Federal Brownfields Tax Incentive:
J. Spear Associates
Milwaukee, Wisconsin
(Overview
The Federal Brownfields Tax Incentive
encourages brownfields redevelopment by
allowing taxpayers to reduce their taxable
income by the cost of their eligible
cleanup expenses. The Incentive was
originally signed into law in August 1997
as part of the Taxpayer Relief Act. It was
renewed in October 2004 through the
Working Families Tax Relief Act of 2004
and continues until December 2005. To
qualify for the Tax Incentive, three criteria
must be met:
The property must be held by the
taxpayer incurring the cleanup cost
for use in a trade or business;
Hazardous substances must be
present or potentially present on
the property; and
The taxpayer must obtain a
statement from a designated state
agency verifying eligibility for the
Tax Incentive.
Designed to spur investment in blighted
properties and assist in revitalizing
communities, the Federal Brownfields Tax
Incentive can serve as a critical tool in
brownfields cleanup and redevelopment
efforts.
|Project Highlights
The Federal Brownfields Tax
Incentive has assisted in the
cleanup and redevelopment of idle
properties along Martin Luther King
Drive in Milwaukee, Wisconsin.
On one formerly contaminated
property, new commercial space
and residential units were
developed.
The Federal Brownfields Tax
Incentive allowed the site's
developer to expense more than
$100,000 in cleanup costs.
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I Project Background
As a local environmental engineering firm in Milwaukee, Wisconsin, J. Spear Associates has
advised multiple clients on the advantages of using the Federal Brownfields Tax Incentive.
One of those clients was a contractor who had recently purchased a property on Martin
Luther King (MLK) Drive. The approximately one-acre property is within the Historic King
Drive Business Improvement District, and the contractor was looking to create a mixed-use
office/residential/retail redevelopment project to coincide with the area's general
revitalization. However, initial assessments of the site revealed a high level of PCBs in the
groundwater and some cleanup would be needed before any redevelopment could occur.
Mr. Spear, head of J. Spear Associates, first heard about the Federal Brownfields Tax Incentive
several years ago, at an EPA-sponsored seminar in Wisconsin. Presenters included EPA staff
and consultants who had developed tools for brownfields stakeholders to assist with cleanup
and redevelopment efforts. One tool which was discussed, the Federal Brownfields Tax
Incentive, caught Spear's attention and he began to think of ways to creatively combine
elements in construction and cleanup that would be eligible to deduct under the Tax
Incentive.
| Benefits of the Tax I ncentive |
Cleanup of contamination on the site was easier than originally suspected, as tests revealed that
the property's contamination had actually migrated from another site. J. Spear Associates
advised its client to cap the contamination; a portion of the cap was then used as a parking area
for the site. Through the Federal Brownfields Tax Incentive, the developer expensed more than
$100,000 in cleanup costs. The site is now home to new commercial space, occupied by a
dentist's office, and two new apartments units.
Mr. Spear lauds the Tax Incentive as an advantage to developers, one that allows brownfields
stakeholders to know earlier in the cleanup process if a planned redevelopment is feasible.
Mr. Spear believes that with the Tax Incentive, "stakeholders do not have to spend a large
amount of their own money on cleanup costs only to eventually realize that redevelopment
isn't a possibility." Regarding the new commercial and residential redevelopment on MLK
drive, Spear says, "I feel like the Incentive really drove the project forward."
| Process for Utilizing the Tax Incentive j
According to Mr. Spear, utilizing the Federal Brownfields Tax Incentive is not a difficult
process; J. Spear Associates advises its clients to follow the guidelines set forth by the
Wisconsin Department of Natural Resources (DNR). Property owners must request a cert-
ification statement from the Wisconsin DNR that the property is a "qualified, contaminated
site." Deductible costs include site assessments, investigation and monitoring, remediation
activities, operation and maintenance costs, voluntary cleanup program fees, and costs for
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the removal of demolition debris.
Community Impact of the Brownfields Tax Incentive
Due to the efforts of brownfields stakeholders and consultants such as J. Spear Associates,
the MLK Drive area and surrounding neighborhood are experiencing a positive
transformation. Redevelopment of the formerly contaminated site on MLK Drive improved
the area's business environment by providing additional commercial and sought-after urban
residential space.
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New apartments and a dentist's office built on a former brownfields property.
|Continuing Success
While Mr. Spear supports developers' use of the Federal Brownfields Tax Incentive, he believes
that more brownfields stakeholders would take advantage of it if they were aware of its
availability. Mr. Spear acknowledges that the flexibility in the types of cleanup costs that can be
deducted, such as capping, can significantly relieve a portion of a taxpayers' financial burden in
an eligible cleanup and redevelopment project. J. Spear Associates will continue to promote and
support the use of the Federal Brownfields Tax Incentive as a means to accomplish cleanup and
redevelopment projects in Milwaukee.
For more information about the Federal Brownfields Tax Incentive, please visit
http://www.epa.gov/brownfields/bftaxinc.htm.
For more information on requirements for using the Federal Brownfields Tax Incentive in
Wisconsin, please visit http://www.dnr.state.wi.us/org/aw/rr/financial/fed_tax.html.
Federal Brownfields Tax Incentive
Case Study
J. Spear Associates
Solid Waste
and Emergency
Response (5105T)
EPAS60-F-05-225
May 2005
www.epa.gov/brownfields
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