qualified contaminated site remediation bond.’’

14 (c) PENALTY FOR FAILURE TO SATISFACTORILY

15 COMPLETE REMEDIATION PLAN.—Subsection (b) of sec16 tion 150 of such Code is amended by adding at the end

17 thereof the following new paragraph:

18 ‘‘(7) QUALIFIED CONTAMINATED SITE REMEDI19 ATION BONDS.—In the case of financing provided by

20 a qualified contaminated site remediation bond for

21 costs described in section 144(d)(1)(C), no deduction

22 shall be allowed under this chapter for interest on

23 such financing during any period during which there

24 is a determination by the Administrator of the Envi25 ronmental Protection Agency that the remediation
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1 plan under which such costs were incurred was not

2 satisfactorily completed.’’

3 (d) CLERICAL AMENDMENTS.—

4 (1) The section heading for section 144 of such

5 Code is amended by inserting before the period

6 ‘‘qualified contaminated site remediation bond’’.

7 (2) The table of sections for subpart A of part

8 IV of subchapter B of chapter 1 of such Code is

9 amended by inserting before the period at the end

10 of the item relating to section 144 ‘‘; qualified con11 taminated site remediation bond’’.

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