[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3527 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 3527
To amend the Internal Revenue Code of 1986 to exclude from unrelated
business taxable income the gain or loss on the sale or exchange of
certain brownfield sites, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 19, 2003
Mrs. Johnson of Connecticut (for herself, Mr. Becerra, Mr. Houghton,
Mr. Weller, Mr. Cardin, and Mr. Neal of Massachusetts) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude from unrelated
business taxable income the gain or loss on the sale or exchange of
certain brownfield sites, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. EXCLUSION OF GAIN OR LOSS ON SALE OR EXCHANGE OF CERTAIN
BROWNFIELD SITES FROM UNRELATED BUSINESS TAXABLE INCOME.
(a) In General.--Subsection (b) of section 512 of the Internal
Revenue Code of 1986 (relating to unrelated business taxable income) is
amended by adding at the end the following new paragraph:
``(18) Treatment of gain or loss on sale or exchange of
certain brownfield sites.--
``(A) In general.--Notwithstanding paragraph
(5)(B), there shall be excluded any gain or loss from
the qualified sale, exchange, or other disposition of
any qualifying brownfield property by an eligible
taxpayer.
``(B) Eligible taxpayer.--For purposes of this
paragraph--
``(i) In general.--The term `eligible
taxpayer' means, with respect to a property,
any organization exempt from tax under section
501(a) which--
``(I) acquires from an unrelated
person a qualifying brownfield
property, and
``(II) pays or incurs eligible
remediation expenditures with respect
to such property in an amount which
exceeds the greater of $550,000 or 12
percent of the fair market value of the
property at the time such property was
acquired by the eligible taxpayer,
determined as if there was not a
presence of a hazardous substance,
pollutant, or contaminant on the
property which is complicating the
expansion, redevelopment, or reuse of
the property.
``(ii) Exception.--Such term shall not
include any organization which is--
``(I) potentially liable under
section 107 of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980 with respect
to the qualifying brownfield property,
``(II) affiliated with any other
person which is so potentially liable
through any direct or indirect familial
relationship or any contractual,
corporate, or financial relationship
(other than a contractual, corporate,
or financial relationship which is
created by the instruments by which
title to any qualifying brownfield
property is conveyed or financed or by
a contract of sale of goods or
services), or
``(III) the result of a
reorganization of a business entity
which was so potentially liable.
``(C) Qualifying brownfield property.--For purposes
of this paragraph--
``(i) In general.--The term `qualifying
brownfield property' means any real property
which is certified, before the taxpayer incurs
any eligible remediation expenditures (other
than to obtain a Phase I environmental site
assessment), by an appropriate State agency
(within the meaning of section 198(c)(4)) in
the State in which such property is located as
a brownfield site within the meaning of section
101(39) of the Comprehensive Environmental
Response, Compensation, and Liability Act of
1980 (as in effect on the date of the enactment
of this paragraph).
``(ii) Request for certification.--Any
request by an eligible taxpayer for a
certification described in clause (i) shall
include a sworn statement by the eligible
taxpayer and supporting documentation of the
presence of a hazardous substance, pollutant,
or contaminant on the property which is
complicating the expansion, redevelopment, or
reuse of the property given the property's
reasonably anticipated future land uses or
capacity for uses of the property (including a
Phase I environmental site assessment and, if
applicable, evidence of the property's presence
on a local, State, or Federal list of
brownfields or contaminated property) and other
environmental assessments prepared or obtained
by the taxpayer.
``(D) Qualified sale, exchange, or other
disposition.--For purposes of this paragraph--
``(i) In general.--A sale, exchange, or
other disposition of property shall be
considered as qualified if--
``(I) such property is transferred
by the eligible taxpayer to an
unrelated person, and
``(II) within 1 year of such
transfer the eligible taxpayer has
received a certification from the
Environmental Protection Agency or an
appropriate State agency (within the
meaning of section 198(c)(4)) in the
State in which such property is located
that, as a result of the eligible
taxpayer's remediation actions, such
property would not be treated as a
qualifying brownfield property in the
hands of the transferee.
``(ii) Request for certification.--Any
request by an eligible taxpayer for a
certification described in clause (i) shall be
made not later than the date of the transfer
and shall include a sworn statement by the
eligible taxpayer certifying the following:
``(I) Remedial actions which comply
with all applicable or relevant and
appropriate requirements (consistent
with section 121(d) of the
Comprehensive Environmental Response,
Compensation, and Liability Act of
1980) have been substantially
completed, such that there are no
hazardous substances, pollutants, or
contaminants which complicate the
expansion, redevelopment, or reuse of
the property given the property's
reasonably anticipated future land uses
or capacity for uses of the property.
``(II) The reasonably anticipated
future land uses or capacity for uses
of the property are more economically
productive or environmentally
beneficial than the uses of the
property in existence on the date of
the certification described in
subparagraph (C)(i). For purposes of
the preceding sentence, use of property
as a landfill or other hazardous waste
facility shall not be considered more
economically productive or
environmentally beneficial.
``(III) A remediation plan has been
implemented to bring the property into
compliance with all applicable local,
State, and Federal environmental laws,
regulations, and standards and to
ensure that the remediation protects
human health and the environment.
``(IV) The remediation plan
described in subclause (III), including
any physical improvements required to
remediate the property, is either
complete or substantially complete,
and, if substantially complete,
sufficient monitoring, funding,
institutional controls, and financial
assurances have been put in place to
ensure the complete remediation of the
property in accordance with the
remediation plan as soon as is
reasonably practicable after the sale,
exchange, or other disposition of such
property.
``(V) Public notice that such
request for certification would be made
was completed before the date of such
request. Such notice shall be in the
same form and manner as required for
public participation required under
section 117(a) of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980 (as in effect
on the date of the enactment of this
paragraph).
``(iii) Attachment to tax returns.--A copy
of each of the requests for certification
described in clause (ii) of subparagraph (C)
and this subparagraph shall be included in the
tax return of the eligible taxpayer (and, where
applicable, of the qualifying partnership) for
the taxable year during which the transfer
occurs.
``(E) Eligible remediation expenditures.--For
purposes of this paragraph--
``(i) In general.--The term `eligible
remediation expenditures' means, with respect
to any qualifying brownfield property, any
amount paid or incurred by the eligible
taxpayer to an unrelated third person to obtain
a Phase I environmental site assessment of the
property, and any amount so paid or incurred
after the date of the certification described
in subparagraph (C)(i) for goods and services
necessary to obtain a certification described
in subparagraph (D)(i) with respect to such
property, including expenditures--
``(I) to manage, remove, control,
contain, abate, or otherwise remediate
a hazardous substance, pollutant, or
contaminant on the property,
``(II) to obtain a Phase II
environmental site assessment of the
property, including any expenditure to
monitor, sample, study, assess, or
otherwise evaluate the release, threat
of release, or presence of a hazardous
substance, pollutant, or contaminant on
the property,
``(III) to obtain environmental
regulatory certifications and approvals
required to manage the remediation and
monitoring of the hazardous substance,
pollutant, or contaminant on the
property, and
``(IV) regardless of whether it is
necessary to obtain a certification
described in subparagraph (D)(i)(II),
to obtain remediation cost-cap or stop-
loss coverage, re-opener or regulatory
action coverage, or similar coverage
under environmental insurance policies,
or financial guarantees required to
manage such remediation and monitoring.
``(ii) Exceptions.--Such term shall not
include--
``(I) any portion of the purchase
price paid or incurred by the eligible
taxpayer to acquire the qualifying
brownfield property,
``(II) environmental insurance
costs paid or incurred to obtain legal
defense coverage, owner/operator
liability coverage, lender liability
coverage, professional liability
coverage, or similar types of coverage,
``(III) any amount paid or incurred
to the extent such amount is
reimbursed, funded, or otherwise
subsidized by grants provided by the
United States, a State, or a political
subdivision of a State for use in
connection with the property, proceeds
of an issue of State or local
government obligations used to provide
financing for the property the interest
of which is exempt from tax under
section 103, or subsidized financing
provided (directly or indirectly) under
a Federal, State, or local program
provided in connection with the
property, or
``(IV) any expenditure paid or
incurred before the date of the
enactment of this paragraph.
For purposes of subclause (III), the Secretary
may issue guidance regarding the treatment of
government-provided funds for purposes of
determining eligible remediation expenditures.
``(F) Determination of gain or loss.--For purposes
of this paragraph, the determination of gain or loss
shall not include an amount treated as gain which is
ordinary income with respect to section 1245 or section
1250 property, including amounts deducted as section
198 expenses which are subject to the recapture rules
of section 198(e), if the taxpayer had deducted such
amounts in the computation of its unrelated business
taxable income.
``(G) Special rules for partnerships.--
``(i) In general.--In the case of an
eligible taxpayer which is a partner of a
qualifying partnership which acquires,
remediates, and sells, exchanges, or otherwise
disposes of a qualifying brownfield property,
this paragraph shall apply to the eligible
taxpayer's distributive share of the qualifying
partnership's gain or loss from the sale,
exchange, or other disposition of such
property.
``(ii) Qualifying partnership.--The term
`qualifying partnership' means a partnership
which--
``(I) has a partnership agreement
which satisfies the requirements of
section 514(c)(9)(B)(vi) at all times
beginning on the date of the first
certification received by the
partnership under subparagraph (C)(i),
``(II) satisfies the requirements
of subparagraphs (B)(i), (C), (D), and
(E), if `qualified partnership' is
substituted for `eligible taxpayer'
each place it appears therein (except
subparagraph (D)(iii)), and
``(III) is not an organization
which would be prevented from
constituting an eligible taxpayer by
reason of subparagraph (B)(ii).
``(iii) Requirement that tax-exempt partner
be a partner since first certification.--This
paragraph shall apply with respect to any
eligible taxpayer which is a partner of a
partnership which acquires, remediates, and
sells, exchanges, or otherwise disposes of a
qualifying brownfield property only if such
eligible taxpayer was a partner of the
qualifying partnership at all times beginning
on the date of the first certification received
by the partnership under subparagraph (C)(i)
and ending on the date of the sale, exchange,
or other disposition of the property by the
partnership.
``(iv) Regulations.--The Secretary shall
prescribe such regulations as are necessary to
prevent abuse of the requirements of this
subparagraph, including abuse through--
``(I) the use of special
allocations of gains or losses, or
``(II) changes in ownership of
partnership interests held by eligible
taxpayers.
``(H) Special rules for multiple properties.--
``(i) In general.--An eligible taxpayer or
a qualifying partnership of which the eligible
taxpayer is a partner may make a 1-time
election to apply this paragraph to more than 1
qualifying brownfield property by averaging the
eligible remediation expenditures for all such
properties acquired during the election period.
If the eligible taxpayer or qualifying
partnership makes such an election, the
election shall apply to all qualified sales,
exchanges, or other dispositions of qualifying
brownfield properties the acquisition and
transfer of which occur during the period for
which the election remains in effect.
``(ii) Election.--An election under clause
(i) shall be made with the eligible taxpayer's
or qualifying partnership's timely filed tax
return (including extensions) for the first
taxable year for which the taxpayer or
qualifying partnership intends to have the
election apply. An election under clause (i) is
effective for the period--
``(I) beginning on the date which
is the first day of the taxable year of
the return in which the election is
included or a later day in such taxable
year selected by the eligible taxpayer
or qualifying partnership, and
``(II) ending on the date which is
the earliest of a date of revocation
selected by the eligible taxpayer or
qualifying partnership, the date which
is 8 years after the date described in
subclause (I), or, in the case of an
election by a qualifying partnership of
which the eligible taxpayer is a
partner, the date of the termination of
the qualifying partnership.
``(iii) Revocation.--An eligible taxpayer
or qualifying partnership may revoke an
election under clause (i)(II) by filing a
statement of revocation with a timely filed tax
return (including extensions). A revocation is
effective as of the first day of the taxable
year of the return in which the revocation is
included or a later day in such taxable year
selected by the eligible taxpayer or qualifying
partnership. Once an eligible taxpayer or
qualifying partnership revokes the election,
the eligible taxpayer or qualifying partnership
is ineligible to make another election under
clause (i) with respect to any qualifying
brownfield property subject to the revoked
election.
``(I) Recapture.--If an eligible taxpayer excludes
gain or loss from a sale, exchange, or other
disposition of property to which an election under
subparagraph (H) applies, and such property fails to
satisfy the requirements of this paragraph, the
unrelated business taxable income of the eligible
taxpayer for the taxable year in which such failure
occurs shall be determined by including any previously
excluded gain or loss from such sale, exchange, or
other disposition allocable to such taxpayer, and
interest shall be determined at the overpayment rate
established under section 6621 on any resulting tax for
the period beginning with the due date of the return
for the taxable year during which such sale, exchange,
or other disposition occurred, and ending on the date
of payment of the tax.
``(J) Related persons.--For purposes of this
paragraph, a person shall be treated as related to
another person if--
``(i) such person bears a relationship to
such other person described in section 267(b)
(determined without regard to paragraph (9)
thereof), or section 707(b)(1), determined by
substituting `25 percent' for `50 percent' each
place it appears therein, and
``(ii) in the case such other person is a
nonprofit organization, if such person controls
directly or indirectly more than 25 percent of
the governing body of such organization.''.
(b) Exclusion From Definition of Debt-Financed Property.--Section
514(b)(1) of the Internal Revenue Code of 1986 (defining debt-financed
property) is amended by striking ``or'' at the end of subparagraph (C),
by striking the period at the end of subparagraph (D) and inserting ``;
or'', and by inserting after subparagraph (D) the following new
subparagraph:
``(E) any property the gain or loss from the sale,
exchange, or other disposition of which would be
excluded by reason of the provisions of section
512(b)(18) in computing the gross income of any
unrelated trade or business.''.
(c) Effective Date.--The amendments made by this section shall
apply to any gain or loss on the sale, exchange, or other disposition
of any property acquired by the taxpayer after the date of the
enactment of this Act.
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