[Congressional Record Volume 151, Number 17 (Wednesday, February 16, 2005)]
[Senate]
[Pages S1528-S1531]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself and Mr. Bayh):
  S. 398. A bill to amend the Internal Revenue Code of 1986 to expand 
the expensing of environmental remediation costs; to the Committee on 
Finance.
  Mr. SANTORUM. Mr. President, I am pleased to introduce with my 
colleague from Indiana, Senator Bayh, important legislation to 
encourage the cleanup of contaminated sites commonly known as 
``brownfields.'' I urge all my colleagues to join Senator Bayh and me 
as supporters of this legislation and ask that they actively work with 
us towards its enactment.
  The United States Environmental Protection Agency, EPA, defines 
brownfields as ``abandoned, idled, or under used industrial commercial 
sites where expansion or redevelopment is complicated by real or 
perceived environmental contamination that can add cost, time, or 
uncertainness to redevelopment projects.''
  Brownfields are not unique to my State of Pennsylvania, nor are they 
to Senator Bayh's State of Indiana. In every State in the Nation, there 
are areas blighted by run down, abandoned properties and unsightly 
vacant lots. They are the shut down manufacturing facilities, deserted 
warehouses and gas stations that are all too familiar to us. On these 
properties once stood vibrant and productive enterprises, but changing 
times and events have drained their vitality and they are now in 
desperate need of revitalization and redevelopment. Compounding the 
problem is that over the years, the activities on these sites have left 
the soil and water tables contaminated with environmental pollutants.
  The negative social and economic effects that these sites cause on 
their surrounding communities are significant. There are serious 
financial impacts not only to the market values of the brownfield 
properties themselves, but also to property values in the surrounding 
neighborhoods. As middle class citizens are working to gain assets and 
potentially be able to borrow against, or even sell their homes in the 
future, property values become a very serious issue. A reduction of 
property values in brownfield neighborhoods hits hardest the families 
who can least afford it.
  Brownfields have other serious repercussions, extending far beyond 
the pocketbook. The unsightliness of brownfields can lead to the 
characterization of entire neighborhoods as run-down and undesirable. 
The once vibrant spirit of these centrally located and thriving urban 
areas can be dampened as these eyesores drag down residents' morale and 
sense of connection with their community.
  The U.S. Conference of Mayors and the Government Accountability 
Office estimate that there are over 400,000 brownfield sites across the 
country. According to a recent U.S. Conference of Mayors survey of 187 
cities throughout the nation, redevelopment of their existing 
brownfields would bring additional tax revenues of up to $2 billion 
annually and could create hundreds of thousands of jobs.

[[Page S1531]]

  Many brownfields are located in prime business locations near 
critical infrastructure, including transportation, and close to an 
already productive workforce. Putting these sites back into use will 
generate good paying jobs and affordable housing in areas where they 
are most needed. Rehabilitating and reusing these sites also serves to 
help prevent urban sprawl. We should encourage the cleanup and use of 
these brownfield sites rather than abandon them and instead always look 
to develop at new locations. A powerful example from my State of a 
successful brownfield revitalization effort and how it can have 
substantial and positive effects on a community is the city of Chester.
  In the midst of a major revitalization, Chester is redeveloping its 
blighted and vacant waterfront district, including the former PECO 
power station. The city is striving to turn a former industrial site 
into a business center. Chester will be able to create new office 
space, and by working with a private developer Chester has received an 
initial commitment to move 2,000 jobs into the area. This initiative 
will help bring more business and infrastructure back to the community, 
adding to the area's prosperity and making Chester an even safer and 
more pleasant place to live.
  Unfortunately, a big reason that so many brownfield properties are 
languishing in a state of decay and disrepair is the substantial clean 
up costs associated with them and the unfavorable tax treatment of 
those costs.
  As part of the Community Renewal and Revitalization Act of 2000, 
Congress enacted section 198 of the Internal Revenue Code, which 
allowed cleanup costs to be expensed in the year they were incurred. 
Prior to that, these costs had to be capitalized to the land, 
postponing any recovery of these costs for tax purposes until the 
property was sold.
  This expedited writeoff of clean up expenses helps a redeveloper 
manage the cost of rehabilitating existing properties which typically 
is much more expensive than developing new sites. Brownfield cleanup 
costs can be an imposing obstacle to redevelopment. While the price tag 
varies with each site, it is not unreasonable for the cleanup of a 
major site to cost between $500,000 and $1 million.
  We in the Senate, and our colleagues in the House, were wise to enact 
section 198 and renew it for 2 years through the Working Families Tax 
Relief Act of 2004. That was a start, but more needs to be done in this 
area.
  The bill my colleague and I are introducing today has three 
provisions. First, it makes section 198 a permanent provision in the 
Tax Code. Second, it broadens the definition of ``hazardous 
substances'' in section 198 to include petroleum. Finally, it repeals 
the provision in the law requiring the recapture of the section 198 
deduction when the property is sold.
  The tax policy of allowing the expensing of clean up costs should be 
a permanent fixture in the Tax Code. Brownfields are a long-term 
problem and this solution will allow us to complete this important 
task.
  Furthermore, a shortcoming of the law passed in 2000 was the absence 
of petroleum as a contaminant that allowed a site to qualify as a 
brownfield under section 198. A large percentage of brownfields across 
the country are contaminated with petroleum. Extending the law to cover 
petroleum contamination makes much more sense and the law much more 
effective.
  Finally, the provision in section 198 that requires a taxpayer who 
uses the clean up deduction to pay income tax on that amount when he or 
she sells the property is illogical. This sends a message to 
developers, that if they undertake the worthy endeavor of remediation 
of brownfield sites they will be subjected to substantial tax penalties 
for doing so. This policy is counterproductive to the efforts we are 
trying to encourage and it should be repealed.
  The benefits of brownfields cleanup are obvious. Remediation of these 
sites revitalizes our neighborhoods and communities, and I urge my 
colleagues to support this legislation.
                                 ______