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.
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.
{"src": "billsum_test", "title": "To amend the Internal Revenue Code of 1986 to deny any deduction for certain oil cleanup costs, and for other purposes."}