Brownfields Tax Incentive Extension

Publication Date: October 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Environment

Type:

Abstract:

The brownfields tax incentive expired on December 31, 2005. Enacted in 1997, the provision allowed a taxpayer to fully deduct the costs of environmental cleanup in the year the costs were incurred (called "expensing"), rather than spreading the costs over a period of years ("capitalizing"). The provision was adopted to stimulate the cleanup and development of less seriously contaminated sites by providing a benefit to taxpaying developers of brownfield properties. Two bills that received congressional attention contained extensions of the provision; in one case (H.R. 4297, P.L. 109-222), the bill was dropped in conference, and in the other (H.R. 5970), the bill passed the House but failed in the Senate. Nevertheless, in each of its budget proposals since FY2003, the administration has suggested that Congress make the tax incentive permanent.

Information on the extent of use of the brownfields tax incentive cannot be determined from federal income tax returns. However, to take advantage of the tax break, a developer had to obtain a certification from the state environmental agency that the site qualified as a brownfield. CRS surveyed the agencies of all states in 2003 to ask how many applications they had received and approved. Twenty-seven states reported that they had received brownfield tax incentive applications, for a total of 161 applications, of which 147 were approved. The other 23 states reported that they received no requests for certification.