Environmental Cleanup Cost Deduction This deduction provides businesses with an incentive to clean upcertain sites that are contaminated with hazardous substances. Yourbusiness does not have to be in an empowerment zone or enterprisecommunity to qualify for this deduction. You can choose to deduct "qualified environmental cleanup costs"in the tax year you pay or incur the cost. You can do this instead ofadding the cost to the basis of your property (and, if the property isdepreciable, recovering the cost by taking depreciation deductionsover a specified recovery period). This special tax treatment is generally available for qualifiedenvironmental cleanup costs you pay or incur after August 5, 1997, andbefore January 1, 2001. Qualified environmental cleanup costs.Qualified environmental cleanup costs are generally costs you payor incur to abate or control a hazardous substance (as defined byInternal Revenue Code section 198(d)) at a "qualified contaminatedsite." Qualified contaminated site.A qualified contaminated site must meet all of the followingrequirements. You hold it for use in a trade or business, for theproduction of income, or as inventory. It is within a "targeted area." accommodation in FunchalThere has been a release, threat of release, or disposal ofa hazardous substance at or on the site. You must get a statement from the designated stateenvironmental agency that the site meets requirements (2) and (3). Targeted area.All of the following areas are targeted areas. A population census tract (or equivalent county divisiondefined by the Bureau of the Census) with a poverty rate of at least20%. A population census tract with a population of less than2,000 that meets the following two requirements. More that 75% of the tract is zoned for commercial orindustrial use. The tract has a common border with one or more of the tractsdescribed in (1). An empowerment zone. The following two supplemental empowerment zones that weredesignated on December 21, 1994. Cleveland, OH. Los Angeles, CA. An enterprise community (designations effective December 21,1994). A site included as a brownfields pilot project of theEnvironmental Protection Agency before February 1, 1997. Recapture.This deduction may have to be recaptured as ordinary income undersection 1245 when you sell or otherwise dispose of the property thatwould have received an addition to basis if you had not elected thisdeduction. More information.For more information about the environmental cleanup costdeduction, see Internal Revenue Code section 198.