As pretty much everyone knows, in order to improve its prospects for passage, the Senate added certain tax provisions to the financial bailout bill – also know as the Emergency Economic Stabilization Act of 2008, or H.R. 1424 – enacted earlier this month. One of the provisions included in the EESA was an extension of the brownfields tax incentive.
The brownfields tax incentive, originally enacted as part of the Taxpayer Relief Act of 1997, and codified as Section 198 of the internal revenue code, allows developers to immediately expense the cost of remedial work at brownfields sites, rather than having to capitalize such costs. The incentive actually expired as of December 31, 2007, but the EESA provision extends that date to December 31, 2009.
Historically, this tax incentive has been used only rarely used. In a report from 2007, the Congressional Research Service identified several possible reasons why. One issue is that the taxpayer must obtain certification from the relevant state environmental agency that the property qualifies as a brownfields site. However, more relevant here, the report noted that Congress’s failure to make the provision permanent – it has expired and been renewed several times at this point – is a significant factor in its limited utility.
Given that the EESA renewal of the provision only continues this stop and start quality, it is not obvious that the provision will find any greater utility now than previously. Nonetheless, for those who are aware of it and whose property qualifies, extension of the provision is certainly good news.