Greenberg Traurig Alert
Amendments to Drycleaner Cleanup Program Provide Tax Breaks and Other Incentives
By Alfred J.
Malefatto and Kara K. Baxter, Greenberg Traurig, West Palm Beach
View or download the PDF version of this Alert here.
On July 1, 1998, Senate Bill 244, amending the Florida Drycleaning Contamination
Cleanup Act (the "Act") became effective. The Act provides for state-conducted
and funded cleanup by encouraging real property owners to undertake voluntary
rehabilitation of contaminated sites. The following is a synopsis of the bill.
The 1998 bill amends Florida Statutes ("F.S.") Chapter 376, Pollutant
Discharge Prevention and Removal, to include ▀376.30781, F.S. This significant provision
was added to encourage voluntary cleanup by providing a partial tax credit for the
restoration of contaminated property pursuant to ▀199.1055, F.S. and ▀220.1845, F.S. The
tax credits are aimed at facilitating property transactions and encouraging economic
growth and development by supplying an incentive to property owners who wish to restore
the environmental condition of their own land. Previously, the primary financial incentive
available to those who wanted to participate in the state-funded program was to place the
facility on a priority waiting list for state-conducted rehabilitation. A voluntary
cleanup agreement for eligible sites could be entered into to receive a limited protection
from some liability, but state funding was not available. Now, in order to encourage
cleanup of drycleaning-solvent contamination at the earliest possible time, credits can be
taken against intangible personal property tax or corporate income tax for voluntary
cleanup activity. Thirty-five percent of the costs of the voluntary cleanup
activity deemed integral to site rehabilitation is accepted as a credit against any tax
due for a taxable year for the following sites: 1) a drycleaning-solvent-contaminated site
eligible for state-funded site rehabilitation; 2) a drycleaning-solvent-contaminated site
where cleanup is undertaken by the real property owner, if the real property owner is not
also the owner or operator of the drycleaning facility where the contamination exists; or
3) a brownfield site1 in a designated brownfield area pursuant to ▀376.79 and
▀376.80, F.S. If the credit is not fully used because of insufficient tax liability, the
amount remaining may be carried over for a five-year period.
Tax credits are capped at $250,000 per site per year, for a taxpayer, or
multiple taxpayers working jointly to clean up a single site. The total amount of tax
credit granted under this bill in a single year is capped at $2 million and approval
is on a first-come, first-served basis. These tax credits may be transferred after a
merger or acquisition to the surviving or acquiring entity and used in the same manner
with the same limitations. Additionally, as an incentive to complete rehabilitation, the
taxpayer may claim an additional ten percent (10%) of the total cleanup cost in the
final year of cleanup. The final year of the cleanup is defined as the year in which the
State of Florida Department of Environmental Protection ("DEP" or the
"Department") issues a "No Further Action" order for that site. This
claim may not exceed $50,000.
To claim the tax credit the applicant must have entered into a voluntary cleanup
agreement with the DEP and have paid all deductibles. The application deadline for an
allocation of the annual credit is on December 31st of each year.
Additionally, the 1998 bill eliminated a tax credit for small spills. Previously, any
costs incurred in response to a spill of more than 1 quart of drycleaning solvent outside
of a containment structure could be credited against the future gross receipts tax or
against the future tax on production or importation of percholoroethylene.
Deadline for Eligibility
The 1998 bill shortened the deadline for applying for eligibility in the program from
December 31, 2005 to December 31, 1998. If contamination is reported after December
31, 1998, costs associated with site rehabilitation will not be reimbursed from the
drycleaning restoration funds. It is uncertain whether this deadline for eligibility will
also revoke immunity from certain administrative or judicial actions which the program
currently provides. The ramifications of this interpretation would allow third persons or
the government to bring an action against the owner or operator of a facility compelling
rehabilitation or demanding payment for the costs associated with rehabilitation. This
problem may remain unclear until the program is put into effect by the agency or until the
ambiguity is addressed through the DEP rule-making process, or by future amendments by the
Conditions for Eligibility: Defining "Grossly Negligent Manner"
One significant component of the existing Act shielded "eligible" drycleaning
facility owners and operators from liability for restoration costs in hopes of encouraging
owners and operators to detect and report contaminated sites. The owners and operators are
insulated from state or local government or third-party restoration liability for any
contamination caused by their drycleaning solvents. The facilities have to satisfy
statutory criteria to be eligible to qualify for government-funded restoration. One
requirement stated that the drycleaning facility may be ineligible for the program if it
was operated in a "grossly negligent manner." This term remained ambiguous until
the legislature defined "grossly negligent manner" in the new legislation to
include: 1) willful discharge of drycleaning solvents on soils or into waters of the state
after the November 19, 1980, with knowledge, intent, and purpose that the discharge would
result in harm to the environment or to public health or result in violation of the law;
2) willful concealment of a discharge of drycleaning solvents with the knowledge, intent,
and purpose that the concealment would result in harm to the environment or to public
health or result in a violation of the law; or 3) willful violation of a local, state or
federal law or rule regulating the operation of drycleaning facilities with knowledge,
intent, and purpose that the act would result in harm to the environment or to public
health or result in a violation of the law.
Dry Drop-Off Facilities
Funding for the rehabilitation program under the existing Act was provided in part by
implementing a two percent (2%) tax on the monthly gross receipts of drycleaning
facilities. The 1998 amendment to ▀376.70(1), F.S., relating to a tax on gross receipts
of drycleaning facilities, now provides that "dry drop-off facilities"
are also subject to the two percent gross receipts tax. A "dry drop-off
facility" was defined to mean a store that only receives clothing for drycleaning,
and does not launder any clothing or fabrics at the store. Owners or operators of dry
drop-off facilities now are also required to register the facility with the Department of
Revenue and pay the $30 registration fee.
Failure to Remit Taxes
According to the 1998 bill, if the facility operator and the real property owner fail
to remit all taxes due pursuant to ▀376.70, F.S. and ▀376.75, F.S., the department may
deny eligibility in the drycleaning solvent cleanup program if the Department of Revenue
first: 1) ascertains the amount of the delinquent tax and communicates the amount in
writing to the applicant and the real property owner; and, 2) provides a method for the
payment of the taxes to the facility owner, the facility operator, and the real property
owner. Also, the owner or operator of a drycleaning facility must demonstrate to the
Department of Revenue that failure to timely remit taxes due was not willful and overt.
In an attempt to reduce the submissions of multiple and conflicting registration
information for each facility, the existing Act established a joint registration
procedure. The facility owner, operator and the real property owner could jointly apply to
the DEP for participation in the program. The 1998 bill clarified that the owner,
operator, and either the real property owner or agent of the real property owner
may apply jointly for the drycleaning contamination cleanup program. The applicant must
still notify the other interested non-applying parties if all interested parties do not
jointly submit the application.
Immunity "Runs With the Land"
The existing Act provided that eligible facilities do not lose their eligibility if the
owner conveys ownership of the drycleaning facility, wholesale supply facility, or real
property on which a facility may be located. The eligibility "runs with the
land." To compel cleanup, persons who conduct voluntary rehabilitation are afforded
immunity from liability under certain conditions. The 1998 bill, in ▀376.3078(10), F.S.,
provided that this immunity also runs with the land. Immunity for persons who conduct
voluntary cleanup would continue to apply to the real property, even if the owners
transfer, convey, lease, or sell property on which a drycleaning facility is located, so
long as the voluntary cleanup activities continue.
Third Party Liability Insurance
The bill also addressed another concern expressed regarding the drycleaning solvent
cleanup program. To protect owners or operators, ▀376.3079, F.S. established third-party
liability insurance coverage. The existing Act required that an owner or operator of an
operating drycleaning facility purchase third-party liability insurance for $1 million of
coverage, if available at a reasonable rate. The 1998 bill, in ▀376.3078(9), F.S., not
only stated that such insurance must be purchased by the owner or operator by January 1,
1999, the owner or operator must also purchase third-party liability insurance for $1
million of coverage for each operating facility. This requirement is applicable
only if the insurance is available at a reasonable rate and covers liability for
contamination before and after the effective date, retroactive to the commencement of
operations at the drycleaning facility or wholesale supply facility. The insurance may
also be offered in group coverage policies with a minimum coverage of $1 million for each
member of the group per year. However, not only is it uncertain whether such insurance is
"available" to owners or operators, the 1998 bill left the meaning of
"reasonable rate" unclear.
Immunity for Adjacent Property Owners
To compel the rehabilitation of sites contaminated by drycleaning solvents, additional
immunity provisions were added to shield nearby property owners from certain
administrative and judicial actions under ▀376.3078(3)(p), F.S. If a person's property
becomes contaminated because of the operation of a nearby drycleaning or wholesale supply
facility, and the person's property has never been occupied by a business that
utilized or stored drycleaning solvents or similar constituents, immunity from certain
administrative and judicial actions may be granted if the person: 1) does not own and has
never held an ownership interest in, or shared in the profits of, the drycleaning facility
operated at the source location; 2) did not participate in the operation or
management of the facility at the source location; and, 3) did not cause,
contribute to, or exacerbate the release or threat of release of any hazardous substance
through any act or omission. This defense does not apply to any liability under a
Because one goal of the 1998 bill was to protect the health of all people "under
actual circumstances of exposure," the bill added and enlarged several specific
considerations for rehabilitation of contaminated property, replacing the priority
language in ▀376.3078(4), F.S. By July 1, 1999, the DEP must establish criteria
for determining, on a site-specific basis, the rehabilitation program tasks that comprise
a site program. In establishing the rule, the DEP is instructed to incorporate, to the
maximum extent feasible, risk-based corrective-action principles to achieve protection of
human health and safety and the environment in a cost-effective manner. The criteria must:
1) consider current exposure and potential risk of exposure to humans and the environment,
including multiple pathways of exposure; 2) establish the point of compliance at the
source of the contamination (the Department may extend the point of compliance beyond the
property boundary if it is needed to facilitate natural attenuation or to address the
current conditions of the plume); 3) ensure that achievement of the applicable
"cleanup target level" is the site-specific cleanup goal for all contaminated
sites; 4) allow the use of institutional or engineering controls where appropriate; 5)
consider the additive effects of contaminants, including the synergistic and antagonistic
effects; 6) take into consideration individual site characteristics, including the use of
affected groundwater and surface water in the vicinity of the site and current and
projected land uses of the affected area; 7) apply state water quality standards; 8)
provide for the department to issue a "No Further Action" order; and, 9)
establish appropriate cleanup target levels for soils.
The 1998 bill added a list of contingencies that may require a site to be reopened.
Pursuant to ▀376.3078(11), F.S., additional site rehabilitation will be required if: 1)
fraud was committed in demonstrating site conditions or completion of site rehabilitation;
2) new information confirms the existence of an area of previously unknown contamination
which exceeds the site-specific rehabilitation levels established or which poses a threat
of real and substantial harm to public health, safety, or the environment; 3) remediation
efforts failed to achieve site rehabilitation criteria established in this bill; 4) the
level of risk increased beyond what is acceptable due to substantial changes in exposure
conditions, such as a change in land use from nonresidential to residential; or, 5) a new
discharge occurs subsequent to a determination of eligibility for participation in the
Negotiations Between DEP & EPA
The Florida legislature recognized its limitations in addressing cleanup liability
under federal pollution control programs in the addition of ▀376.3078(12)(c), F.S.
Therefore, in an effort to secure federal liability protection for persons who are willing
to undertake remediation responsibility at a drycleaning site, the bill required the DEP
to attempt to negotiate a memorandum of agreement or similar document with the United
States Environmental Protection Agency ("EPA"). In the memorandum of agreement,
the EPA may agree to forego enforcement of federal corrective action at sites that have
received "Site Rehabilitation Completion," or a "No Further Action"
determination from the DEP, or at sites that are in the process of implementing a
voluntary cleanup agreement.
Payment of Deductibles
Funding for the cleanup program was provided by a deductible fee per contamination
incident to be paid to the Hazardous Waste Management Trust Fund. The 1998 bill, in
▀376.3078(3), F.S., changed the due dates for the applicant's or current property owner's
payment of deductibles. The legislation stated that for contamination reported to the
department from July 1, 1997, through September 30, 1998, a $5,000 deductible per incident
must be submitted within 60 days after receipt of billing. Shortening the deadline by
several years, the 1998 bill provided that for contamination reported between October
1, 1998 and December 31, 1998, the applicant or current property owner must pay a
$10,000 deductible per incident within 60 days after receipt of billing. Because costs
will not be reimbursed from the restoration funds after December 31, 1998, the provision
that once related to the payment of deductibles through December 31, 2005 was removed.
The 1998 bill added Section 6 to ▀213.053, F.S. to provide additional funding for the
rehabilitation program. The $4 million appropriated from the General Revenue Fund Specific
Appropriation 1727 for Brownfield Redevelopment in the Conference Report on HB 4201 was
reduced by $1 million, and that $1 million will be used to cover the cost of the tax
credit provisions authorized in this bill.
The 1998 bill added a provision relating to late fees for registration renewals
in ▀376.303(1)(d)(2)(a), F.S. A penalty of $75.00 will be assessed if any facility fails
to pay the renewal fee within 30 days after receipt of billing.
Paragraph (o) was added to subsection (7) of ▀213.053, F.S. to state that the Department
of Revenue can provide information relative to ▀376.70, F.S. and ▀376.75, F.S. to
the DEP in the conduct of its official business, and also to the facility owner, operator
and real property owners.
The existing Act provided for funding for the rehabilitation program in part by a $5
per gallon tax on the sale or transfer of perchloroethylene to the drycleaning
facility, or import into the state by a drycleaning facility. The 1998 bill stated that
this tax was not subject to the sales and use tax levied pursuant to Ch. 212, F.S.
An exemption from the gross receipts tax is granted pursuant to ▀376.70(5),
F.S., which was added by the 1998 bill, if the gross receipts arise from charges for
services that are taxable under this bill and the charges are also imposed on others for
those same services.
This GT ALERT is issued for informational purposes only and is not intended
to be construed or used as general legal advice. Greenberg Traurig attorneys provide
practical, result-oriented strategies and solutions tailored to meet our clientsĺ
individual legal needs.