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$ 20.10 Revocation.

Certification hereunder may be revoked by the Regional Administrator on 30 days written notice to the applicant, served by certified mail, whenever the Regional Administrator shall determine that the facility in question is no longer being operated consistent with the $ 20.8(b) and (c) criteria in effect at the time the facility was placed in service. Within such 30-day period, the applicant may submit to the Regional Administrator such evidence, data or other written materials as the applicant may deem appropri. ate to show why the certification here under should not be revoked. Notification of a revocation under this section shall be given to the Secretary of the Treasury or his delegate. See 26 CFR 1.169-4(b)(1).



1. General.
2. Air Pollution Control Facilities.

a. Pollution control or treatment facilities normally eligible for certification.

b. Air pollution control facility boundaries.

c. Examples of eligibility limits.

d. Replacement of manufacturing process by another nonpolluting process.

3. Water Pollution Control Facilities.

a. Pollution control or treatment facilities normally eligible for certification.

b. Examples of eligibility limits. 4. Multiple-purpose facilities.

5. Facilities serving both old and new plants.

6. State certification.
7. Dispersal of pollutants.
8. Profit-making facilities.
9. Multiple applications.

1. General. Section 2112 of the Tax Reform Act of 1976 (Public Law 94-455, October 4, 1976) amended section 169 of the Internal Revenue Code of 1954, "Amortization of Pollution Control Facilities." The amendment made permanent the rapid am. ortization provisions of section 704 of the Tax Reform Act of 1969 (Public Law 91-172, December 30, 1969) and redefined eligibility limits to allow certification of facilities which prevent the creation or emission of pollutants.

The law defines a "certified pollution control facility" as "a new identifiable treatment facility" which is:

(a) Used in connection with a plant or other property in operation before January

1, 1976, to abate or control air or water pol. lution by removing, altering, disposing of, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat;

(b) Constructed, reconstructed, erected or (if purchased) first placed in service by the taxpayer after December 31, 1975;

(c) Not to "significantly" increase the output or capacity, extend the useful life, alter the nature of the manufacturing or production process or facility or reduce the total operating costs of the operating unit of the plant or other property most directly associated with the pollution control facility (as suggested by the legislative history, EPA regulations define the term "significant" as any increase, reduction or extension greater than 5%); and

(d) Certified by both State and Federal authorities, as provided in section 169(d)(1) (A) and (B) of the Internal Revenue Code.

If the facility is a building, the statute requires that it be exclusively devoted to pollution control. Most questions as to whether a facility is a “building" and, if so, whether it is “exclusively" devoted to pollution control are resolved by section 1.169-2(b)(2) of the Treasury Department regulations.

Since a treatment facility is eligible only if it furthers the general policies of the United States under the Clean Air Act and the Clean Water Act, a facility will be certified only if its purpose is to improve the quality of the air or water outside the plant. Facilities to protect the health or safety of employees inside the plant are not eligible.

Facilities installed before January 1, 1976, in plants placed in operation after December 31, 1968, are ineligible for certification under the statute. 26 U.S.C. 169.

2. Air pollution control facilities.

a. Pollution control or treatment facilities normally eligible for certification. The following devices are illustrative of facilities for removal, alteration, disposal, storage or preventing the creation or emission of air pollution:

(1) Inertial separators (cyclones, etc.).
(2) Wet collection devices (scrubbers).
(3) Electrostatic precipitators.
(4) Cloth filter collectors (baghouses).
(5) Director fired afterburners.
(6) Catalytic afterburners.
(7) Gas absorption equipment.
(8) Vapor condensers.
(9) Vapor recovery systems.
(10) Floating roofs for storage tanks.
(11) Fuel cleaning equipment.
(12) Combinations of the above.

(b) Air Pollution control facility boundaries. Most facilities are systems consisting of several parts. A facility need not start at the point where the gaseous effluent leaves the last unit of the processing equipment, nor will it always extend to the point where

the effluent is emitted to the atmosphere or existing stack, breeching, duct work or vent. It includes all the auxiliary equipment used to operate the control system, such as fans, blowers, duct work, valves, dampers and electrical equipment. It also includes all equipment used to handle, store, transport or dispose of the collected pollutants.

(c) Examples of eligibility limits. The am ortization deduction is limited to new identifiable treatment facilities which remove, alter, destroy, dispose of, store, or prevent the creation or emission of pollutants, con taminants or wastes. It is not available for all expenditures for air pollution control and is limited to devices which are installed for the purpose of pollution control and which actually remove, alter, destroy, dispose of, store or prevent the creation or emission of pollutants by removing potential pollutants at any stage of the production process.

(1) Boiler modifications or replacements. Modifications of boilers to accommodate "cleaner" fuels are not eligible for rapid am ortization: e.g., removal of stokers from a coal-fired boiler and the addition of gas or oil burners. The purpose of the burners is to produce heat, and they are not identifiable as treatment facilities nor do they prevent the creation or emission of pollutants by removing potential pollutants. A new gas or oil-fired boiler that replaces a coal-fired boiler would also be ineligible for certification.

(2) Fuel processing. Eligible air pollution control facilities include preprocessing equipment which removes potential air pol. lutants from fuels before they are burned. A desulfurization facility would thus be eligible provided it is used in connection with the plant where the desulfurized coal will be burned or is used as a centralized facility for one or more plants. However, fluidized bed facilities would generally not be eligible for rapid amortization. Such facilities would almost certainly increase output or capacity, reduce total operating costs, or extend the useful life of the plant or other property by more than 5%, since the boiler itself would be the operating unit of the plant most closely associated with the pollution control facility. Where the Regional Office and the taxpayer disagree as to the applicability of the 5% rule, the Regional office should nonetheless certify the facility if it is otherwise eligible and leave the ultimate determi. nation to the Treasury Department. The certification should alert Treasury to the possibility that the facility is ineligible for rapid amortization.

(3) Incinerators. The addition of an after burner, secondary combustion chamber or particulate collector would be eligible as would any device added to effect more efficient combustion.

(4) Collection devices used to collect products or process material. In some manufacturing operations, devices are used to collect product or process material, as in the case of the manufacture of carbon black. The baghouse would be eligible for certification, but the certification should notify the Treasury Department of the profitable waste recovery involved. (See paragraph 8 below.)

(5) Intermittent control systems. Measuring devices which inform the taxpayer that ambient air quality standards are being exceeded are not eligible for certification since they do not physically remove, alter, de. stroy, dispose of, store or prevent the creation or emission of pollutants, but merely act as a signal to curtail operations. Of course, measuring devices used in connection with an eligible pollution control facility would be eligible.

d. Replacement of manufacturing process by another, nonpolluting process. An installation does not qualify for certification where it uses a process known to be "cleaner" than an alternative, but which does not actually remove, alter, destroy, dispose of, store or prevent the creation or emission of pollutants by removing potential pollutants at any stage in the production process. For example, a minimally polluting electric induction furnace to melt cast iron which replaces, or is installed instead of, a heavily polluting iron cupola furnace would be ineligible for this reason and because it is not an identifiable treatment facility. However, if the replacement equipment has an air pollution control device added to it, the control device would be eligible even though the process equipment would not. For example, where a primary copper smelting reverberatory furnace is replaced by a flash smelting furnace, followed by the installation of a contact sulfuric acid plant, the acid plant would qualify since it is a control device not necessary to the production process. The flash smelting furnace would not quanty because its purpose is to produce copper matte.

3. Water Pollution Control Facilities.

a. Pollution control or treatment facilities normally eligible for certification. The following types of equipment are illustrative of facilities to remove, alter, destroy, store or prevent the creation of water pollution:

(1) Pretreatment facilities which neutralize or stabilize industrial or sanitary wastes, or both, from a point immediately preceding the point of such treatment to the point of disposal to, and acceptance by, a publiclyowned treatment works. The necessary pumping and transmitting facilities are also eligible.

(2) Treatment facilities which neutralize or stabilize industrial or sanitary wastes, or both, to comply with Federal, State or local

effluent or water quality standards, from a pears to be incorrect. Although not generalpoint immediately preceding the point of ly necessary or desireable, site inspections such treatment to the point of disposal, in- may be appropriate in cases involving large cluding necessary pumping and transmitting sums of money or unusual types of equipfacilities, including those for recycle or seg. ment. regation of wastewater.

5. Facilities serving both old and new (3) Ancillary devices and facilities such as plants. The statute provides that pollution lagoons, ponds and structures for storage, control facilities must be used in connection recycle, segregation or treatment, or any with a plant or other property in operation combination of these, of wastewaters or before January 1, 1976. When a facility is wastes from a plant or other property.

used in connection with both pre-1976 and (4) Devices, equipment or facilities con

newer property, it may qualify for rapid amstructed or installed for the primary pur

ortization to the extent it is used in connecpose of recovering a by-product of the oper

tion with pre-1976 property. ation (saleable or otherwise) previously lost

Again, the applicant will submit a theory either to the atmosphere or to the waste ef

of allocation for review by the Regional fluent. Examples are:

Office. The usual method of allocation is to (A) A facility to concentrate and recover

compare the effluent capacity of the prevaporous by-products from a process stream

1976 plant to the treatment capacity of the for reuse as raw feedstock or for resale,

control facility. For example, if the old unless the estimated profits from resale

plant has a capacity of 80 units of effluent exceed the cost of the facility (see para

(but an average output of 60 units), the new graph 8 below).

plant has a capacity of 40 units (but an (B) A facility to concentrate or remove

average output of 20 units), and the control "gunk" or similar "tars" or polymerized tar

facility has a capacity of 150 units, then like materials from the process waste efflu

89150 of the cost of the control facility would ent previously discharged in the plant ef

be eligible for rapid amortization. fluents. Removal may occur at any stage of the production process.

If a taxpayer presents a seemingly reason(C) A device used to extract or remove in

able method of allocation different from the soluble constitutents from a solid or liquid

foregoing, Regional Office personnel should by use of a selective solvent; an open or

consult with the Office of Air Quality Planclosed tank or vessel in which such extrac

ning and Standards or the Office of Water tion or removal occurs; a diffusion battery

Planning and Standards, and with the of tanks or vessels for countercurrent decan

Office of General Counsel. tation, extraction, or leaching, etc.

6. State certification. To qualify for rapid (D) A skimmer or similar device for re amortization under section 169, a facility moving grease, oils and fat-like materials

must first be certified by the State as from the process or effluent stream.

having been installed "in conformity with (b) Examples of eligibility limits.

the State program or requirements for (1) In-plant process changes which may abatement or control of water or atmosresult in the reduction or elimination of pol pheric pollution or contamination." Signifilution but which do not themselves remove,

cantly, the statute does not say that the alter, destroy, dispose of, store or prevent State must require that a facility be inthe creation of pollutants by removing po stalled. If use of a facility will not actually tential pollutants at some point in the proc. contravene a State requirement, the State ess stream are not eligible for certification. may certify. However, since State certifica

(2) A device, piece of equipment or facility tion is a prerequisite to EPA certification, is not eligible if it is associated with or in

EPA may not certify if the State has denied cluded in a stream for subsurface injection certification for whatever reason. of untreated or inadequately treated indus It should be noted that certification of a trial or sanitary waste.

facility does not constitute the personal 4. Multiple-purpose facilities. A facility warranty of the certifying official that the can qualify for rapid amortization if it conditions of the statute have been met. serves a function other than the abatement EPA certification is binding on the Governof pollution (unless it is a building). Other ment only to the extent the submitted facts wise, the effect might be to discourage in. are accurate and complete. stallation of sensible pollution abatement 7. Dispersal of pollutants. Section 169 apfacilities in favor of less efficient single plies to facilities which remove, alter, defunction facilities.

stroy, dispose of, store or prevent the creThe regulations require applicants to ation or emission of pollutants-including state what percentage of the cost of a facili. heat. Facilities which merely disperse polty is properly allocable to its abatement lutants (such as tall stacks) do not qualify. function and to justify the allocation. The However, there is no way to "dispose of" Regional Office will review these alloca- heat other than by transferring B.t.u.'s to tions, and the certification will inform the the environment. A cooling tower is thereTreasury Department if the allocation ap- fore eligible for certification provided it is

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substantially identical properties. It is not contemplated that the multiple application option will be used with respect to facilities in different States, since each such facility would require a separate application for certification to the State involved. EPA regulations also permit an applicant to incorporate by reference in an application material contained in an application previously filed. The purpose of this provision is to avoid the burden of furnishing detailed information (which may in some cases include portions of catalogs or process flow diagrams) which the certifying official has previously received. Accordingly, material filed with a Regional Office of EPA may be incorporated by reference only in an application subsequently filed with the same Regional Office. (47 FR 38319, Aug. 31, 1982]


used in connection with a pre-1976 plant. A cooling pond or an addition to an outfall structure which results in a decrease in the amount by which the temperature of the receiving water is raised and which meets applicable State standards is likewise eligible.

8. Profit-making facilities. The statute denies rapid amortization where the cost of pollution control facilities will be recovered from profits derived through the recovery or wastes “or otherwise."

If a facility recovers marketable wastes, estimated profits on which are not sufficient to recover the entire cost of the facili. ty, the amortization basis of the facility will be reduced in accordance with Treasury De. partment regulations. The responsibility of the Regional Offices is merely to identify for the Treasury Department those cases in which estimated profits will arise. The Treasury Department will determine the amount of such profits and the extent to which they can be expected to result in cost recovery, but the EPA certification should inform the Treasury whether cost recovery is possible.

The phrase "or otherwise" also includes situations where the taxpayer is in the business of renting the facility for a fee or charging for the treatment of waste. In such cases, the facility may theoretically qualify for EPA certification. The decision as to the extent of its profitability is for the Treasury Department. Situations may also arise where use of a facility is furnished at no additional charge to a number of users, or to the public, as part of a package of other services. In such cases, no profits will be deemed to arise from operation of the facility unless the other services included in the package are merely ancillary to use of the facility. Of course, the cost recovery provision does not apply where a taxpayer merely recovers the cost of a facility through general revenues; otherwise no profitable firm would ever be eligible for rapid amortization.

It should be noted that $ 20.9 of the EPA regulation is not meant to affect general principles of Federal income tax law. An individual other than the title holder of a piece of property may be entitled to take de preciation deductions on it if the arrangements by which such individual has use of the property may, for all practical purposes, be viewed as a purchase. In any such case, the facility could qualify for full rapid amortization, notwithstanding the fact that the title holder charges a separate fee for the use of the facility, so long as the taxpayer-in such a case, the user-does not charge a separate fee for use of the facility.

9. Multiple applications. Under EPA regulations, a multiple application may be submitted by a taxpayer who applies for certifi. cation of substantially identical pollution abatement facilities used in connection with

Sec. 21.1 Scope. 21.2 Definitions. 21.3 Submission of applications. 21.4 Review of application. 21.5 Issuance of statements. 21.6 Exclusions. 21.7 (Reserved) 21.8 Resubmission of application. 21.9 Appeals. 21.10 Utilization of the statement. 21.11 Public participation. 21.12 State issued statements. 21.13 Effect of certification upon authority

to enforce applicable standards. AUTHORITY: (15 U.S.C. 636), as amended by Pub. L. 92-500.

SOURCE: 42 FR 8083, Feb. 8, 1977, unless otherwise noted.

8 21.1 Scope.

This part establishes procedures for the issuance by EPA of the statements, referred to in section 7(g) of the Small Business Act and section 8 of the Federal Water Pollution Control Act Amendments of 1972, to the effect that additions to or alterations in the equipment, facilities (including the construction of pretreatment facilities and interceptor sewers), or methods of operations of small business concerns are necessary and adequate to comply with requirements established under the Federal Water Pollution Control Act, 33 U.S.C. 1151, et seq.

$ 21.2 Definitions.

(a) “Small business concern" means a concern defined by section 2[3] of the Small Business Act, 15 U.S.C. 632, 13 CFR Part 121, and regulations of the Small Business Administration promulgated thereunder.

(b) For purposes of paragraph 7(g)(2) of the Small Business Act, “necessary and adequate” refers to additions, alterations, or methods of operation in the absence of which a small business concern could not comply with one or more applicable standards. This can be determined with reference to design specifications provided by manufacturers, suppliers, or consulting engineers; including, without limitations, additions, alterations, or methods of operation the design specifications of which will provide a measure of treatment or abatement of pollution in excess of that required by the applicable standard.

(c) “Applicable Standard” means any requirement, not subject to an exception under $ 21.6, relating to the quality of water containing or poten. tially containing pollutants, if such requirement is imposed by:

(1) The Act;

(2) EPA regulations promulgated thereunder or permits issued by EPA or a State thereunder;

(3) Regulations by any other Federal Agency promulgated thereunder;

(4) Any State standard or requirement as applicable under section 510 of the Act;

(5) Any requirements necessary to comply with an areawide management plan approved pursuant to section 208(b) of the Act;

(6) Any requirements necessary to comply with a facilities plan developed under section 201 of the Act (see 35 CFR Subpart E);

(7) Any State regulations or laws controlling the disposal of aqueous pollutants that may affect ground. water.

(d) “Regional Administrator" means the Regional Administrator of EPA for the region including the State in which the facility or method of oper. ation is located, or his designee.

(e) “Act" means the Federal Water Pollution Control Act, 33 U.S.C. 1151, et seq.

(f) “Pollutant" means dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water. For the purposes of this section, the term also means sewage from from vessels within the meaning of

vessels section 312 of the Act.

(g) "Permit" means any permit issued by either EPA or a State under the authority of section 402 of the Act; or by the Corps of Engineers under section 404 of the Act.

(h) “State" means a State, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Trust Territory of the Pacific Islands.

Comment: As the SBA does not extend its programs to the Canal Zone, the listing of the Canal Zone as a State for the purposes of meeting a requirement imposed by sections 311 or 312 of the Act is not effective in this regulation.

(i) “Statement” means a written approval by EPA, or if appropriate, a State, of the application.

(j) "Facility" means any building, structure, installation or vessel, or portion thereof.

(k) "Construction" means the erection, building, acquisition, alteration, remodeling, modification, improvement, or extension of any facility; Provided, that it does not mean preparation or undertaking of: Plans to determine feasibility; engineering, architectural, legal, fiscal, or economic investigations or studies; surveys, designs, plans, writings, drawings, specifications or procedures.

Comment: This provision would not later preclude SBA financial assistance being utilized for any planning or design effort conducted previous to construction.

(1) The term "additions and alterations" means the act of undertaking construction of any facility.

(m) The term "methods of operation" means the installation, emplacement, or introduction of materials, including those involved in construction, to achieve a process or procedure to control: Surface water pollu

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