text: 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.
target: 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.
feat_title: To amend the Internal Revenue Code of 1986 to deny any deduction for certain oil cleanup costs, and for other purposes.