The EPA wants investors to take advantage of a tax benefit program focused on distressed communities, but says it first needs help from the IRS.
Existing regulations for the Internal Revenue Service’s “opportunity zones” distressed community investment program aren’t clear enough to spur investors to confidently sink funds into brownfield sites, an Environmental Protection Agency official said Oct. 17.
“We really would love—love—for the IRS to clarify things for us,” said Aimee Storm of the EPA’s Office of Brownfields and Land Revitalization in Washington, D.C. She spoke at a conference in Newark, N.J., organized by Brownfield Listings, which runs a classifieds board for properties with redevelopment potential.
Opportunity zones, as established by the Tax Cuts and Jobs Act of 2017, are economically distressed communities identified by state governors as having potential for investment. Through the IRS program, investors may defer capital gains tax by adding their gains to special funds dedicated to opportunity zone revitalization.
‘Bugs Have Not Been Worked Out’
An initial tranche of IRS guidelines for the program, issued in October of 2018, made the Environmental Protection Agency uncertain whether typical brownfield site activities, including site assessment and cleanup, are considered valid site preparation costs, Storm said.
The second tranche of guidelines, released in April, appeared to clarify that those are valid in certain cases. But the IRS does not mention brownfields explicitly.
At a brownfield property, redevelopment is complicated by actual or potential contamination from previous uses. Brownfields are “overwhelmingly concentrated” in communities with low-income residents and other marginalized populations, according to the EPA.
The opportunity zone program is intelligent and innovative, but like many tax programs, it’s also complicated, said Stephen Fauer, CEO of Environmental Strategies & Applications Inc., based in Middlesex, N.J.
“A lot of the bugs have not been worked out,” he said at the conference.