Monetary Consequences of Environmental Regulations: Costs of Doing Business or Non-deductible Penalties or Fines?
The cost of doing business in the United States has increased significantly with the advent of environmental protection laws and regulations. Federal, state, and local governments are continually strengthening the laws and regulations protecting the environment. In light of the current regulatory climate, the paper analyzes the federal income tax consequences to businesses for compliance, or noncompliance, with environmental regulation. A threshold question is whether the cost or expense of complying with environmental regulations, or resolving alleged violations, is considered a cost of doing business, restoration of damage, or a penalty or fine.