article: SECTION 1. DISALLOWANCE OF DEDUCTION FOR CERTAIN OIL CLEANUP COSTS. (a) General Rule.--Part IX of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to certain items not deductible) is amended by adding at the end thereof the following new section: ``SEC. 280I. DISALLOWANCE OF CERTAIN OIL CLEANUP COSTS. ``(a) General Rule.--Except as otherwise provided in this section, no deduction shall be allowed for any applicable discharge costs. ``(b) Exceptions.-- ``(1) Small spills.--Subsection (a) shall not apply to any applicable discharge costs of any taxpayer which are attributable to any oil discharge involving less than 36,000 gallons of oil. For purposes of the preceding sentence, all discharges at a facility during any 6-month period shall be aggregated and treated as one discharge. ``(2) Facility closed and cleanup completed.--Subsection (a) shall not apply to any applicable discharge costs of the taxpayer which are attributable to any oil discharge from any facility if-- ``(A) the Administrator of the Environmental Protection Agency certifies to the Secretary that all cleanup and other remediation actions required by reason of such discharge have been completed, and ``(B) all operations (whether by the taxpayer or any other person) at such facility involving the transportation, storage, or processing of oil have been permanently terminated. ``(3) Taxpayer with complete liability defense.-- ``(A) In general.--Subsection (a) shall not apply to any applicable discharge costs of any taxpayer which are attributable to any oil discharge if such taxpayer has a complete liability defense with respect to such discharge. ``(B) Complete liability defense.--For purposes of subparagraph (A), a taxpayer has a complete liability defense with respect to any oil discharge, if it is determined under section 1003 of the Oil Pollution Act of 1990 or section 311 of the Clean Water Act that such taxpayer has no liability under section 1002 of the Oil Pollution Act of 1990 or section 311 of the Clean Water Act. ``(c) Applicable Discharge Costs.--For purposes of this section, the term `applicable discharge costs' means any of the following costs incurred in connection with any oil discharge: ``(1) Any costs incurred in removing or attempting to remove the oil. ``(2) Any costs to prevent, minimize, or mitigate pollution or other damages resulting from such discharge. ``(3) Any costs attributable to liabilities for damages, fines, or penalties from such discharge. ``(4) Any costs incurred in determining the amount of the taxpayer's liability for any of the foregoing. ``(5) Any amount deductible on account of the loss of the material discharged or released. ``(d) Oil Discharge.--For purposes of this section, the term `oil discharge' means any discharge (as defined in section 1001 of the Oil Pollution Act of 1990 or section 311 of the Clean Water Act) of oil (as defined in such sections). ``(e) Treatment of Certain Insurance Proceeds, Etc.--Gross income shall include any compensation by insurance or otherwise received with respect to costs for which a deduction is disallowed under subsection (a).'' (b) Prohibition Against Offset by Net Operating Loss Deduction.-- Section 172 of such Code is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection: ``(i) Limitation on Use To Offset Deductions Disallowed Under Section 280I.--The deduction allowed under this section shall not reduce taxable income for any taxable year to an amount less than the amount disallowed under section 280I for such taxable year. Appropriate adjustments in the application of subsection (b)(2) shall be made to take into account the provisions of this subsection.'' (c) Clerical Amendment.--The table of sections for part IX of subchapter B of chapter 1 of such Code is amended by adding at the end thereof the following new item: ``Sec. 280I. Disallowance of certain oil cleanup costs.'' (d) Effective Date.--The amendments made by this section shall apply in the case of any applicable discharge costs paid after the date of the enactment of this Act. SEC. 2. EXPENSE TREATMENT FOR EXPENDITURE TO REDUCE RISK OF OIL SPILLS. (a) General Rule.--Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section: ``SEC. 198. EXPENDITURES TO REDUCE RISKS OF OIL SPILLS. ``(a) Treatment as Expenses.--Any qualified oil facility expenditures paid or incurred by the taxpayer during the taxable year shall be treated as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction for such taxable year. ``(b) Qualified Oil Facility Expenditures.--For purposes of this section-- ``(1) In general.--The term `qualified oil facility expenditures' means expenditures which-- ``(A) are paid or incurred in connection with a trade or business of the taxpayer, ``(B) are paid or incurred for purposes of reducing the risk of a discharge of oil from any facility operated by the taxpayer, ``(C) the Administrator of the Environmental Protection Agency has certified to the Secretary as being necessary or appropriate for purposes of reducing the risk of such discharges; and ``(D) the taxpayer elects to take into account under this section. ``(2) Definitions.--For purposes of this subsection, the term `discharge', has the meaning given such term by section 1001 of the Oil Pollution Act of 1990 or section 311 of the Clean Water Act and the term `oil' has the meaning given such term by such sections.'' (b) Clerical Amendment.--The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by adding at the end thereof the following new item: ``Sec. 198. Expenditures to reduce risks of oil spills.'' (c) Effective Date.--The amendments made by this section shall apply to expenditures paid or incurred after the date of the enactment of this Act.
summary: Amends the Internal Revenue Code to disallow a tax deduction for oil cleanup costs, except: (1) spills involving less than 36,000 gallons of oil; (2) facility closures and cleanup completions; and (3) oil discharge costs where the taxpayer has a complete liability defense. Prohibits the net operating loss deduction from reducing taxable income to an amount less than the amount disallowed for oil cleanup costs. Treats qualified oil facility expenditures to reduce risks of oil spills as expenses which are not chargeable to capital account. Allows such expenditures as a deduction.