This deduction provides businesses with an incentive to clean up certain sites that are contaminated with hazardous substances. Businesses can choose to deduct qualified environmental cleanup costs in the tax year they pay or incur the cost. A business can do this instead of adding the cost to the basis of its property (and, if the property is depreciable, recovering the cost by taking depreciation deductions over a specified recovery period). Businesses do not have to be located in an Empowerment Zone (EZ), Enterprise Community (EC), or Renewal Community (RC) to qualify for this deduction. This special tax treatment is generally available for qualified environmental cleanup costs that businesses pay or incur after August 5, 1997, and before January 1, 2004.
Target Audience:
- Prospective purchasers of contaminated property that are willing to pay the cost of cleanup rather than having the seller pay.
- Businesses with sufficient income to be able to use the full deduction of cleanup costs in the year expenditures are paid or incurred.
- Current owners of contaminated property who wish to expand or improve property.
- Businesses interested in developable sites. (No forms; see IRS Pub. 954).
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