On December 31, 2011, one of the biggest federal tax incentives for contaminated site remediation lapsed, leaving in doubt its application to remedial expenses incurred in the current calendar year. If the incentive is not retroactively extended by Congress, then such remedial expenditures would have to be capitalized and deducted over a period of years or decades, as opposed to being fully deducible in the year they are incurred.
The “Brownfield Expensing Tax Incentive” had provided for the accelerated deduction of remedial costs at “qualified contamination sites,” which are: (a) held by the taxpayer for trade, business, or income generation purposes, (b) contaminated by a hazardous substance or petroleum, and (c) neither listed nor proposed for listing on the Superfund National Priorities List. Taxpayers also require a certificate of eligibility from the state environmental agency in which the property at issue is located (in New York, the Department of Environmental Conservation), though New York sites need not be enrolled in the state’s Brownfield Cleanup Program (“BCP”) or Spill Response Program to be certified as eligible.
The incentive previously lapsed due to legislative inaction three times since its 1997 enactment, but following each expiration Congress retroactively extended it during the next calendar year, leaving no gap in the coverage of eligible expenses. It remains to be seen whether the current Congress will do the same.
On a state level, the tax credits available under for New York’s BCP are also in danger of expiring in the absence of a legislative extension. Brownfield Tax Credits are only available for cleanups that receive a Certificate of Completion (“COC”) by March 31, 2015; obtaining a COC often takes three or more years from a site’s admission into the BCP. Pending legislation in the New York State Senate would remove this sunset date, in addition to enacting other BCP amendments.
For more information on tax incentives for Brownfield remediation, contact David Yudelson or Christine Leas.
