‘‘(B) the aggregate environmental remedi-
ation credit amount allocated by the State for 
such preceding year. 
‘‘(5) UNUSED ENVIRONMENTAL REMEDIATION 
CREDIT ALLOCATED AMONG STATES AFTER 1-YEAR 
CARRYFORWARD.— 
‘‘(A) IN GENERAL.—The excess unused en-
vironmental remediation credit of a State for 
any calendar year shall be assigned to the Sec-
retary for allocation among qualified States for 
the succeeding calendar year. 
‘‘(B) EXCESS
UNUSED
ENVIRONMENTAL 
REMEDIATION
CREDIT.—For purposes of this 
paragraph, the excess unused environmental re-
mediation credit of a State for any calendar 
year is the excess (if any) of— 
‘‘(i) the unused State environmental 
remediation credit ceiling for the preceding 
calendar year, over 
‘‘(ii) the aggregate environmental re-
mediation credit amount allocated by the 
State for such preceding year. 
‘‘(C) FORMULA FOR ALLOCATION OF EX-
CESS UNUSED ENVIRONMENTAL REMEDIATION 
CREDIT AMONG STATES.—Rules similar to the
rules of clauses (iii) and (iv) of section 
42(h)(3)(D) shall apply for purposes of this 
paragraph. 
‘‘(6) POPULATION.—For purposes of this sub-
section, population shall be determined in accord-
ance with section 146(j). 
‘‘(7) INFLATION ADJUSTMENT.—In the case of 
any calendar year after 2006, the $1,000,000,000 
amount contained in paragraph (3) shall be in-
creased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year, determined by substituting ‘calendar year 
2005’ for ‘calendar year 1992’ in subparagraph 
(B) thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$500,000. 
‘‘(i) OTHER DEFINITIONS AND SPECIAL RULE.—For 
purposes of this section— 
‘‘(1) ELIGIBLE AREA.— 
‘‘(A) IN
GENERAL.—The term ‘eligible 
area’ means the entire area encompassed by a 
local governmental unit or Indian tribal govern-
ment if such entire area contains at least 1 cen-
sus tract having a poverty rate of at least 20 
percent. 
‘‘(B) USE OF EQUIVALENT COUNTY DIVI-
SIONS.—In the case of any area which is not 
tracted for population census tracts, the equiva-
lent county divisions (as defined by the Bureau 
of the Census for purposes of defining poverty 
areas) shall be treated as census tracts for pur-
poses of subparagraph (A). 
‘‘(C) USE
OF
CENSUS
DATA.—For pur-
poses of this paragraph, population and poverty 
rate shall be determined by the most recent de-
cennial census data available. 
‘‘(2) STATE
ENVIRONMENTAL
AGENCY.—The 
term ‘State environmental agency’ means any State 
agency specifically authorized by gubernatorial act 
or State statute to carry out the functions and re-
sponsibilities of a State environmental agency for 
purposes of this section. 
‘‘(3) 
STATE
DEVELOPMENT
AGENCY.—The 
term ‘State development agency’ means any State 
agency specifically authorized by gubernatorial act 
or State statute to carry out the functions and re-
sponsibilities of a State development agency for pur-
poses of this section. 
‘‘(4) POSSESSIONS TREATED AS STATES.—The 
term ‘State’ includes a possession of the United 
States. 
‘‘(5) SPECIAL
RULES
FOR
HAZARDOUS
SUB-
STANCES THAT ARE PETROLEUM PRODUCTS.—In the 
case of an area at or on which there has been a re-
lease (or threat of release) or disposal of any haz-
ardous substance that is a petroleum product, the 
following rules shall apply: 
‘‘(A) 
The 
requirement 
of 
subsection 
(c)(1)(A) shall be deemed to be met. 
‘‘(B) 
The 
requirement 
of 
subsection 
(e)(1)(A) shall be deemed to be met. 
‘‘(C) Subsection (e)(2) shall be applied by 
substituting ‘(1)(C) and (2)’ for ‘(1)(A), (1)(C), 
and (2)’. 
‘‘(j) CREDIT MAY BE ASSIGNED.— 
‘‘(1) IN GENERAL.—If a taxpayer elects the ap-
plication of this subsection for any taxable year, the 
amount of credit determined under this section for 
such year which would (but for this subsection) be 
allowable to the taxpayer shall be allowable to the 
person designated by the taxpayer. The person so
designated shall be treated as the taxpayer for pur-
poses of this title (other than this paragraph). 
‘‘(2) TREATMENT OF AMOUNTS PAID FOR AS-
SIGNMENT.—If any amount is paid to the person 
who assigns the credit determined under this sec-
tion, no portion of such amount shall be includible 
in such person’s gross income. 
‘‘(k) RECAPTURE OF CREDIT IF APPROVED REMEDI-
ATION PLAN OR APPROVED REDEVELOPMENT PLAN NOT 
PROPERLY COMPLETED.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) the State environmental agency deter-
mines that the approved remediation plan for 
the qualified contaminated site was not properly 
completed, or 
‘‘(B) the State development agency deter-
mines that the approved redevelopment plan for 
such site was not properly completed, 
the taxpayer’s tax under this chapter for the taxable 
year in which such determination is made shall be 
increased by the credit recapture amount. 
‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount 
is an amount equal to the sum of—
‘‘(A) the aggregate decrease in the credits 
allowed to the taxpayer under section 38 for all 
prior taxable years which would have resulted if 
the credit allowable by reason of this section 
were not allowed, plus 
‘‘(B) interest at the overpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each 
prior taxable year for the period beginning on 
the due date for filing the return for the prior 
taxable year involved. 
No deduction shall be allowed under this chapter for 
interest described in subparagraph (B). 
‘‘(3) SPECIAL RULES.— 
‘‘(A) TAX
BENEFIT
RULE.—The tax for 
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed 
by reason of this section which were used to re-
duce tax liability. In the case of credits not so 
used to reduce tax liability, the carryforwards 
and carrybacks under section 39 shall be appro-
priately adjusted. 
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be 
treated as a tax imposed by this chapter for
purposes of determining the amount of any 
credit or the tax imposed by section 55. 
‘‘(l) DENIAL OF DOUBLE BENEFIT.— 
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the qualified remediation 
expenditures otherwise allowable as a deduction for 
the taxable year which is equal to the amount of the 
credit determined for such taxable year under this 
section. 
‘‘(2) SIMILAR
RULE
WHERE
TAXPAYER
CAP-
ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 
‘‘(A) the amount of the credit determined 
for the taxable year under this section, exceeds 
‘‘(B) the amount allowable as a deduction 
for such taxable year for qualified remediation 
expenditures (determined without regard to 
paragraph (1)), 
the amount chargeable to capital account for the 
taxable year for such expenditures shall be reduced 
by the amount of such excess. 
‘‘(3) CONTROLLED GROUPS.—In the case of a 
corporation which is a member of a controlled group 
of corporations (within the meaning of section 
41(f)(5)) or a trade or business which is treated as 
being under common control with other trades or
businesses 
(within 
the 
meaning 
of 
section 
41(f)(1)(B)), this subsection shall be applied under 
rules prescribed by the Secretary similar to the rules 
applicable under subparagraphs (A) and (B) of sec-
tion 41(f)(1). 
‘‘(m) COST OF REMOVAL OR REMEDIAL ACTION.— 
The credit allowed under this section shall not be treated 
as a cost of removal or remedial action incurred by the 
United States for purposes of section 107(a)(4)(A) of the 
Comprehensive Environmental Response, Compensation, 
and Liability Act of 1980.’’. 
(b) EXCLUSION BY SITE OWNER OF REMEDIATION 
EXPENDITURES PAID
BY POTENTIALLY RESPONSIBLE 
PARTIES.—Part III of subchapter B of chapter 1 of such 
Code is amended by inserting after section 139A the fol-
lowing new section: 
‘‘SEC. 139B. REMEDIATION CONTRIBUTIONS BY POTEN-
TIALLY RESPONSIBLE PARTIES. 
‘‘(a) IN GENERAL.—Gross income shall not include 
any amount received as a qualified remediation contribu-
tion. 
‘‘(b) QUALIFIED REMEDIATION CONTRIBUTION.— 
For purposes of this section, the term ‘qualified remedi-
ation contribution’ means any amount which is paid to or 
for the benefit of the owner of any property by a poten-
tially responsible party (within the meaning of the Com-
prehensive Environmental Response, Compensation, and 
Liability Act of 1980) with respect to such property for 
qualified remediation expenditures (as defined in section 
45N(b)) with respect to such property. 
‘‘(c) DENIAL
OF
DOUBLE
BENEFIT.—Notwith-
standing any other provision of this subtitle— 
‘‘(1) no deduction or credit shall be allowed (to 
the person for whose benefit a qualified remediation 
contribution is made) for, or by reason of, any ex-
penditure to the extent of the amount excluded 
under this section with respect to such expenditure, 
and 
‘‘(2) no increase in the basis of any property 
shall result from any amount excluded under this 
section with respect to such property.’’. 
(c) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) of such Code is amended by striking ‘‘and’’ at 
the end of paragraph (25), by striking the period at the 
end of paragraph (26) and inserting ‘‘, plus’’, and by add-
ing at the end the following new paragraph: 
‘‘(27) the environmental remediation credit de-
termined under section 45N(a).’’. 
(d) CLERICAL AMENDMENTS.—
(1) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding at the end the following new 
item: 
‘‘Sec. 45N. Environmental remediation credit.’’. 
(2) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by 
inserting after the item relating to section 139A the 
following new item: 
‘‘Sec. 139B. Remediation contributions by potentially responsible parties.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
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