
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)[162(c)]]
[CITE: 26USC198]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 198. Expensing of environmental remediation costs


(a) In general

    A taxpayer may elect to treat any qualified environmental 
remediation expenditure which is paid or incurred by the taxpayer as an 
expense which is not chargeable to capital account. Any expenditure 
which is so treated shall be allowed as a deduction for the taxable year 
in which it is paid or incurred.

(b) Qualified environmental remediation expenditure

    For purposes of this section--

                           (1) In general

        The term ``qualified environmental remediation expenditure'' 
    means any expenditure--
            (A) which is otherwise chargeable to capital account, and
            (B) which is paid or incurred in connection with the 
        abatement or control of hazardous substances at a qualified 
        contaminated site.

     (2) Special rule for expenditures for depreciable property

        Such term shall not include any expenditure for the acquisition 
    of property of a character subject to the allowance for depreciation 
    which is used in connection with the abatement or control of 
    hazardous substances at a qualified contaminated site; except that 
    the portion of the allowance under section 167 for such property 
    which is otherwise allocated to such site shall be treated as a 
    qualified environmental remediation expenditure.

(c) Qualified contaminated site

    For purposes of this section--

                           (1) In general

        The term ``qualified contaminated site'' means any area--
            (A) which is held by the taxpayer for use in a trade or 
        business or for the production of income, or which is property 
        described in section 1221(a)(1) in the hands of the taxpayer, 
        and
            (B) at or on which there has been a release (or threat of 
        release) or disposal of any hazardous substance.

          (2) National priorities listed sites not included

        Such term shall not include any site which is on, or proposed 
    for, the national priorities list under section 105(a)(8)(B) of the 
    Comprehensive Environmental Response, Compensation, and Liability 
    Act of 1980 (as in effect on the date of the enactment of this 
    section).

    (3) Taxpayer must receive statement from State environmental 
                                   agency

        An area shall be treated as a qualified contaminated site with 
    respect to expenditures paid or incurred during any taxable year 
    only if the taxpayer receives a statement from the appropriate 
    agency of the State in which such area is located that such area 
    meets the requirement of paragraph (1)(B).

                    (4) Appropriate State agency

        For purposes of paragraph (3), the chief executive officer of 
    each State may, in consultation with the Administrator of the 
    Environmental Protection Agency, designate the appropriate State 
    environmental agency within 60 days of the date of the enactment of 
    this section. If the chief executive officer of a State has not 
    designated an appropriate environmental agency within such 60-day 
    period, the appropriate environmental agency for such State shall be 
    designated by the Administrator of the Environmental Protection 
    Agency.

(d) Hazardous substance

    For purposes of this section--

                           (1) In general

        The term ``hazardous substance'' means--
            (A) any substance which is a hazardous substance as defined 
        in section 101(14) of the Comprehensive Environmental Response, 
        Compensation, and Liability Act of 1980, and
            (B) any substance which is designated as a hazardous 
        substance under section 102 of such Act.

                            (2) Exception

        Such term shall not include any substance with respect to which 
    a removal or remedial action is not permitted under section 104 of 
    such Act by reason of subsection (a)(3) thereof.

(e) Deduction recaptured as ordinary income on sale, etc.

    Solely for purposes of section 1245, in the case of property to 
which a qualified environmental remediation expenditure would have been 
capitalized but for this section--
        (1) the deduction allowed by this section for such expenditure 
    shall be treated as a deduction for depreciation, and
        (2) such property (if not otherwise section 1245 property) shall 
    be treated as section 1245 property solely for purposes of applying 
    section 1245 to such deduction.

(f) Coordination with other provisions

    Sections 280B and 468 shall not apply to amounts which are treated 
as expenses under this section.

(g) Regulations

    The Secretary shall prescribe such regulations as may be necessary 
or appropriate to carry out the purposes of this section.

(h) Termination

    This section shall not apply to expenditures paid or incurred after 
December 31, 2003.

(Added Pub. L. 105-34, title IX, Sec. 941(a), Aug. 5, 1997, 111 Stat. 
882; amended Pub. L. 106-170, title V, Secs. 511, 532(c)(2)(A), Dec. 17, 
1999, 113 Stat. 1924, 1930; Pub. L. 106-554, Sec. 1(a)(7) [title I, 
Sec. 162(a), (b)], Dec. 21, 2000, 114 Stat. 2763, 2763A-625.)

                       References in Text

    The date of the enactment of this section, referred to in subsec. 
(c)(2), (4), is the date of enactment of Pub. L. 105-34, which was 
approved Aug. 5, 1997.
    Sections 101(14), 102, 104, and 105(a)(8)(B) of the Comprehensive 
Environmental Response, Compensation, and Liability Act of 1980, 
referred to in subsecs. (c)(2) and (d), are classified to sections 
9601(14), 9602, 9604, and 9605(a)(8)(B), respectively, of Title 42, The 
Public Health and Welfare.


                               Amendments

    2000--Subsec. (c). Pub. L. 106-554, Sec. 1(a)(7) [title I, 
Sec. 162(a)], amended subsec. (c) generally. Prior to amendment, subsec. 
(c) defined the term ``qualified contaminated site'' to include certain 
property described in section 1221(a)(1) of this title, within a 
targeted area, and at which there had been a release or disposal of any 
hazardous substance, provided that an area could be treated as a 
qualified contaminated site only if the taxpayer received a certain 
statement from an appropriate State agency, provided for designation of 
appropriate State agencies, and defined targeted area.
    Subsec. (h). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 162(b)], 
substituted ``2003'' for ``2001''.
    1999--Subsec. (c)(1)(A)(i). Pub. L. 106-170, Sec. 532(c)(2)(A), 
substituted ``section 1221(a)(1)'' for ``section 1221(1)''.
    Subsec. (h). Pub. L. 106-170, Sec. 511, substituted ``2001'' for 
``2000''.


                    Effective Date of 2000 Amendment

    Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 162(c)], Dec. 21, 2000, 
114 Stat. 2763, 2763A-625, provided that: ``The amendments made by this 
section [amending this section] shall apply to expenditures paid or 
incurred after the date of the enactment of this Act [Dec. 21, 2000].''


                    Effective Date of 1999 Amendment

    Amendment by section 532(c)(2)(A) of Pub. L. 106-170 applicable to 
any instrument held, acquired, or entered into, any transaction entered 
into, and supplies held or acquired on or after Dec. 17, 1999, see 
section 532(d) of Pub. L. 106-170, set out as a note under section 170 
of this title.


                             Effective Date

    Section 941(c) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [enacting this section] shall apply to expenditures 
paid or incurred after the date of the enactment of this Act [Aug. 5, 
1997], in taxable years ending after such date.''
