Credit for expenditures to remediate contaminated sites

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

45N.

Environmental remediation credit

(a)

In general

For purposes of section 38, the environmental remediation credit determined under this section is 50 percent of the qualified remediation expenditures paid or incurred by the taxpayer during the taxable year with respect to a qualified contaminated site located in an eligible area. (b)

Qualified remediation expenditures

For purposes of this section, the term qualified remediation expenditures means expenditures, whether or not chargeable to capital account, in connection with— (1)the abatement or control of any hazardous substance at the qualified contaminated site in accordance with an approved remediation plan, (2)the demolition of any structure (or portion thereof) on such site if any portion of such structure is demolished in connection with such abatement or control, (3)the removal and disposal of property in connection with the activities described in paragraphs (1) and (2), and (4)the reconstruction of utilities in connection with such activities.

Such term includes the cost of financial assurances (including bonding) and insurance described in subsection (g)(4).

(c)

Qualified contaminated site

For purposes of this section— (1)

In general

The term qualified contaminated site means any area— (A)which is an eligible response site as defined in section 101(41) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, (B)which is held by the taxpayer for use in a trade or business or for the production of income, or which is property described in section 1221(a)(1) in the hands of the taxpayer, (C)at or on which there has been a release (or threat of release) or disposal of any hazardous substance, and (D)with respect to which an approved remediation plan and an approved redevelopment plan are both in effect. (2)

National priorities listed sites not included

Such term shall not include any site which is on, or proposed for, the national priorities list under section 105(a)(8)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (as in effect on the date of the enactment of this section). (d)

Hazardous substance

For purposes of this section— (1)

In general

The term hazardous substance means— (A)any substance which is a hazardous substance as defined in section 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, (B)any substance which is designated as a hazardous substance under section 102 of such Act, and (C)any petroleum product (within the meaning of section 4612(a)(3)). (2)

Exception

Such term shall not include any substance with respect to which a removal or remedial action is not permitted under section 104 of such Act by reason of subsection (a)(3) thereof. (e)

Approved remediation plan

For purposes of this section, the term approved remediation plan means, with respect to any site, any plan for the conduct of the activities described in paragraphs (1) through (4) of subsection (b)— (1)which is approved by a State environmental agency— (A)pursuant to a response program which includes each of the elements listed in section 128(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and (B)after a determination by such agency that the plan provides for the abatement or control of the hazardous substances at such site, and (2)which includes a written statement from such agency that such site meets the requirements of paragraphs (1)(A), (1)(C), and (2) of subsection (c). (f)

Approved redevelopment plan

For purposes of this section, the term approved redevelopment plan means, with respect to any site, any plan for the redevelopment of such site which is approved by the State development agency after a determination by such agency that the plan provides for the redevelopment of such site in a manner beneficial to the State and local economy and to the local community generally. (g)

Credit may not exceed allocation

(1)

In general

The environmental remediation credit determined under this section with respect to any qualified contaminated site shall not exceed the credit amount allocated under this section by the State development agency to the taxpayer with respect to such site. (2)

Time for making allocation

An allocation shall be taken into account under paragraph (1) for any taxable year only if made before the close of the calendar year in which such taxable year begins. (3)

Manner of allocation

(A)

Allocation must be pursuant to plan

No amount may be allocated under this subsection to any qualified contaminated site unless— (i)an approved remediation plan and an approved redevelopment plan are both in effect with respect to such site, and (ii)such amount is allocated pursuant to a qualified allocation plan of the State development agency. (B)

Qualified allocation plan

For purposes of this paragraph, the term qualified allocation plan means any plan— (i)which sets forth selection criteria to be used to determine priorities of the State development agency in allocating credit amounts under this section, and (ii)which gives preference in allocating credit amounts under this section to qualified contaminated sites based on— (I)the extent of poverty, (II)whether the site is located in an empowerment zone, enterprise community, or renewal community, (III)whether the site is located in the central business district of the local jurisdiction, (IV)the extent of the required environmental remediation, (V)the extent of the commercial, industrial, or residential redevelopment of the site in addition to environmental remediation, (VI)the extent of the financial commitment to such redevelopment, (VII)the amount of new employment expected to result from such redevelopment, and (VIII)whether it is reasonably expected that under the approved remediation plan at least 25 percent of the estimated total qualified remediation expenditures will be borne by one or more persons who are potentially liable under section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. (4)

States may impose other conditions

Nothing in this section shall be construed to prevent any State from requiring— (A)assurances, including bonding, that any project for which a credit amount is allocated under this section will be properly completed or that the financial commitments of the taxpayer are actually carried out, (B)that the taxpayer obtain insurance which reimburses qualified remediation expenditures in excess of the total estimated amount of such expenditures, or (C)that the taxpayer obtain insurance covering liability for personal injury, death, or property damage. (h)

State environmental remediation credit ceiling

For purposes of this section— (1)

Limitation

The aggregate credit amounts allocated by the State development agency during any calendar year shall not exceed the State environmental remediation credit ceiling applicable to such State for such calendar year. (2)

Determination of limitation amount

The State environmental remediation credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of— (A)such State’s share of the national environmental remediation credit limitation for the calendar year, (B)the unused State environmental remediation credit ceiling (if any) of such State for the calendar year, (C)the amount of State environmental remediation credit ceiling returned in the calendar year, plus (D)the amount (if any) allocated under paragraph (5) to such State by the Secretary. (3)

National environmental remediation credit limitation

(A)

In general

The national environmental remediation credit limitation for each calendar year is $1,000,000,000. (B)

State’s share of limitation

A State’s share of such limitation is the amount which bears the same ratio to the limitation applicable under subparagraph (A) for the calendar year as such State’s population bears to the population of the United States. (4)

Unused State environmental remediation credit ceiling

The unused State environmental remediation credit ceiling for any calendar year is the excess (if any) of— (A)the State environmental remediation credit ceiling applicable to the State for the preceding calendar year (determined without regard to paragraph (2)(B)), over (B)the aggregate environmental remediation credit amount allocated by the State for such preceding year. (5)

Unused environmental remediation credit allocated among States after 1-year carryforward

(A)

In general

The excess unused environmental remediation credit of a State for any calendar year shall be assigned to the Secretary for allocation among qualified States for the succeeding calendar year. (B)

Excess unused environmental remediation credit

For purposes of this paragraph, the excess unused environmental remediation credit of a State for any calendar year is the excess (if any) of— (i)the unused State environmental remediation credit ceiling for the preceding calendar year, over (ii)the aggregate environmental remediation credit amount allocated by the State for such preceding year. (C)

Formula for allocation of excess unused environmental remediation credit among States

Rules similar to the rules of clauses (iii) and (iv) of section 42(h)(3)(D) shall apply for purposes of this paragraph. (6)

Population

For purposes of this subsection, population shall be determined in accordance with section 146(j). (7)

Inflation adjustment

In the case of any calendar year after 2006, the $1,000,000,000 amount contained in paragraph (3) shall be increased by an amount equal to— (A)such dollar amount, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2005 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $500,000.

(i)

Other definitions and special rule

For purposes of this section— (1)

Eligible area

(A)

In general

The term eligible area means the entire area encompassed by a local governmental unit or Indian tribal government if such entire area contains at least 1 census tract having a poverty rate of at least 20 percent. (B)

Use of equivalent county divisions

In the case of any area which is not tracted for population census tracts, the equivalent county divisions (as defined by the Bureau of the Census for purposes of defining poverty areas) shall be treated as census tracts for purposes of subparagraph (A). (C)

Use of census data

For purposes of this paragraph, population and poverty rate shall be determined by the most recent decennial census data available. (2)

State environmental agency

The term State environmental agency means any State agency specifically authorized by gubernatorial act or State statute to carry out the functions and responsibilities of a State environmental agency for purposes of this section. (3)

State development agency

The term State development agency means any State agency specifically authorized by gubernatorial act or State statute to carry out the functions and responsibilities of a State development agency for purposes of this section. (4)

Possessions treated as States

The term State includes a possession of the United States. (5)

Special rules for hazardous substances that are petroleum products

In the case of an area at or on which there has been a release (or threat of release) or disposal of any hazardous substance that is a petroleum product, the following rules shall apply: (A)The requirement of subsection (c)(1)(A) shall be deemed to be met. (B)The requirement of subsection (e)(1)(A) shall be deemed to be met. (C)Subsection (e)(2) shall be applied by substituting (1)(C) and (2) for (1)(A), (1)(C), and (2). (j)

Credit may be assigned

(1)

In general

If a taxpayer elects the application of this subsection for any taxable year, the amount of credit determined under this section for such year which would (but for this subsection) be allowable to the taxpayer shall be allowable to the person designated by the taxpayer. The person so designated shall be treated as the taxpayer for purposes of this title (other than this paragraph). (2)

Treatment of amounts paid for assignment

If any amount is paid to the person who assigns the credit determined under this section, no portion of such amount shall be includible in such person’s gross income. (k)

Recapture of credit if approved remediation plan or approved redevelopment plan not properly completed

(1)

In general

If— (A)the State environmental agency determines that the approved remediation plan for the qualified contaminated site was not properly completed, or (B)the State development agency determines that the approved redevelopment plan for such site was not properly completed,

the taxpayer’s tax under this chapter for the taxable year in which such determination is made shall be increased by the credit recapture amount.

(2)

Credit recapture amount

For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of— (A)the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if the credit allowable by reason of this section were not allowed, plus (B)interest at the overpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.

No deduction shall be allowed under this chapter for interest described in subparagraph (B).

(3)

Special rules

(A)

Tax benefit rule

The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted. (B)

No credits against tax

Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit or the tax imposed by section 55. (l)

Denial of double benefit

(1)

In general

No deduction shall be allowed for that portion of the qualified remediation expenditures otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under this section. (2)

Similar rule where taxpayer capitalizes rather than deducts expenses

If— (A)the amount of the credit determined for the taxable year under this section, exceeds (B)the amount allowable as a deduction for such taxable year for qualified remediation expenditures (determined without regard to paragraph (1)),

the amount chargeable to capital account for the taxable year for such expenditures shall be reduced by the amount of such excess.

(3)

Controlled groups

In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 41(f)(5)) or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section 41(f)(1)(B)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subparagraphs (A) and (B) of section 41(f)(1). (m)

Cost of removal or remedial action

The credit allowed under this section shall not be treated as a cost of removal or remedial action incurred by the United States for purposes of section 107(a)(4)(A) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

(b)

Exclusion by site owner of remediation expenditures paid by potentially responsible parties

Part III of subchapter B of chapter 1 of such Code is amended by inserting after section 139A the following new section:

139B.

Remediation contributions by potentially responsible parties

(a)

In general

Gross income shall not include any amount received as a qualified remediation contribution. (b)

Qualified remediation contribution

For purposes of this section, the term qualified remediation contribution means any amount which is paid to or for the benefit of the owner of any property by a potentially responsible party (within the meaning of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980) with respect to such property for qualified remediation expenditures (as defined in section 45N(b)) with respect to such property. (c)

Denial of double benefit

Notwithstanding any other provision of this subtitle— (1)no deduction or credit shall be allowed (to the person for whose benefit a qualified remediation contribution is made) for, or by reason of, any expenditure to the extent of the amount excluded under this section with respect to such expenditure, and (2)no increase in the basis of any property shall result from any amount excluded under this section with respect to such property.

(c)

Credit treated as business credit

Section 38(b) of such Code is amended by striking and at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting , plus, and by adding at the end the following new paragraph:

(27)the environmental remediation credit determined under section 45N(a).

(d)

Clerical amendments

(1)The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 45N. Environmental remediation credit

(2)The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139A the following new item:

Sec. 139B. Remediation contributions by potentially responsible parties

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2005.