IRS PLR: Environmental Mitigation Costs Deductible as Business Expense (IRC §162)

A corporation may deduct, as an ordinary and necessary business expense under tax code Section 162, a payment to “Entity A” for its allocable share of the costs of Entity A’s acquisition of a right to water flow as an environmental damage mitigation activity in implementing an energy facilities development agreement, the IRS ruled. Taxpayer does not have to capitalize the payment under Treasury Regulations Section 1.263(a)-4, which requires such for amounts paid for real property or improvements. Three alternative ruling requests contingent on capitalization being required did not need to be addressed, the IRS stated. ...