§198 Expensing of environmental remediation costs

Summary

A taxpayer may choose to treat certain cleanup costs as normal business expenses and deduct them in the year they pay or incur them, instead of adding those costs to the value of the property. The choice applies only to costs that would otherwise be capitalized and that are paid to clean up or control hazardous substances at a qualified contaminated site. It does not cover buying depreciable equipment used in cleanup, except the part of the depreciation that is tied to the site. For one tax rule (section 1245) those deductions are treated like depreciation and the related property is treated as section 1245 property. Two other rules (sections 280B and 468) do not apply. The Treasury Secretary must write rules to carry this out. The rule does not apply to costs paid after December 31, 2011. Definitions: "Qualified environmental remediation expenditure" = a capitalizable cost paid to abate or control hazardous substances at a qualified site. "Qualified contaminated site" = land held for business or income where there has been a release or threat of release of hazardous substances; sites on or proposed for the federal Superfund (national priorities) list are excluded. A taxpayer can only apply this if a designated State environmental agency gives a statement that the site meets the release or threat condition. Each State’s chief executive had 60 days after enactment to name that agency; if not, the EPA Administrator will name it. "Hazardous substance" = substances defined or listed under CERCLA (including certain petroleum products), except substances for which cleanup is barred under CERCLA section 104(a)(3).