Federal Brownfields Income Tax Deduction
Update: This deduction has been extended through December 31, 2009, as part of the Emergency Economic Stabilization Act of 2008 (HR 1424).
Attention Owners of Contaminated Properties: Do you qualify for this deduction?
Businesses that own and cleanup contaminated properties may be eligible to take advantage of a federal income tax deduction for expenses incurred by December 31, 2009.
The Federal Brownfields Tax Deduction allows a taxpayer to deduct qualified environmental remediation expenditures at a property held for use in a trade or business or for the production of income. The taxpayer takes the deductions from federal income in the year that the expenditures were paid or incurred, rather than depreciating them over several years.
How to Qualify
What's deductible?
Remediation expenditures include site assessment, investigation and monitoring; remediation activities; operation and maintenance costs; voluntary cleanup program fees; and costs for removal of demolition debris.
The 2006 federal Tax Relief and Health Care act applied these deductions to remediation expenses associated with federally defined petroleum products – including crude oil, crude oil condensates, and natural gasoline – incurred from December 31, 2005 to December 31, 2009.
The law also applies the federal income tax deduction to eligible expenses incurred after 1998 that are associated with the abatement or control of hazardous substances, as defined under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The definitions of a federal hazardous substance and a petroleum product can be found in DNR's Federal Brownfields Tax Incentive Fact Sheet (RR-592) [PDF, 45KB].
Additional Qualifications
- The property cannot be listed or proposed to be listed on the EPA's National Priorities List. Wisconsin's sites are listed in DNR's publication Superfund Sites in Wisconsin (RR-005) [PDF, 27KB].
- The taxpayer must own the property while the eligible expenses are incurred.
- The property must be held for use in a trade or business or for income.
- A hazardous substance defined under CERCLA or a federally defined petroleum product (as defined in s. 4612(a) (3) of the federal tax code) must be present or potentially present on the property.
- Expenses must be "qualified environmental remediation expenditures." Check with a qualified tax advisor.
- The expenses must be paid or incurred by December 31, 2009.
Process for Getting DNR Certification
DNR must provide a statement that the property is a "qualified contaminated site". To get the certification, read the Federal Brownfields Tax Incentive Fact Sheet (RR-592) [PDF, 68KB] and get the Brownfields Federal Tax Deduction Pre-Certification Form (Form 4400-206) [PDF, 19KB], dated January 2007. Complete the form, include the necessary information, and return the materials to the DNR.
Other Information Sources
- U.S. Environmental Protection Agency Brownfields Tax Incentive Website [exit DNR]
- Congressional Research Service Report on the Section 198 Brownfields Tax Incentive [exit DNR]
News Releases
For more information on this subject, contact:
Melissa Enoch
608.266.9263
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