ADEQ seeks to facilitate the cleanup and redevelopment of brownfields properties. A brownfield is an abandoned or under-used property with an active redevelopment potential that is complicated by either real or perceived environmental contamination. Once a source of jobs and economic benefits to the community, these properties frequently lie abandoned for fear of the contamination and the liability it implies. Remediation and redevelopment of brownfields reduces potential environmental hazards, encourages economic development, and efficiently uses existing utilities and roads.

A variety of tools are available to assist with brownfields redevelopment, including EPA funded grants and loans for environmental site assessments and cleanups, and eligibility certification for the federal brownfields tax incentive. In addition, the ADEQ Superfund section administers a prospective purchaser agreement to limit potential liability for existing contamination.

• Arizona Brownfields Cleanup Revolving Loan Fund
• ADEQ Brownfields Search Utility
• Targeted Site Assessment Grants
• Federal Brownfields Tax Deduction Incentive
• Prospective Purchaser Agreement
• Flagstaff KAFF radio interview with Director Owens about Northern Arizona projects (mp3)
• Reference Links
• Frequently Asked Questions
• Contacts

We have created five brochures and a toolbox manual in PDF format that you can download to help you further understand the program and its tools:

• Brownfields Assistance Program
• Brownfields Toolbox - A guide to assist Arizona's rural communities in brownfields redevelopment
• Declaration of Environmental Use Restriction
• Prospective Purchaser Agreement
• UST State Lead and Municipal Tank Closure Programs
• Voluntary Remediation Program

See also:
  ADEQ Voluntary Remediation Program
  ADEQ Superfund Programs
  Statewide, Brownfield and VRP Site Locations (Interactive GIS eMaps)

Arizona Brownfields Cleanup Revolving Loan Fund
ADEQ has been awarded a total of $1 million from EPA to fund revolving loans to clean up brownfields sites in the cities of Tucson and Phoenix. The grant created the Arizona Brownfields Cleanup Revolving Loan Fund (Arizona BCRLF), which provides low interest rate loans to public and private parties to clean up brownfields sites that have already been assessed for hazardous substance contamination. The Arizona BCRLF is managed through a coalition of partners: ADEQ, the cities of Phoenix and Tucson, and the Water Infrastructure Finance Authority.

Targeted Site Assessment Grants
Through an EPA grant, the VRP will contract a consultant to perform an environmental site investigation for a qualifying brownfield property. The program is available to municipalities, prospective purchasers, and parties who would not be found liable for any existing contamination at the property. Information discovered during an investigation will be considered a public record and will be made available for review at ADEQ.

• Arizona Targeted Site Assessment Application
• Targeted Site Assessment Access Agreement

Federal Brownfields Tax Deduction Incentive

Background
The Federal Brownfields Tax Incentive was originally signed into law as part of the Federal Tax Relief Act of August 1997. This tax incentive was renewed, effective after Dec. 31, 2005, and extended until Dec. 31, 2007 and maintains the original intent to encourage the cleanup and reuse of Brownfields. The incentive was reactivated retroactively to Jan. 1, 2006. Eligible expenses incurred in 2006 prior to the incentive's reactivation can still be deducted under the incentive. Improvements in the extension expanded the tax incentive to include petroleum cleanup where petroleum products such as crude oil, crude oil condensates, and natural gasoline were previously ineligible. This tax incentive, codified through Section 198(a) of the Internal Revenue Code, is intended to spur the cleanup and revitalization of Brownfields properties. These properties may be large or small; urban or rural; former factories or warehouses or mine scarred lands, etc. Typically, they have all been left idle due to concerns about cleanup costs and issues surrounding legal liabilities. Redevelopment can lead to a wide variety of public benefits, including environmental cleanup, reduced blight, new jobs, and higher tax revenues. Private sector companies have also seen the advantages of Brownfields redevelopment. Existing infrastructure, transportation, and promising markets characterize the locations of many but not all of these sites.

Under this tax incentive, certain environmental cleanup costs at targeted sites may be fully deducted by eligible taxpayers in the year in which they are incurred, rather than having to be capitalized and spread over a period of years. The Brownfields Tax Incentive is not a tax credit, but reduces your tax burden indirectly by lowering your taxable income. The incentive does this by allowing you to claim eligible cleanup costs as a current expense, rather than capitalizing them as long-term assets. Companies prefer deductions because these substantially reduce their current income, allowing them to capture tax savings now rather than later which is an immediate tax advantage helping to offset short-term cleanup costs.

In Arizona, the taxpayer must receive a pre-certification letter from the Arizona Department of Environmental Quality (ADEQ) that the property is a qualified contaminated site. To apply for a pre-certification letter, an applicant must submit an ADEQ Brownfields Tax Incentive Application Form. The application form, along with its attachments will be used to determine the eligibility of the site.

Eligibility Requirements

1. The Brownfields Tax Incentive is applicable to properties that meet specific land use and contamination requirements. Geographic and socioeconomic eligibility requirements were eliminated on Dec. 21, 2002. To satisfy the land use requirement, the property must be held by the taxpayer incurring the eligible expenses for use in a trade or business or for the production of income; or the property must be included in the taxpayer's inventory. To satisfy the contamination requirement, the taxpayer must demonstrate that there has been a release, threat of release, or disposal of a hazardous substance at the property.
2. The property is an area at or on which there has been a release (or threat of release) or disposal of a hazardous substance, as defined by sections 101(14), 101 (22) and 102 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980, with exception to the limitations in section 104(a)(3). Section 198(d) of the Brownfields Tax Incentive excludes expenditures associated with substances for which a removal or remedial action would not be permitted under CERCLA § 104(a)(3). CERCLA § 104(a)(3) generally provides that a removal or remedial action cannot be taken to address products that are part of the building structure and result in exposure within residential buildings or business or community structures (e.g., interior lead-based paint contamination or asbestos which results in indoor exposure).
3. Sites on the Environmental Protection Agency (EPA) National Priority List ("Superfund" sites) are excluded.
4. The Brownfields Tax Incentive became law on Aug. 5, 1997. While amended tax returns may be filed to deduct expenditures from prior tax years, IRS guidance indicates that such returns must be filed within three years after the date a corporation filed its original return, or within two years after the date a corporation paid the tax (if filing for a refund), whichever is later. The IRS or a qualified tax professional should be consulted if there is any uncertainty as to whether prior tax year deductions are allowable.

If you have a site that you believe qualifies for the incentive, download a certification application form.

Once the taxpayer has submitted the application form, along with its attachments, the Brownfields Coordinator will route the application to the appropriate ADEQ Program. The ADEQ Program will conduct a desktop review of the materials and either declares the property eligible to receive the certification or informs the taxpayer what additional information is needed to complete the eligibility process. Before the IRS will accept the deduction, ADEQ must provide the taxpayer with a pre-certification letter indicating that there has been a release, threat of release, or disposal of a hazardous substance at or on the property. Please note that ADEQ does not determine whether a given expenditure is eligible. Taxpayers should work with their business tax accountant or counsel on the matter of eligible expenses.

Additional Information on the Federal Brownfields Tax Incentive
For Frequently Asked Questions (FAQs) and guidelines on the Brownfields Tax Incentive, please visit the following U.S. EPA Brownfields websites:

• Guidelines
• Case Studies on the use of the Brownfields Tax Incentive

Contacts for Further Information

• ADEQ Brownfields Coordinator, (602) 771-4401 or (800) 234-5677
• U.S. EPA, Office of Brownfields Cleanup and Redevelopment, (202) 566-2777.

Prospective Purchaser Agreement
Arizona is one of a growing number of states to address, through statutes, the liability issues associated with buying, selling or developing property contaminated by hazardous substances. If the purchaser of the property did not contribute to the contamination at the site, potential Water Quality Assurance Revolving Fund (WQARF) and state Comprehensive Environmental Response Compensation and Liability Act (CERCLA) liability may be avoided through a written agreement with ADEQ. A prospective purchaser agreement provides a written release and covenant not to sue for any potential WQARF liability for existing contamination, if certain statutory conditions are met. See the Superfund Program for more information.

Reference Links

• Environmental Protection Agency Office of Solid Waste and Emergency Response Brownfields page
• EnviroMapper - Mapping environmental information
• Environmental Protection Agency Region IX Brownfields page
• City of Phoenix Brownfields Land Recycling Program
• Coming Clean for Economic Development: A Downloadable Resource Book on Environmental Cleanup and Economic Development Opportunities. Copyright ©1996 by Northeast-Midwest Institute.