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Not Your CPA’s Tax Credit – Brownfields Tax Credit Program

February 6th, 2014 by Rick Cote, P.E., LSP

Last year I was asked to guest blog for the The Cherrytree Group – an innovative tax credit consulting, brokerage and syndication company. Still very relevant, I thought it appropriate to repost this piece on Brownfield Tax Credits…

Having worked in the area of environmental site remediation for nearly 35 years, I’ve witnessed many changes in the profession, including the requirement of LSPs (Licensed Site Professionals) to lead hazardous waste remediation projects. LSPs are individuals authorized to oversee the assessment and cleanup of contaminated property. My participation in the Commonwealth’s LSP program since its origination in 1993 marked a significant change in the industry, essentially privatizing the cleanup of hazardous waste sites throughout the state.

The addition of the LSP program is only but one example of the growth and development of the industry and so is the evolution of the Commonwealth’s Brownfield Redevelopment process. I recently had the pleasure of working with Mr. Kerry Bowie, Director of Brownfields and Environmental Justice for the Massachusetts Department of Environmental Protection and Cherrytree Group President, Mr. Warren Kirshenbaum. One June 14th, 2013, the three of us presented Energizing Tax Credits: Turning Brownfields into Brightfields. This very well attended seminar provided information on the Brownfields Program.

Initiated in the early 1990’s and administered by U.S EPA, the Brownfields Program was limited in scope and accessibility through the Federal Targeted Brownfields Assessment program, which expanded to include municipalities with block grants to Community Development Departments. In 1998, the Brownfields Act provided liability relief to the provisions of Massachusetts General Laws Chapter 21E (21E) or Massachusetts Contingency Plan (MCP). MassDevelopment expanded the options with loans up to $100,000 available for environmental testing and up to $500,000 for environmental clean-up required for redevelopment. For the municipal readers, these programs still exist but are not user friendly for the individual developer without municipal backing. Furthermore, current available funding is questionable given various economic circumstances and other state priorities.

The more recent Brownfields Tax Credit program, which targets individual developers, provides tax credits to remediate environmental contamination where the contamination was not caused by the taxpayer. Taxpayers can use or transfer the tax credits since there is a secondary marketplace for the trading of these tax credits. This program is up for renewal in August 2013, and while much of it may remain the same if renewed, expect some changes and more scrutiny. For example, while incurred costs can reach back to 2001, anticipate the post-2006 deadline for filing the RAO to be cast in stone. As a result, LSPs will need to be even more diligent with cleanup recordkeeping of the cleanup including itemized invoices, canceled checks and other backup.

The tax credits apply to “property boundaries” not necessarily the “site boundaries” as defined by the MCP. So purchase and sale, and access agreements to implement the work must demonstrate “site control”. The tax credits can amount to 50% of the eligible costs of a qualified remediation when the permanent solution does not contain an Activity and Use Limitation (AUL), so the more you spend and the cleaner the site the more you get back. Even if the site requires an AUL, that amounts to 25% of the eligible costs.

This program holds a bright future for real estate and remediation efforts alike, however working with individuals who have experience with tax credits can be a key component and the difference between a stalled project and financial success. Let’s just say it’s not for the CPA that does your taxes.

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For more information on Brownfield Tax Credits and hazardous waste remediation please contact Rick Cote, P.E., LSP directly at 800.725.2550 or email him at rcote@ceiengineers.com.

Posted in the categories Hazardous Waste Remediation, MCP.