§179B Deduction for Capital Costs Incurred in Complying with Environmental Protection Agency Sulfur Regulations

Summary

Small refiners can choose to deduct 75% of certain capital costs they pay or incur in a tax year, as long as those costs are recorded as capital expenses and meet the law’s definition of “qualified costs.” If a refiner’s average daily runs for the year ending December 31, 2002, were more than 155,000 barrels, the 75% figure is cut down by multiplying 75% by the amount over 155,000 divided by 50,000, but it can’t go below zero. The tax basis of the property is lowered by the part of the cost that was deducted, and that deducted amount is treated like depreciation for recapture rules. The rule in section 280B does not apply to amounts treated as expenses under this rule. If the refiner and some owners are cooperatives under the tax rules for cooperatives, the refiner may elect to pass all or part of the deduction to those owners in proportion to their ownership. That election must be made on the timely filed return for the year and cannot be changed for that year. The cooperative must give each owner written notice of any allocation before the return is due.