‘‘(b) QUALIFIED
ENVIRONMENTAL
REMEDIATION
EXPENDITURE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified envi-
ronmental remediation expenditure’ means any ex-
penditure—
‘‘(A) which is otherwise chargeable to cap-
ital account, and
‘‘(B) which is paid or incurred in connec-
tion with the abatement or control of hazardous
substances at a qualified contaminated site.
‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR
DEPRECIABLE PROPERTY.—Such term shall not in-
clude any expenditure for the acquisition of property
of a character subject to the allowance for deprecia-
tion which is used in connection with the abatement
or control of hazardous substances at a qualified
contaminated site; except that the portion of the al-
lowance under section 167 for such property which
is otherwise allocated to such site shall be treated as
a qualified environmental remediation expenditure.
‘‘(c) QUALIFIED CONTAMINATED SITE.—For pur-
poses of this section—
‘‘(1) QUALIFIED CONTAMINATED SITE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
contaminated site’ means any area—
‘‘(i) which is held by the taxpayer for
use in a trade or business or for the pro-
duction of income, or which is property de-
scribed in section 1221(1) in the hands of
the taxpayer,
‘‘(ii) which is within a targeted area,
and
‘‘(iii) which contains (or potentially
contains) any hazardous substance.
‘‘(B) TAXPAYER
MUST
RECEIVE
STATE-
MENT
FROM
STATE
ENVIRONMENTAL
AGEN-
CY.—An area shall be treated as a qualified
contaminated site with respect to expenditures
paid or incurred during any taxable year only
if the taxpayer receives a statement from the
appropriate agency of the State in which such
area is located that such area meets the re-
quirements of clauses (ii) and (iii) of subpara-
graph (A).
‘‘(C) APPROPRIATE STATE AGENCY.— For
purposes of subparagraph (B), the appropriate
agency of a State is the agency designated by
the Administrator of the Environmental Protec-
tion Agency for purposes of this section. If no
agency of a State is designated under the pre-
ceding sentence, the appropriate agency for
such State shall be the Environmental Protec-
tion Agency.
‘‘(2) TARGETED AREA.—
‘‘(A) IN
GENERAL.—The term ‘targeted
area’ means—
‘‘(i) any population census tract with
a poverty rate of not less than 20 percent,
‘‘(ii) a population census tract with a
population of less than 2,000 if—
‘‘(I) more than 75 percent of
such tract is zoned for commercial or
industrial use, and
‘‘(II) such tract is contiguous to
1 or more other population census
tracts which meet the requirement of
clause (i) without regard to this
clause,
‘‘(iii) any empowerment zone or enter-
prise community (and any supplemental
zone designated on December 21, 1994),
and
‘‘(iv) any site announced before Feb-
ruary 1, 1997, as being included as a
brownfields pilot project of the Environ-
mental Protection Agency.
‘‘(B) NATIONAL PRIORITIES LISTED SITES
NOT INCLUDED.—Such term shall not include
any site which is on the national priorities list
under section 105(a)(8)(B) of the Comprehen-
sive Environmental Response, Compensation,
and Liability Act of 1980 (as in effect on the
date of the enactment of this section).
‘‘(C) CERTAIN
RULES
TO
APPLY.—For
purposes of this paragraph, the rules of sections
1392(b)(4) and 1393(a)(9) shall apply.
‘‘(D) TREATMENT
OF
CERTAIN
SITES.—
For purposes of this paragraph, a single con-
taminated site shall be treated as within a tar-
geted area if—
‘‘(i) a substantial portion of the site is
located within a targeted area described in
subparagraph (A) (determined without re-
gard to this subparagraph), and
‘‘(ii) the remaining portions are con-
tiguous to, but outside, such targeted area.
‘‘(d) HAZARDOUS SUBSTANCE.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘hazardous sub-
stance’ means—
‘‘(A) any substance which is a hazardous
substance as defined in section 101(14) of the
Comprehensive Environmental Response, Com-
pensation, and Liability Act of 1980, and
‘‘(B) any substance which is designated as
a hazardous substance under section 102 of
such Act.
‘‘(2) EXCEPTION.—Such term shall not include
any substance with respect to which a removal or re-
medial action is not permitted under section 104 of
such Act by reason of subsection (a)(3) thereof.
‘‘(e) DEDUCTION RECAPTURED AS ORDINARY IN-
COME ON SALE, ETC.—Solely for purposes of section
1245, in the case of property to which a qualified environ-
mental remediation expenditure would have been capital-
ized but for this section—
‘‘(1) the deduction allowed by this section for
such expenditure shall be treated as a deduction for
depreciation, and
‘‘(2) such property (if not otherwise section
1245 property) shall be treated as section 1245
property solely for purposes of applying section 1245
to such deduction.
‘‘(f) COORDINATION WITH OTHER PROVISIONS.—
Sections 280B and 468 shall not apply to amounts which
are treated as expenses under this section.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part VI of subchapter B of chapter 1 is amended by
adding at the end the following new item:
‘‘Sec. 198. Expensing of environmental remediation costs.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures paid or incurred
after the date of the enactment of this Act, in taxable
years ending after such date.
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