Academic journal article Journal of Accountancy

IRS Guidance on Environmental Cleanup Projects

Academic journal article Journal of Accountancy

IRS Guidance on Environmental Cleanup Projects

Article excerpt

For a two-year period that began on February 2, 1998, taxpayers may seek written guidance from the IRS on the capitalization or deductibility of environmental cleanup costs incurred during multiyear projects under revenue procedure 98-17 (1998-5 IRB 1). This new procedure is similar to one the IRS proposed last year (revenue procedure 97-7, 1997-1, IRB 8). Generally, 98-17 removes some procedural impediments to resolving all of the tax issues associated with an environmental remediation project.

The environmental cleanup guidance could cover years for which a return has been filed, is under examination or is before an IRS appeals office. It also could cover future years. The IRS will not provide guidance, however, if the taxpayer (or a related party) is litigating the issue under discussion.

The written guidance applies only to the costs of activities that the taxpayer describes in its request for a ruling. These may include costs for assessment, mitigation, removal or remediation of environmental hazards, whether latent or imminent, on the taxpayer's property or other property. An environmental cleanup project may consist of one or more related cleanup activities, such as

* Studying, remediating and monitoring soil and groundwater at a former manufacturing site.

* Removing and replacing asbestos in manufacturing equipment located at several of the taxpayer's operating plants. …

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