SECTION 3. SCOPE

.01 In general. Except as provided in section 3.06 below, this revenue procedure applies to a request for guidance on the deductibility (under §§ 162, 165, or 198) or capitalization (under § 263) of environmental cleanup costs incurred in a continuing project ( e.g., one that occurs over prior and future taxable years). Generally, a taxpayer may request a letter ruling under this revenue procedure that will cover all tax years in which the costs of the environmental cleanup project that are the subject of the request are taken into account for federal income tax purposes (“project years”). Thus, the letter ruling

1998–5 I.R.B 21 February 2, 1998

may cover project years for which a return has been filed, even if such return is under examination or before an appeals office.

.02 Environmental cleanup costs. For purposes of this revenue procedure, environmental cleanup costs include, in general, any costs associated with the assessment, mitigation, removal or remediation of environmental hazards, whether latent or imminent, on the taxpayer’s property or on the property of another.

.03 Environmental cleanup project. An environmental cleanup project may consist of one or more related environmental cleanup activities. For example, a taxpayer may request a letter ruling under this procedure on the tax treatment of costs paid or incurred over several years:

(1) to study, remediate, and monitor soil and groundwater at a former manufacturing site;

(2) to remove and replace asbestos in manufacturing equipment located at several of the taxpayer’s operating plants; or

(3) to remove underground storage tanks, treat contaminated soil and groundwater, and remove asbestos from a retail facility where the taxpayer intends to begin operations.

A letter ruling issued under this revenue procedure will cover only the costs of activities described in the taxpayer’s request.

.04 Factual nature of question. Section 7.01 of Rev. Proc. 98–1 provides that the national office ordinarily will not issue letter rulings in certain areas because of the factual nature of the problem. Although the question of whether amounts are deductible or must be capitalized is generally dependent upon the taxpayer’s specific facts, only in rare or unusual circumstances will the national office decline to issue a letter ruling under this revenue procedure solely because of the factual nature of the question.

.05 Alternative plans and hypothetical situations. Section 7.02 of Rev. Proc. 98– 1 provides that the national office ordinarily will not issue a letter ruling on alternative plans of proposed transactions or on hypothetical situations. Thus, the taxpayer must have a proposed environmental cleanup plan on which to base the ruling request. However, the Service recognizes that all aspects of any environmental cleanup project may not be defi

nite at the time of the request, particularly if the assessment of the contamination is not yet complete. Ordinarily, this will not preclude issuance of a letter ruling, provided that the Service is given sufficient facts to reach a determination. If the taxpayer’s environmental cleanup project changes after the letter ruling is issued, the taxpayer may request that the national office modify or supplement its letter ruling to address the changes to the project. See section 8 of this revenue procedure.

.06 Identical issue in litigation. Taxpayers may not request guidance under this revenue procedure if the identical environmental cleanup issue is in the taxpayer’s return for an earlier period and that issue is pending in litigation in a case involving the taxpayer (or a related taxpayer within the meaning of § 267, or a member of an affiliated group of which the taxpayer is also a member within the meaning of § 1504).

.07 Requests more appropriately made under Rev. Proc. 98–1 or 98–2. The national office may determine that a request for written guidance under this revenue procedure would be more appropriately made under Rev. Proc. 98–1 or 98–2. In such a case, the taxpayer will be notified and given an opportunity to explain why the request is more appropriately made under this revenue procedure.