Land Use Forum
Archive
Land Use Articles
Brownfields Tax Deduction Could Mean Savings For You!
by Tom Larson
Most federal brownfields financial incentives benefit state programs or municipalities. One important exception is the federal brownfields tax incentive available to individuals with qualified contaminated sites that are used in trade or business.
This brownfields incentive is actually a tax deduction available to taxpayers, including responsible parties, for properties that meet the eligibility requirements. The incentive allows the full deduction of costs that are considered "qualified environmental remediation expenses" in the year paid, rather than being capitalized over time. Sixteen properties in Wisconsin have already used the deduction, and more can qualify.
"This program allowed us to take a direct credit that reduced our net taxes on the property in the same year that we incurred the expense and filed," said Robert Zache of Central Place Real Estate. Zache used the deduction at a brownfields redevelopment site in Madison. He added that the tax deduction helped lessen the costs of remediation efforts, since receiving a cash reimbursement for remediation expenses was not available at the time. "The minor logistics required to process the matter was well worth the time and effort involved on our part," said
Zache.
Properties and the remediation expenses must meet eligibility criteria based on ownership, the nature of the contamination, and the dates when the expenses were incurred. Initially signed into law in August, 1997, the Taxpayer Relief Act was modified in 2000 to remove the geographic limitations present in the original legislation. Below are the highlights of the program, with more information available in the publication Federal Brownfields Tax Incentive (publication #RR-592), available online at
www.dnr.state.wi.us/org/aw/rr/archives/pubs/RR592.pdf:
- A taxpayer must incur eligible expenses while holding a property for use in a trade or business or for the production of income;
- A federally-defined hazardous substance must be present or potentially present on the property; however, the federal definition of a hazardous substance in the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980 excludes the deduction of expenses for abatement or control of petroleum, or products that are part of a building (such as lead paint or asbestos);
- The deduction is available from Dec. 21, 2000, through the end of 2003;
- The property may not be on the federal Superfund's National Priorities List
(NPL);
- The taxpayer must obtain a statement from DNR that the property meets the hazardous substance release, threatened release or disposal requirements; the one-page form (Form 4400-206) is available at the RR Web site at www.dnr.state. wi.us/org/aw/rr/archives/pub_index.html#forms or by calling the RR Information Line at (800) 367-6076 (in-state long distance) or 608-264-6020 (Madison area and out-of-state long distance); and
- Between Aug. 5, 1997, and Dec. 21, 2000, qualified expenses are limited to properties located in low income areas, enterprise zones, or former Brownfield Environmental Assessment Program (BEAP) sites. Eight properties used the deduction under the original law.
If the property has a hazardous substance as defined in CERCLA, deductible expenses include site assessment, investigation and monitoring, remediation, operation and maintenance, voluntary party liability exemption (VPLE) fees, and costs incurred for the removal of demolition debris. A tax advisor can provide more information on specific eligible costs.
To get more information about DNR's certification, please check out the RR Web site at
www.dnr.state.wi.us/org/aw/rr/financial/fed_tax.html, or contact
Michael Prager at
608-261-4927.
Back to Inside This
Edition
Return to On-Line
Publications
2003 Use-Value Penalties Now Available
by Tom Larson
The Wisconsin Department of Revenue recently published the specific penalty amounts that will be assessed for converting agricultural land to a non-agricultural use under Wisconsin's use-value program. Penalties range from $543 per acre in Waukesha County (less than 10 acres converted) to $0 per acre in Menominee (any amount of land converted).
Under the use-value program, the assessed value of all agricultural land is based on its use-value rather than its fair market value. The use-value assessment system requires that the assessed value of agricultural land be based on the income that could be generated from its rental for agricultural use. When a person converts agricultural land to a nonagricultural use (e.g., residential, commercial, recreation, etc.), that person will owe a penalty, unless he/she qualifies for one of the narrow
exceptions.
As a a result of the recent changes to the use value penalty that were part of the 2002 state budget repair bill, the penalty for converting agricultural land is much easier to calculate.
(Vist the WRA Web site for more information on the recent changes to the
use-value penalty. In fact, the Department of Revenue has created a chart that outlines the penalty amounts throughout the state.
You can access the PDF file of this chart at www.dor.state.wi.us/slf/03uvpen.pdf
The penalty is broken down by county and is based upon the average sale price of agricultural land in that county. To determine the amount of the penalty, (1) locate the county in which the land is located, (2) choose the applicable penalty amount based upon the amount of land being converted (five percent if the converted land is more than 30 acres; 7.5 percent if the converted land is between 10 acres and 30 acres; 10 percent if the converted land is less than 10 acres) (Note-any penalty less than $25 per acre will not be assessed); and (3) multiply the dollar amount per acre by the number of acres being converted.
Back to Inside This
Edition
Return to On-Line
Publications
WRA Completes Smart Growth Community Survey
by Tom Larson
The WRA recently completed a model Smart Growth Survey to be used by local communities as part of the comprehensive planning process. A community survey is often the first step in the planning process and is used to gauge the public's attitudes on a variety of land use issues. With generous funding for this project provided by WHEDA, the WRA worked closely with a variety of other interest groups from throughout the state. The survey will be sent to each of Wisconsin's 1800+ local units of government during the first week of January 2003, and will be posted on the web sites of the WRA, WHEDA, and other interest groups.
The model survey can be downloaded from the WRA Web site at www.wra.org/pdf/government/landuse/combined_doc.pdf.
Back to Inside This
Edition
Return to On-Line
Publications
Back to Top
|
