The Brownfields
  Tax Incentive
What's In It
 For you?

All eligible expenses must be incurred after August 5,
1997 and before January 1, 2001.

5. State verification requirements

In order for the Internal Revenue Service (IRS) to accept
deductions on your tax return, a  designated state
agency must verify that the property meets the
geographic and contamination criteria described above.

Your state agency will not charge you a fee, but it will
ask you to fill out an application  and possibly submit
some documentation.  Once the verification is issued,
the IRS will consider it valid for life of the tax incentive.
In order to claim the deduction, you need simply write
"Section 198 Election" on your income tax return on the
line where you claim the deduction.

It is important to note that the state agency can only
verify that a property is eligible.  To determine whether
a specific expenditure is eligible, you should consult a
tax attorney.

State contact information is located on the EPA website
6. For more information

Additional information on the Brownfields Tax
Incentive is located on the EPA website at

The website includes information on the following:

     • Responses to Frequently Asked Questions (FAQ's)
      on the Brownfields Tax Incentive.

     • Sources and tools to learn whether your property lies
      within one of the targeted geographic areas.

     • Designated state agency contacts.
                                      Additional information can be located by calling EPA's
                                      Brownfields Office at (202) 260-4039 or HUD's
                                      Community Connections at (800) 998-9999.
U.S. Environmental
Protection Agency
Washington, DC 20460
Office of Solid Waste
and Emergency
Response (5101)
September 1999

Brownfields Redevelopment

Commercial developers and economic development
officials are becoming more aware of the potential
redevelopment value of brownfields, or parcels of land
with real or perceived contamination.

These sites offer advantages, such as access to existing
infrastructure and transportation systems.  Moreover,
they are often close to major population centers, placing
companies near customers and potential workers.
Looking at the big picture, many developers have found
brownfields can be as attractive as undeveloped land.

Federal, state and local governments have also realized
that they can play a role in returning these brownfields
sites to new uses.  Governments have stepped in and
offered a wide variety of assistance, ranging from low-
cost financing to tax incentives. The end result has
been many successful projects and an improved quality
of life for nearby residents.

The Brownfields Tax Incentive

The Brownfields Tax Incentive encourages brownfields
redevelopment by allowing taxpayers to immediately
reduce their taxable income by the cost of their eligible
cleanup expenses in targeted areas.  This incentive
creates an immediate tax advantage from these
expenses, helping to offset short-term cleanup costs.

This brochure will give you an overview of the
incentive, which was created by the Taxpayer Relief Act
of 1997.

More specifically, it will describe:

  •  Who can use the incentive
  •  Where properties must be located
  •  What contaminants must be present, and what expenses
    may be deductible
  •  How to seek state verification to use the incentive
  •  Where to find other information on the incentive
1. Taxpayer eligibility requirements

If you wish to use the tax incentive on a brownfields
redevelopment project, you must meet the following
eligibility requirements:

 • The property must be held by the taxpayer.

 • The taxpayer must hold the property for business or
   income generation purposes.
2. Property location requirements

The tax incentive program is designed to create
economic growth in disadvantaged areas by
encouraging the redevelopment of brownfields.

As a result, the tax incentive primarily targets areas with
low household income, as well as areas that have shown
a historical commitment to brownfields redevelopment.

Your property qualifies for the incentive if it lies in one of
the following areas:

  •  Census tracts with a poverty rate of 20% or more.

  •  Census tracts with populations of less than 2,000, where
    more than 75% of the tract is zoned for commercial or
    industrial use. The tract must also be located next to other
    census tracts with poverty rates of 20% or more.

  •  All Federally designated Empowerment Zones  or
    Enterprise Communities.

  •  Brownfields pilot sites designated by the EPA prior to
    February 1997.

To determine whether a property meets these criteria,
visit the EPA web  site or
request a copy of the Brownfields Tax Incentive
Guidelines from a  designated state agency. These
agencies can also be found on the EPA web site or by
calling the EPA Brownfields Office at (202) 260-4039.
3. Contamination eligibility

The tax incentive may be used as long as the property is
an area at or on which there has been:

    •  A release or a threat of release of a hazardous
      substance, or

    •  Disposal of a hazardous substance.

Hazardous substances include a variety of contaminants
that are regulated under the Comprehensive
Environmental Response, Compensation and Liability
Act.  You should consult an environmental attorney to
determine if the contamination at your site qualifies for
the incentive.

The tax incentive excludes products in a building's
structure (such as asbestos or lead-based paint) that
lead exclusively to indoor exposure.

In addition, the site may not be listed or proposed for
listing on EPA's National Priorities List.

4. Deductible expenses

Generally, taxpayers may deduct expenses that are paid
or incurred in connection with the abatement or control
of hazardous materials. Types of eligible expenses

    •  Site assessment and investigation

    •  Site monitoring

    •  Cleanup costs

    •  Operations and maintenance costs

    •  State voluntary cleanup program oversight fees

    •  Removal of demolition debris