Brownfields Cleanups Sweetened by the Tax Code

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Article from EPA's Cleanup News 

BROWNFIELDS TAX INCENTIVE
KARL ALVAREZ & BECKY BROOKS
OUTREACH AND SPECIAL PROJECTS STAFF
OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE
April 1999

For more information contact Karl Alvarez, 202-260-3525


Brownfields Cleanups Sweetened by the Tax Code

EPA's efforts toward redeveloping lands which are abandoned, idle, or
under-utilized because of real or perceived contamination have received
support from a very unlikely source: the U.S. tax code.  Well, perhaps it's
not so unlikely.  The tax code can offer financial incentives on a scale
which defies all other sources.  Section 198 of the tax code seeks to bring
thousands of brownfields properties back into productive use.

Current environmental liability can serve as a disincentive to
redevelopment of a former industrial site; less uncertainty exists on
suburban or rural greenfields.  With high density in the urban core and
existing infrastructure (roads, sewers, schools, mass transit), property
values and taxes are usually higher in our inner cities.  Demolition or
restoration of existing buildings and structures is often more expensive
than new construction.  The bottom line: all of these trends serve as
incentives to abandon the city core in favor of the suburban areas outside
of town.

In an effort to minimize such trends and encourage brownfields
redevelopment, on August 5, 1997, President Clinton signed into law the
Taxpayer Relief Act of 1997, which included the Brownfields Tax Incentive
provisions.  The changes to the tax code are designed to "level the playing
field" for brownfields properties.  The brownfields incentive allows
taxpayers to deduct from their net income the costs of certain cleanup
activities in targeted areas in the year incurred.  Four criteria were
developed to focus the incentive's impact on lower income, urban,
comercial/ industrial areas.  Eligible property must fall into at least one
of the four categories designated below:

1. Census tracts with a poverty rate of 20% or more.
2. Census tracts with populations of less than 2,000 people which are more
than 75% zoned commercial/industrial and adjacent to a census tract with a
poverty rate of 20% or more.
3. All Federally designated Empowerment Zones or Enterprise Communities.
4. EPA Brownfields Pilot sites designated prior to February 1997.

 To assist taxpayers in determining the eligibility of their specific
property, EPA has provided a fact sheet which details all available sources
of criteria information.  This fact sheet can be found, along with a series
of additional tax incentive information, on the Brownfields home page at
http://www.epa.gov/brownfields.	

On March 5, 1999, OSWER's Outreach and Special Projects Staff, which is
responsible for implementing the Brownfields program, hosted a National
Brownfields Tax Incentive Roundtable in Chicago, IL, to hear from
brownfields stakeholders on the incentive.  Bankers, lawyers, community
activists, developers, accountants, insurers, engineers, analysts, and
public officials from Federal, State, and local governments began a
dialogue on strategies to educate taxpayers on the incentive, increase use
of the incentive, and strengthen the incentive based on market and business
needs.  A summary of the Roundtable proceedings and tools for educating
taxpayers and stakeholders will soon be available on the Brownfields home
page.

The Brownfields Tax Incentive is an additional tool in local efforts to
marshal funding for revitalization and redevelopment efforts.  We recognize
that the incentive will not create redevelopment of brownfields, but at
least it can help "sweeten" a potential real estate redevelopment project.