UNITED STATES CODE
TITLE 26.
INTERNAL REVENUE CODE
SUBTITLE A. INCOME TAXES
CHAPTER 1. NORMAL TAXES AND SURTAXES
SUBCHAPTER B. COMPUTATION OF TAXABLE INCOME
PART VI. ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
26 USC § 168
§ 168. Accelerated cost recovery system.
(a) General rule. Except as otherwise provided in this section, the
depreciation deduction provided by section 167(a) for any tangible property
shall be determined by using--
(1) the applicable depreciation method,
(2) the applicable recovery period, and
(3) the applicable convention.
(b) Applicable depreciation method. For purposes of this section--
(1) In general. Except as provided
in paragraphs (2) and (3), the applicable depreciation method is--
(A) the 200 percent declining balance method,
(B) switching to the straight line method for
the 1st taxable year for which using the straight line method with respect to
the adjusted basis as of the beginning of such year will yield a larger
allowance.
(2) 150 percent declining balance method in certain cases.
Paragraph (1) shall be applied by substituting "150 percent" for
"200 percent" in the case of--
(A) any 15-year or 20-year property not referred
to in paragraph (3),
(B) any property used in a farming business
(within the meaning of section 263A(e)(4),
(C) any property (other than property described
in paragraph (3)) which is a qualified smart electric meter or qualified smart
electric grid system, or
(D) any property (other than property described
in paragraph (3)) with respect to which the taxpayer elects under paragraph (5)
to have the provisions of this paragraph apply.
(3) Property to which straight line method applies. The
applicable depreciation method shall be the straight line method in the case of
the following property:
(A) Nonresidential real property.
(B) Residential rental property.
(C) Any railroad grading or tunnel bore.
(D) Property with respect to which the taxpayer
elects under paragraph (5) to have the provisions of this paragraph apply.
(E) Property described in subsection (e)(3)(D)(ii).
(F) Water utility property described in
subsection (e)(5).
(G) Qualified leasehold improvement property
described in subsection (e)(6).
(H) Qualified restaurant property described in
subsection (e)(7).
(I) Qualified retail improvement property
described in subsection (e)(8).
(4) Salvage value treated as zero. Salvage value shall be
treated as zero.
(5) Election. An election under paragraph (2)(C) or (3)(D)
may be made with respect to 1 or more classes of property for any taxable year
and once made with respect to any class shall apply to all property in such
class placed in service during such taxable year. Such an election, once made,
shall be irrevocable.
(c) Applicable recovery period. For purposes of this section, the applicable
recovery period shall be determined in accordance with the following table:
The
applicable
In
the case of: recovery period is:
3-year
property ............... 3 years
5-year
property ............... 5 years
7-year
property ............... 7 years
10-year
property .............. 10 years
15-year
property .............. 15 years
20-year
property .............. 20 years
Water
utility property ........... 25 years
Residential
rental property ......... 27.5 years
Nonresidential
real property ........ 39 years
Any
railroad grading or tunnel bore ..... 50 years
(d) Applicable convention. For purposes of this section--
(1) In general. Except
as otherwise provided in this subsection, the applicable convention is the
half-year convention.
(2) Real property. In the case of--
(A) nonresidential real property,
(B) residential rental property, and
(C) any railroad grading or tunnel bore,
the applicable convention is the mid-month convention.
(3) Special rule where substantial property placed in service
during last 3 months of taxable year.
(A) In general. Except as provided in
regulations, if during any taxable year--
(i)
the aggregate bases of property to which this section applies placed in service
during the last 3 months of the taxable year, exceed
(ii) 40 percent of the
aggregate bases of property to which this section applies placed in service
during such taxable year,
the applicable convention for all property to
which this section applies placed in service during such taxable year shall be
the mid-quarter convention.
(B) Certain property not taken into account. For
purposes of subparagraph (A), there shall not be taken into account--
(i)
any nonresidential real property, residential rental property, and railroad
grading or tunnel bore, and
(ii) any other property
placed in service and disposed of during the same taxable year.
(4) Definitions.
(A) Half-year convention. The half-year
convention is a convention which treats all property placed in service during
any taxable year (or disposed of during any taxable year) as placed in service
(or disposed of) on the mid-point of such taxable year.
(B) Mid-month convention. The mid-month
convention is a convention which treats all property placed in service during
any month (or disposed of during any month) as placed in service (or disposed
of) on the mid-point of such month.
(C) Mid-quarter convention.
The mid-quarter convention is a convention which treats all property placed in
service during any quarter of a taxable year (or disposed of during any quarter
of a taxable year) as placed in service (or disposed of) on the mid-point of
such quarter.
(e) Classification of property. For purposes of this section--
(1) In general. Except as otherwise
provided in this subsection, property shall be classified under the following
table:
If
such property has a class
Property
shall be treated as: life
(in years) of:
3-year property ........4 or less
5-year property ........More than 4 but
less than 10
7-year property ........10 or more but
less than 16
10-year property .......16 or more but
less than 20
15-year property .......20 or more but
less than 25
20-year property
.......25 or more.
(2) Residential rental or nonresidential real property.
(A) Residential rental property.
(i)
Residential rental property. The term "residential rental property"
means any building or structure if 80 percent or more of the gross rental
income from such building or structure for the taxable year is rental income
from dwelling units.
(ii) Definitions. For
purposes of clause (i)--
(I) the term
"dwelling unit" means a house or apartment used to provide living
accommodations in a building or structure, but does not include a unit in a
hotel, motel, or other establishment more than one-half of the units in which
are used on a transient basis, and
(II) if any
portion of the building or structure is occupied by the taxpayer, the gross
rental income from such building or structure shall include the rental value of
the portion so occupied.
(B) Nonresidential real property. The term
"nonresidential real property" means section 1250 property which is
not--
(i)
residential rental property, or
(ii) property with a
class life of less than 27.5 years.
(3) Classification of certain property.
(A) 3-year property. The term "3-year
property" includes--
(i)
any race horse--
(I) which is
placed in service before January 1, 2014, and
(II) which
is placed in service after December 31, 2013, and which is more than 2 years
old at the time such horse is placed in service by such purchaser,
(ii) any horse other than
a race horse which is more than 12 years old at the time it is placed in
service, and
(iii) any qualified
rent-to-own property.
(B) 5-year property. The term "5-year
property" includes--
(i)
any automobile or light general purpose truck,
(ii) any semi-conductor
manufacturing equipment,
(iii) any computer-based
telephone central office switching equipment,
(iv) any qualified
technological equipment,
(v) any section 1245
property used in connection with research and experimentation,
(vi) any property which--
(I) is
described in subparagraph (A) of section 48(a)(3) (or would be so described if
"solar or wind energy" were substituted for "solar energy"
in clause (i) thereof and the last sentence of such
section did not apply to such subparagraph),
(II) is
described in paragraph (15) of section 48(l) (as in effect on the day before
the date of the enactment of the Revenue Reconciliation Act of 1990) and is a
qualifying small power production facility within the meaning of section
3(17)(C) of the Federal Power Act (16 U.S.C. 796(17)(C)), as in effect on
September 1, 1986, or
(III) is
described in section 48(l)(3)(A)(ix) (as in effect on the day before the date
of the enactment of the Revenue Reconciliation Act of 1990), and
(vii) any machinery or
equipment (other than any grain bin, cotton ginning asset, fence, or other land
improvement) which is used in a farming business (as defined in section
263A(e)(4), the original use of which commences with the taxpayer after
December 31, 2008, and which is placed in service before January 1, 2010.
Nothing in any provision of law shall be
construed to treat property as not being described in clause (vi)(I) (or the
corresponding provisions of prior law) by reason of being public utility
property (within the meaning of section 48(a)(3).
(C) 7-year property. The term "7-year
property" includes--
(i)
any railroad track and
(ii) any motorsports
entertainment complex,
(iii) any Alaska natural
gas pipeline,
(iv) any natural gas
gathering line the original use of which commences with the taxpayer after
April 11, 2005, and
(v) any property which--
(I) does not
have a class life, and
(II) is not
otherwise classified under paragraph (2) or this paragraph.
(D) 10-year property. The term "10-year
property" includes--
(i)
any single purpose agricultural or horticultural structure (within the meaning
of subsection (i)(13)),
(ii) any tree or vine
bearing fruit or nuts,
(iii) any qualified smart
electric meter, and
(iv) any qualified smart
electric grid system.
(E) 15-year property. The term "15-year
property" includes--
(i)
any municipal wastewater treatment plant,
(ii) any telephone
distribution plant and comparable equipment used for 2-way exchange of voice
and data communications,
(iii) any section 1250 property
which is a retail motor fuels outlet (whether or not food or other convenience
items are sold at the outlet),
(iv) any qualified
leasehold improvement property placed in service before January 1, 2010,
(v) any qualified
restaurant property placed in service before January 1, 2010,
(vi) initial clearing and
grading land improvements with respect to gas utility property,
(vii) any section 1245
property (as defined in section 1245(a)(3) used in the transmission at 69 or
more kilovolts of electricity for sale and the original use of which commences
with the taxpayer after April 11, 2005,
(viii) any natural gas
distribution line the original use of which commences with the taxpayer after
April 11, 2005, and which is placed in service before January 1, 2011, and
(ix) any qualified retail
improvement property placed in service after December 31, 2008, and before
January 1, 2010.
(F) 20-year property. The term "20-year
property" means initial clearing and grading land improvements with
respect to any electric utility transmission and distribution plant.
(4) Railroad grading or tunnel bore. The term "railroad
grading or tunnel bore" means all improvements resulting from excavations
(including tunneling), construction of embankments, clearings, diversions of
roads and streams, sodding of slopes, and from
similar work necessary to provide, construct, reconstruct, alter, protect,
improve, replace, or restore a roadbed or right-of-way for railroad track.
(5) Water utility property. The term "water utility
property" means property--
(A) which is an integral part of the gathering,
treatment, or commercial distribution of water, and which, without regard to
this paragraph, would be 20-year property, and
(B) any municipal sewer.
(6) Qualified leasehold improvement property. The term
"qualified leasehold improvement property" has the meaning given such
term in section 168(k)(3) except that the following
special rules shall apply:
(A) Improvements made by lessor.
In the case of an improvement made by the person who was the lessor of such improvement when such improvement was placed
in service, such improvement shall be qualified leasehold improvement property
(if at all) only so long as such improvement is held by such person.
(B) Exception for changes in form of business.
Property shall not cease to be qualified leasehold improvement property under
subparagraph (A) by reason of--
(i)
death,
(ii) a transaction to
which section 381(a) applies,
(iii) a mere change in
the form of conducting the trade or business so long as the property is
retained in such trade or business as qualified leasehold improvement property
and the taxpayer retains a substantial interest in such trade or business,
(iv) the acquisition of
such property in an exchange described in section 1031, 1033, or 1038 [26 USCS
§ 1031, 1033, or 1038] to the extent that the basis of such property includes
an amount representing the adjusted basis of other property owned by the
taxpayer or a related person, or
(v) the acquisition of
such property by the taxpayer in a transaction described in section 332, 351,
361, 721, or 731 (or the acquisition of such property by the taxpayer from the
transferee or acquiring corporation in a transaction described in such
section), to the extent that the basis of the property in the hands of the taxpayer
is determined by reference to its basis in the hands of the transferor or
distributor.
(7) Qualified restaurant property.
(A) In general. The term "qualified
restaurant property" means any section 1250 property which is--
(i)
a building, if such building is placed in service after December 31, 2008, and
before January 1, 2010, or
(ii) an improvement to a
building,
if more than 50 percent of the building's square
footage is devoted to preparation of, and seating for on-premises consumption
of, prepared meals.
(B) Exclusion from bonus depreciation. Property
described in this paragraph shall not be considered qualified property for
purposes of subsection (k).
(8) Qualified retail improvement property.
(A) In general. The term "qualified retail
improvement property" means any improvement to an interior portion of a
building which is nonresidential real property if--
(i)
such portion is open to the general public and is used in the retail trade or
business of selling tangible personal property to the general public, and
(ii) such improvement is
placed in service more than 3 years after the date the building was first
placed in service.
(B) Improvements made by owner. In the case of
an improvement made by the owner of such improvement, such improvement shall be
qualified retail improvement property (if at all) only so long as such
improvement is held by such owner. Rules similar to the rules under paragraph
(6)(B) shall apply for purposes of the preceding
sentence.
(C) Certain improvements not included. Such term
shall not include any improvement for which the expenditure is attributable
to--
(i)
the enlargement of the building,
(ii) any elevator or escalator,
(iii) any structural
component benefitting a common area, or
(iv)
the internal structural framework of the building.
(D) Exclusion from bonus depreciation. Property
described in this paragraph shall not be considered qualified property for
purposes of subsection (k).
(E) Termination. Such term shall not include any
improvement placed in service after December 31, 2009.
(f) Property to which section does not apply. This section shall not apply to--
(1) Certain methods of depreciation.
Any property if--
(A) the taxpayer elects to exclude such property
from the application of this section, and
(B) for the 1st taxable year for which a
depreciation deduction would be allowable with respect to such property in the
hands of the taxpayer, the property is properly depreciated under the
unit-of-production method or any method of depreciation not expressed in a term
of years (other than the retirement-replacement-betterment method or similar
method).
(2) Certain public utility property. Any public utility
property (within the meaning of subsection (i)(10)) if the taxpayer does not use a normalization method
of accounting.
(3) Films and video tape. Any motion
picture film or video tape.
(4) Sound recordings. Any works which result from the
fixation of a series of musical, spoken, or other sounds, regardless of the
nature of the material (such as discs, tapes, or other phonorecordings)
in which such sounds are embodied.
(5) Certain property placed in service in churning
transactions.
(A) In general. Property--
(i)
described in paragraph (4) of section 168(e) (as in effect before the
amendments made by the Tax Reform Act of 1986), or
(ii) which would be
described in such paragraph if such paragraph were applied by substituting
"1987" for "1981" and "1986" for "1980"
each place such terms appear.
(B) Subparagraph (A)(ii)
not to apply. Clause (ii) of subparagraph (A) shall not apply to--
(i)
any residential rental property or nonresidential real property,
(ii) any property if, for
the 1st taxable year in which such property is placed in service--
(I) the
amount allowable as a deduction under this section (as in effect before the
date of the enactment of this paragraph) with respect to such property is
greater than,
(II) the
amount allowable as a deduction under this section (as in effect on or after
such date and using the half-year convention) for such taxable year, or
(iii) any property to
which this section (as amended by the Tax Reform Act of 1986) applied in the
hands of the transferor.
(C) Special rule. In the case of any property to
which this section would apply but for this paragraph, the depreciation deduction
under section 167 shall be determined under the provisions of this section as
in effect before the amendments made by section 201 of the Tax Reform Act of
1986.
(g) Alternative depreciation system for certain property.
(1) In general. In the case of--
(A) any tangible property which during the
taxable year is used predominantly outside the United States,
(B) any tax-exempt use property,
(C) any tax-exempt bond financed property,
(D) any imported property covered by an
Executive order under paragraph (6), and
(E) any property to which an election under
paragraph (7) applies,
the depreciation deduction provided by section 167(a) shall
be determined under the alternative depreciation system.
(2) Alternative depreciation system. For purposes of
paragraph (1), the alternative depreciation system is depreciation determined
by using--
(A) the straight line method (without regard to
salvage value),
(B) the applicable convention determined under
subsection (d), and
(C) a recovery period determined under the
following table:
In the case of:
The recovery period shall be:
(i) Property not described in
clause (ii) or (iii) ............. The
class life.
(ii) Personal
property with no
class life .......................
12 years.
(iii)
Nonresidential real and
residential rental property ....
40 years.
(iv) Any railroad grading or tunnel
bore or water utility property .....
50 years.
(3) Special rules for determining class life.
(A) Tax-exempt use property subject to lease. In
the case of any tax-exempt use property subject to a lease, the recovery period
used for purposes of paragraph (2) shall (notwithstanding any other
subparagraph of this paragraph) in no event be less than 125 percent of the
lease term.
(B) Special rule for certain property assigned
to classes. For purposes of paragraph (2), in the case of property described in
any of the following subparagraphs of subsection (e)(3),
the class life shall be determined as follows:
If property is described
The class
in subparagraph:
life is:
(A)(iii) ................................. 4
(B)(ii) .................................. 5
(B)(iii) ................................. 9.5
(B)(vii) ................................. 10
(C)(i)
................................... 10
(C)(iii) ................................. 22
(C)(iv) .................................. 14
(D)(i).................................... 15
(D)(ii)................................... 20
(E)(i).................................... 24
(E)(ii)................................... 24
(E)(iii).................................. 20
(E)(iv)................................... 39
(E)(v).................................... 39
(E)(vi)................................... 20
(E)(vii).................................. 30
(E)(viii)................................. 35
(E)(ix)................................. 39
(F)....................................... 25
(C) Qualified technological equipment. In the
case of any qualified technological equipment, the recovery period used for
purposes of paragraph (2) shall be 5 years.
(D) Automobiles, etc. In the case of any
automobile or light general purpose truck, the recovery period used for
purposes of paragraph (2) shall be 5 years.
(E) Certain real property. In the case of any
section 1245 property which is real property with no class life, the recovery
period used for purposes of paragraph (2) shall be 40 years.
(4) Exception for certain property used outside
(A) any aircraft which is registered by the
Administrator of the Federal Aviation Agency and which is operated to and from
the United States or is operated under contract with the United States;
(B) rolling stock which is used within and
without the United States and which is--
(i)
of a rail carrier subject to part A of subtitle IV of title 49, or
(ii) of a United States
person (other than a corporation described in clause (i))
but only if the rolling stock is not leased to one or more foreign persons for
periods aggregating more than 12 months in any 24-month period;
(C) any vessel documented under the laws of the
United States which is operated in the foreign or domestic commerce of the
United States;
(D) any motor vehicle of a United States person
(as defined in section 7701(a)(30) which is operated to and from the United
States;
(E) any container of a United States person
which is used in the transportation of property to and from the United States;
(F) any property (other than a vessel or an
aircraft) of a United States person which is used for the purpose of exploring
for, developing, removing, or transporting resources from the outer Continental
Shelf (within the meaning of section 2 of the Outer Continental Shelf Lands
Act, as amended and supplemented; (43 U.S.C. 1331));
(G) any property which is owned by a domestic
corporation (other than a corporation which has an election in effect under
section 936 or by a United States citizen (other than a citizen entitled to the
benefits of section 931 or 933 and which is used predominantly in a possession
of the United States by such a corporation or such a citizen, or by a
corporation created or organized in, or under the law of, a possession of the
United States;
(H) any communications satellite (as defined in
section 103(3) of the Communications Satellite Act of 1962, 47 U.S.C. 702(3)),
or any interest therein, of a United States person;
(I) any cable, or any interest therein, of a
domestic corporation engaged in furnishing telephone service to which section
168(i)(10)(C) applies (or of a wholly owned domestic
subsidiary of such a corporation), if such cable is part of a submarine cable
system which constitutes part of a communication link exclusively between the
United States and one or more foreign countries;
(J) any property (other than a vessel or an
aircraft) of a United States person which is used in international or
territorial waters within the northern portion of the Western Hemisphere for
the purpose of exploring for, developing, removing, or transporting resources
from ocean waters or deposits under such waters;
(K) any property described in section
48(l)(3)(A)(ix) (as in effect on the day before the date of the enactment of
the Revenue Reconciliation Act of 1990 which is owned by a United States person
and which is used in international or territorial waters to generate energy for
use in the United States; and
(L) any satellite (not described in subparagraph
(H)) or other spacecraft (or any interest therein) held by a United States
person if such satellite or other spacecraft was launched from within the
United States.
For purposes of subparagraph (J), the term "northern
portion of the Western Hemisphere" means the area lying west of the 30th
meridian west of
(5) Tax-exempt bond financed property. For purposes of this
subsection--
(A) In general. Except as otherwise provided in
this paragraph, the term "tax-exempt bond financed property" means
any property to the extent such property is financed (directly or indirectly)
by an obligation the interest on which is exempt from tax under section 103(a).
(B) Allocation of bond proceeds. For purposes of
subparagraph (A), the proceeds of any obligation shall be treated as used to
finance property acquired in connection with the issuance of such obligation in
the order in which such property is placed in service.
(C) Qualified residential rental projects. The
term "tax-exempt bond financed property" shall not include any
qualified residential rental project (within the meaning of section 142(a)(7).
(6) Imported property.
(A) Countries maintaining trade restrictions or
engaging in discriminatory acts. If the President determines that a foreign
country--
(i)
maintains nontariff trade restrictions, including variable import fees, which
substantially burden United States commerce in a manner inconsistent with
provisions of trade agreements, or
(ii) engages in
discriminatory or other acts (including tolerance of international cartels) or
policies unjustifiably restricting United States commerce,
the President may by Executive order provide for
the application of paragraph (1)(D) to any article or class of articles
manufactured or produced in such foreign country for such period as may be
provided by such Executive order. Any period specified in the preceding
sentence shall not apply to any property ordered before (or the construction,
reconstruction, or erection of which began before) the date of the Executive
order unless the President determines an earlier date to be in the public
interest and specifies such date in the Executive order.
(B) Imported property. For purposes of this
subsection, the term "imported property" means any property if--
(i)
such property was completed outside the
(ii) less than 50 percent
of the basis of such property is attributable to value added within the
For purposes of this subparagraph, the term
"
(7) Election to use alternative depreciation system.
(A) In general. If the taxpayer makes an
election under this paragraph with respect to any class of property for any
taxable year, the alternative depreciation system under this subsection shall
apply to all property in such class placed in service during such taxable year.
Notwithstanding the preceding sentence, in the case of nonresidential real
property or residential rental property, such election may be made separately
with respect to each property.
(B) Election irrevocable. An election under
subparagraph (A), once made, shall be irrevocable.
(h) Tax-exempt use property.
(1) In general. For purposes of this section--
(A) Property other than nonresidential real
property. Except as otherwise provided in this subsection,
the term "tax-exempt use property" means that portion of any tangible
property (other than nonresidential real property) leased to a tax-exempt
entity.
(B) Nonresidential real property.
(i)
In general. In the case of nonresidential real property, the term
"tax-exempt use property" means that portion of the property leased
to a tax-exempt entity in a disqualified lease.
(ii) Disqualified lease.
For purposes of this subparagraph, the term "disqualified lease"
means any lease of the property to a tax-exempt entity, but only if--
(I) part or
all of the property was financed (directly or indirectly) by an obligation the
interest on which is exempt from tax under section 103(a) and such entity (or a
related entity) participated in such financing,
(II) under
such lease there is a fixed or determinable price purchase or sale option which
involves such entity (or a related entity) or there is the equivalent of such
an option,
(III) such
lease has a lease term in excess of 20 years, or
(IV) such
lease occurs after a sale (or other transfer) of the property by, or lease of
the property from, such entity (or a related entity) and such property has been
used by such entity (or a related entity) before such sale (or other transfer)
or lease.
(iii)
35-percent threshold test. Clause (i) shall apply to
any property only if the portion of such property leased to tax-exempt entities
in disqualified leases is more than 35 percent of the property.
(iv)
Treatment of improvements. For purposes of this subparagraph,
improvements to a property (other than land) shall not be treated as a separate
property.
(v) Leasebacks during 1st
3 months of use not taken into account. Subclause
(IV) of clause (ii) shall not apply to any property which is leased within 3
months after the date such property is first used by the tax-exempt entity (or
a related entity).
(C) Exception for short-term leases.
(i)
In general. Property shall not be treated as tax-exempt use property merely by
reason of a short-term lease.
(ii) Short-term lease.
For purposes of clause (i), the term "short-term
lease" means any lease the term of which is--
(I) less
than 3 years, and
(II) less
than the greater of 1 year or 30 percent of the property's present class life.
In the case of
nonresidential real property and property with no present class life, subclause (II) shall not apply.
(D) Exception where property used in unrelated
trade or business. The term "tax-exempt use property" shall not
include any portion of a property if such portion is predominantly used by the
tax-exempt entity (directly or through a partnership of which such entity is a
partner) in an unrelated trade or business the income of which is subject to
tax under section 511. For purposes of subparagraph (B)(iii),
any portion of a property so used shall not be treated as leased to a
tax-exempt entity in a disqualified lease.
(E) Nonresidential real property defined. For
purposes of this paragraph, the term "nonresidential real property"
includes residential rental property.
(2) Tax-exempt entity.
(A) In general. For purposes of this subsection,
the term "tax-exempt entity" means--
(i)
the United States, any State or political subdivision thereof, any possession
of the United States, or any agency or instrumentality of any of the foregoing,
(ii) an organization
(other than a cooperative described in section 521) which is exempt from tax
imposed by this chapter,
(iii) any foreign person
or entity, and
(iv) any Indian tribal
government described in section 7701(a)(40).
For purposes of applying this subsection, any
Indian tribal government referred to in clause (iv)
shall be treated in the same manner as a State.
(B) Exception for certain property subject to
(i)
subject to tax under this chapter, or
(ii) included under
section 951 in the gross income of a United States shareholder for the taxable
year with or within which ends the taxable year of the controlled foreign
corporation in which such income was derived.
For purposes of the preceding sentence, any
exclusion or exemption shall not apply for purposes of determining the amount
of the gross income so derived, but shall apply for purposes of determining the
portion of such gross income subject to tax under this chapter.
(C) Foreign person or entity. For purposes of
this paragraph, the term "foreign person or entity" means--
(i)
any foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, and
(ii) any person who is
not a
Such term does not include any foreign
partnership or other foreign pass-thru entity.
(D) Treatment of certain taxable
instrumentalities. For purposes of this subsection, a corporation shall not be
treated as an instrumentality of the United States or of any State or political
subdivision thereof if--
(i)
all of the activities of such corporation are subject to tax under this chapter,
and
(ii) a majority of the
board of directors of such corporation is not selected by the United States or
any State or political subdivision thereof.
(E) Certain previously tax-exempt organizations.
(i)
In general. For purposes of this subsection, an organization shall be treated
as an organization described in subparagraph (A)(ii)
with respect to any property (other than property held by such organization) if
such organization was an organization (other than a cooperative described in
section 521) exempt from tax imposed by this chapter at any time during the
5-year period ending on the date such property was first used by such
organization. The preceding sentence and subparagraph (D)(ii)
shall not apply to the Federal Home Loan Mortgage Corporation.
(ii) Election not to have
clause (I) apply.
(I) In general. In the case of an organization formerly
exempt from tax under section 501(a) as an organization described in section
501(c)(12), clause (i) shall
not apply to such organization with respect to any property if such
organization elects not to be exempt from tax under section 501(a) during the
tax-exempt use period with respect to such property.
(II)
Tax-exempt use period. For purposes of subclause (I),
the term "tax-exempt use period" means the period beginning with the
taxable year in which the property described in subclause
(I) is first used by the organization and ending with the close of the 15th
taxable year following the last taxable year of the applicable recovery period
of such property.
(III) Election.
Any election under subclause (I), once made, shall be
irrevocable.
(iii) Treatment of
successor organizations. Any organization which is engaged in activities
substantially similar to those engaged in by a predecessor organization shall
succeed to the treatment under this subparagraph of such predecessor
organization.
(iv)
First used. For purposes of this subparagraph, property shall be treated
as first used by the organization--
(I) when the
property is first placed in service under a lease to such organization, or
(II) in the
case of property leased to (or held by) a partnership (or other pass-thru
entity) in which the organization is a member, the later of when such property
is first used by such partnership or pass-thru entity or when such organization
is first a member of such partnership or pass-thru entity.
(3) Special rules for certain high technology equipment.
(A) Exemption where lease term is 5 years or
less. For purposes of this section, the term "tax-exempt use
property" shall not include any qualified technological equipment if the
lease to the tax-exempt entity has a lease term of 5 years or less.
Notwithstanding subsection (i)(3)(A)(i), in determining a lease term for purposes of the preceding
sentence, there shall not be taken into account any option of the lessee to
renew at the fair market value rent determined at the time of renewal; except
that the aggregate period not taken into account by reason of this sentence
shall not exceed 24 months.
(B) Exception for certain property.
(i)
In general. For purposes of subparagraph (A), the term "qualified
technological equipment" shall not include any property leased to a
tax-exempt entity if--
(I) part or
all of the property was financed (directly or indirectly) by an obligation the
interest on which is exempt from tax under section 103(a),
(II) such
lease occurs after a sale (or other transfer) of the property by, or lease of
such property from, such entity (or related entity) and such property has been
used by such entity (or a related entity) before such sale (or other transfer)
or lease, or
(III) such
tax-exempt entity is the United States or any agency or instrumentality of the
United States.
(ii) Leasebacks during
1st 3 months of use not taken into account. Subclause
(II) of clause (i) shall not apply to any property
which is leased within 3 months after the date such property is first used by
the tax-exempt entity (or a related entity).
(4) Related entities. For purposes of this subsection--
(A) (i) Each
governmental unit and each agency or instrumentality of a governmental unit is
related to each other such unit, agency, or instrumentality which directly or
indirectly derives its powers, rights, and duties in whole or in part from the
same sovereign authority.
(ii) For purposes of
clause (i), the
(B) Any entity not described in subparagraph (A)(i) is related to any other
entity if the 2 entities have--
(i)
significant common purposes and substantial common membership, or
(ii) directly or
indirectly substantial common direction or control.
(C) (i)
An entity is related to another entity if either entity owns (directly or
through 1 or more entities) a 50 percent or greater interest in the capital or
profits of the other entity.
(ii) For purposes of
clause (i), entities treated as related under
subparagraph (A) or (B) shall be treated as 1 entity.
(D) An entity is related to another entity with
respect to a transaction if such transaction is part of an attempt by such
entities to avoid the application of this subsection.
(5) Tax-exempt use of property leased to partnerships, etc.,
determined at partner level. For purposes of this subsection--
(A) In general. In the case of any property
which is leased to a partnership, the determination of whether any portion of
such property is tax-exempt use property shall be made by treating each
tax-exempt entity partner's proportionate share (determined under paragraph
(6)(C)) of such property as being leased to such partner.
(B) Other pass-thru entities; tiered entities.
Rules similar to the rules of subparagraph (A) shall also apply in the case of
any pass-thru entity other than a partnership and in the case of tiered
partnerships and other entities.
(C) Presumption with respect to foreign
entities. Unless it is otherwise established to the satisfaction of the
Secretary, it shall be presumed that the partners of a foreign partnership (and
the beneficiaries of any other foreign pass-thru entity) are persons who are
not
(6) Treatment of property owned by partnerships, etc.
(A) In general. For purposes of this subsection,
if--
(i)
any property which (but for this subparagraph) is not tax-exempt use property
is owned by a partnership which has both a tax-exempt entity and a person who
is not a tax-exempt entity as partners, and
(ii) any allocation to
the tax-exempt entity of partnership items is not a qualified allocation,
an amount equal to such tax-exempt entity's
proportionate share of such property shall (except as provided in paragraph
(1)(D)) be treated as tax-exempt use property.
(B) Qualified allocation. For purposes of
subparagraph (A), the term "qualified allocation" means any
allocation to a tax-exempt entity which--
(i)
is consistent with such entity's being allocated the same distributive share of
each item of income, gain, loss, deduction, credit, and basis and such share
remains the same during the entire period the entity is a partner in the
partnership, and
(ii) has substantial
economic effect within the meaning of section 704(b)(2).
For purposes of this subparagraph, items
allocated under section 704(c) shall not be taken into account.
(C) Determination of proportionate share.
(i)
In general. For purposes of subparagraph (A), a tax-exempt entity's
proportionate share of any property owned by a partnership shall be determined
on the basis of such entity's share of partnership items of income or gain
(excluding gain allocated under section 704(c), whichever results in the
largest proportionate share.
(ii) Determination where
allocations vary. For purposes of clause (i), if a
tax-exempt entity's share of partnership items of income or gain (excluding
gain allocated under section 704(c) may vary during the period such entity is a
partner in the partnership, such share shall be the highest share such entity
may receive.
(D) Determination of whether property used in
unrelated trade or business. For purposes of this subsection, in the case of
any property which is owned by a partnership which has both a tax-exempt entity
and a person who is not a tax-exempt entity as partners, the determination of
whether such property is used in an unrelated trade or business of such an
entity shall be made without regard to section 514.
(E) Other pass-thru entities; tiered entities.
Rules similar to the rules of subparagraphs (A), (B), (C), and (D) shall also
apply in the case of any pass-thru entity other than a partnership and in the
case of tiered partnerships and other entities.
(F) Treatment of certain taxable entities.
(i)
In general. For purposes of this paragraph and paragraph (5), except as
otherwise provided in this subparagraph, any tax-exempt controlled entity shall
be treated as a tax-exempt entity.
(ii) Election. If a
tax-exempt controlled entity makes an election under this clause--
(I) such
entity shall not be treated as a tax-exempt entity for purposes of this
paragraph and paragraph (5), and
(II) any
gain recognized by a tax-exempt entity on any disposition of an interest in
such entity (and any dividend or interest received or accrued by a tax-exempt
entity from such tax-exempt controlled entity) shall be treated as unrelated
business taxable income for purposes of section 511.
Any such election shall
be irrevocable and shall bind all tax-exempt entities holding interests in such
tax-exempt controlled entity. For purposes of subclause
(II), there shall only be taken into account dividends which are properly
allocable to income of the tax-exempt controlled entity which was not subject
to tax under this chapter.
(iii) Tax-exempt
controlled entity.
(I) In general. The term "tax-exempt controlled
entity" means any corporation (which is not a tax-exempt entity determined
without regard to this subparagraph and paragraph (2)(E))
if 50 percent or more (in value) of the stock in such corporation is held by 1
or more tax-exempt entities (other than a foreign person or entity).
(II) Only
5-percent shareholders taken into account in case of publicly traded stock. For
purposes of subclause (I), in the case of a
corporation the stock of which is publicly traded on an established securities
market, stock held by a tax-exempt entity shall not be taken into account
unless such entity holds at least 5 percent (in value) of the stock in such
corporation. For purposes of this subclause, related
entities (within the meaning of paragraph (4)) shall be treated as 1 entity.
(III)
Section 318 to apply. For purposes of this clause, a tax-exempt entity shall be
treated as holding stock which it holds through application of section 318 (determined
without regard to the 50-percent limitation contained in subsection (a)(2)(C) thereof).
(G) Regulations. For purposes of determining
whether there is a qualified allocation under subparagraph (B), the regulations
prescribed under paragraph (8) for purposes of this paragraph--
(i)
shall set forth the proper treatment for partnership guaranteed payments, and
(ii) may provide for the
exclusion or segregation of items.
(7) Lease. For purposes of this subsection, the term
"lease" includes any grant of a right to use property.
(8) Regulations. The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this subsection.
(i) Definitions and special rules. For
purposes of this section--
(1) Class life. Except as provided in this section,
the term "class life" means the class life (if any) which would be
applicable with respect to any property as of January 1, 1986, under subsection
(m) of section 167 (determined without regard to paragraph (4) and as if the
taxpayer had made an election under such subsection). The Secretary, through an
office established in the Treasury, shall monitor and analyze actual experience
with respect to all depreciable assets. The reference in this paragraph to
subsection (m) of section 167 shall be treated as a reference to such
subsection as in effect on the day before the date of the enactment of the Revenue
Reconciliation Act of 1990.
(2) Qualified technological equipment.
(A) In general. The term "qualified
technological equipment" means--
(i)
any computer or peripheral equipment,
(ii) any high technology
telephone station equipment installed on the customer's premises, and
(iii) any high technology
medical equipment.
(B) Computer or peripheral equipment defined. For purposes of this paragraph--
(i)
In general. The term "computer or peripheral equipment"
means--
(I) any
computer, and
(II) any
related peripheral equipment.
(ii) Computer. The term
"computer" means a programmable electronically activated device
which--
(I) is
capable of accepting information, applying prescribed processes to the
information, and supplying the results of these processes with or without human
intervention, and
(II)
consists of a central processing unit containing extensive storage, logic,
arithmetic, and control capabilities.
(iii)
Related peripheral equipment. The term "related peripheral equipment"
means any auxiliary machine (whether on-line or off-line) which is designed to
be placed under the control of the central processing unit of a computer.
(iv)
Exceptions. The term "computer or peripheral equipment" shall
not include--
(I) any
equipment which is an integral part of other property which is not a computer,
(II)
typewriters, calculators, adding and accounting machines, copiers, duplicating
equipment, and similar equipment, and
(III)
equipment of a kind used primarily for amusement or entertainment of the user.
(C) High technology medical equipment. For purposes
of this paragraph, the term "high technology medical equipment" means
any electronic, electromechanical, or computer-based high technology equipment
used in the screening, monitoring, observation, diagnosis, or treatment of
patients in a laboratory, medical, or hospital environment.
(3) Lease term.
(A) In general. In determining a lease term--
(i)
there shall be taken into account options to renew,
(ii) the term of a lease
shall include the term of any service contract or similar arrangement (whether
or not treated as a lease under section 7701(e)--
(I) which is
part of the same transaction (or series of related transactions) which includes
the lease, and
(II) which
is with respect to the property subject to the lease or substantially similar
property, and
(iii) 2 or more
successive leases which are part of the same transaction (or a series of
related transactions) with respect to the same or substantially similar
property shall be treated as 1 lease.
(B) Special rule for fair rental options on
nonresidential real property or residential rental property. For purposes of
clause (i) of subparagraph (A), in the case of
nonresidential real property or residential rental property, there shall not be
taken into account any option to renew at fair market value determined at the
time of renewal.
(4) General asset accounts. Under regulations, a taxpayer may
maintain 1 or more general asset accounts for any property to which this
section applies. Except as provided in regulations, all proceeds realized on
any disposition of property in a general asset account shall be included in
income as ordinary income.
(5) Changes in use. The Secretary shall, by regulations,
provide for the method of determining the deduction allowable under section
167(a) with respect to any tangible property for any taxable year (and the
succeeding taxable years) during which such property changes status under this
section but continues to be held by the same person.
(6) Treatments of additions or improvements to property. In
the case of any addition to (or improvement of) any property--
(A) any deduction under subsection (a) for such
addition or improvement shall be computed in the same manner as the deduction
for such property would be computed if such property had been placed in service
at the same time as such addition or improvement, and
(B) the applicable recovery period for such
addition or improvement shall begin on the later of--
(i)
the date on which such addition (or improvement) is placed in service, or
(ii) the date on which
the property with respect to which such addition (or improvement) was made is
placed in service.
(7) Treatment of certain transferees.
(A) In general. In the case of any property
transferred in a transaction described in subparagraph (B), the transferee
shall be treated as the transferor for purposes of computing the depreciation
deduction determined under this section with respect to so much of the basis in
the hands of the transferee as does not exceed the adjusted basis in the hands
of the transferor. In any case where this section as in
effect before the amendments made by section 201 of the Tax Reform Act of 1986
applied to the property in the hands of the transferor, the reference in the
preceding sentence to this section shall be treated as a reference to this
section as so in effect.
(B) Transactions covered. The transactions
described in this subparagraph are--
(i)
any transaction described in section 332, 351, 361, 721, or 731, and
(ii) any transaction
between members of the same affiliated group during any taxable year for which
a consolidated return is made by such group.
Subparagraph (A) shall not apply in the case of
a termination of a partnership under section 708(b)(1)(B).
(C) Property reacquired by the taxpayer. Under
regulations, property which is disposed of and then reacquired by the taxpayer
shall be treated for purposes of computing the deduction allowable under
subsection (a) as if such property had not been disposed of.
(8) Treatment of leasehold improvements.
(A) In general. In the case of any building
erected (or improvements made) on leased property, if such building or
improvement is property to which this section applies, the depreciation
deduction shall be determined under the provisions of this section.
(B) Treatment of lessor
improvements which are abandoned at termination of lease. An improvement--
(i)
which is made by the lessor of leased property for
the lessee of such property, and
(ii) which is irrevocably
disposed of or abandoned by the lessor at the termination
of the lease by such lessee,
shall be treated for purposes of determining
gain or loss under this title as disposed of by the lessor
when so disposed of or abandoned.
(C) Cross reference. For treatment of qualified
long-term real property constructed or improved in connection with cash or rent
reduction from lessor to lessee, see section 110(b).
(9) Normalization rules.
(A) In general. In order to use a normalization
method of accounting with respect to any public utility property for purposes
of subsection (f)(2)--
(i)
the taxpayer must, in computing its tax expense for purposes of establishing
its cost of service for ratemaking purposes and reflecting operating results in
its regulated books of account, use a method of depreciation with respect to
such property that is the same as, and a depreciation period for such property
that is no shorter than, the method and period used to compute its depreciation
expense for such purposes; and
(ii) if the amount
allowable as a deduction under this section with respect to such property
differs from the amount that would be allowable as a deduction under section
167 using the method (including the period, first and last year convention, and
salvage value) used to compute regulated tax expense under clause (i), the taxpayer must make adjustments to a reserve to
reflect the deferral of taxes resulting from such difference.
(B) Use of inconsistent estimates and
projections, etc.
(i)
In general. One way in which the requirements of subparagraph (A) are not met
is if the taxpayer, for ratemaking purposes, uses a procedure or adjustment
which is inconsistent with the requirements of subparagraph (A).
(ii) Use of inconsistent
estimates and projections. The procedures and adjustments which are to be
treated as inconsistent for purposes of clause (i)
shall include any procedure or adjustment for ratemaking purposes which uses an
estimate or projection of the taxpayer's tax expense, depreciation expense, or
reserve for deferred taxes under subparagraph (A)(ii)
unless such estimate or projection is also used, for ratemaking purposes, with
respect to the other 2 such items and with respect to the rate base.
(iii) Regulatory
authority. The Secretary may by regulations prescribe procedures and
adjustments (in addition to those specified in clause (ii)) which are to be
treated as inconsistent for purposes of clause (i).
(C) Public utility property which does not meet
normalization rules. In the case of any public utility property to which this
section does not apply by reason of subsection (f)(2), the allowance for
depreciation under section 167(a) shall be an amount computed using the method
and period referred to in subparagraph (A)(i).
(10) Public utility property. The term "public utility
property" means property used predominantly in the trade or business of
the furnishing or sale of--
(A) electrical energy, water, or sewage disposal
services,
(B) gas or steam through a local distribution
system,
(C) telephone services, or other communication
services if furnished or sold by the Communications Satellite Corporation for
purposes authorized by the Communications Satellite Act of 1962 (47 U.S.C.
701), or
(D) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case may be,
have been established or approved by a State or political subdivision thereof,
by any agency or instrumentality of the United States, or by a public service
or public utility commission or other similar body of any State or political
subdivision thereof.
(11) Research and experimentation. The term "research
and experimentation" has the same meaning as the term research and experimental
has under section 174.
(12) Section 1245 and 1250 property. The terms "section
1245 property" and "section 1250 property" have the meanings
given such terms by sections 1245(a)(3) and 1250(c), respectively.
(13) Single purpose agricultural or horticultural structure.
(A) In general. The term "single purpose
agricultural or horticultural structure" means--
(i)
a single purpose livestock structure, and
(ii) a single purpose
horticultural structure.
(B) Definitions. For purposes
of this paragraph--
(i)
Single purpose livestock structure. The term "single purpose
livestock structure" means any enclosure or structure specifically
designed, constructed, and used--
(I) for
housing, raising, and feeding a particular type of livestock and their produce,
and
(II) for
housing the equipment (including any replacements) necessary for the housing,
raising, and feeding referred to in subclause (I).
(ii) Single purpose
horticultural structure. The term "single purpose horticultural
structure" means--
(I) a
greenhouse specifically designed, constructed, and used for the commercial
production of plants, and
(II) a
structure specifically designed, constructed, and used for the commercial
production of mushrooms.
(iii) Structures which
include work space. An enclosure or structure which provides work space shall
be treated as a single purpose agricultural or horticultural structure only if
such work space is solely for--
(I) the
stocking, caring for, or collecting of livestock or plants (as the case may be)
or their produce,
(II) the
maintenance of the enclosure or structure, and
(III) the
maintenance or replacement of the equipment or stock enclosed or housed
therein.
(iv)
Livestock. The term "livestock" includes poultry.
(14) Qualified rent-to-own property.
(A) In general. The term "qualified rent-to-own
property" means property held by a rent-to-own dealer for purposes of
being subject to a rent-to-own contract.
(B) Rent-to-own dealer. The term
"rent-to-own dealer" means a person that, in the ordinary course of
business, regularly enters into rent-to-own contracts with customers for the
use of consumer property, if a substantial portion of those contracts terminate
and the property is returned to such person before the receipt of all payments
required to transfer ownership of the property from such person to the
customer.
(C) Consumer property. The term "consumer
property" means tangible personal property of a type generally used within
the home for personal use.
(D) Rent-to-own contract. The term
"rent-to-own contract" means any lease for the use of consumer
property between a rent-to-own dealer and a customer who is an individual
which--
(i)
is titled "Rent-to-Own Agreement" or "Lease Agreement with
Ownership Option," or uses other similar language,
(ii) provides for level
(or decreasing where no payment is less than 40 percent of the largest
payment), regular periodic payments (for a payment period which is a week or
month),
(iii) provides that legal
title to such property remains with the rent-to-own dealer until the customer
makes all the payments described in clause (ii) or early purchase payments
required under the contract to acquire legal title to the item of property,
(iv) provides a beginning
date and a maximum period of time for which the contract may be in effect that
does not exceed 156 weeks or 36 months from such beginning date (including
renewals or options to extend),
(v) provides for payments
within the 156-week or 36-month period that, in the aggregate, generally exceed
the normal retail price of the consumer property plus interest,
(vi) provides for
payments under the contract that, in the aggregate, do not exceed $ 10,000 per
item of consumer property,
(vii) provides that the
customer does not have any legal obligation to make all the payments referred
to in clause (ii) set forth under the contract, and that at the end of each
payment period the customer may either continue to use the consumer property by
making the payment for the next payment period or return such property to the
rent-to-own dealer in good working order, in which case the customer does not
incur any further obligations under the contract and is not entitled to a
return of any payments previously made under the contract, and
(viii) provides that the
customer has no right to sell, sublease, mortgage, pawn, pledge, encumber, or
otherwise dispose of the consumer property until all the payments stated in the
contract have been made.
(15) Motorsports entertainment complex.
(A) In general. The term "motorsports
entertainment complex" means a racing track facility which--
(i)
is permanently situated on land, and
(ii) during the 36-month
period following the first day of the month in which the asset is placed in
service, hosts 1 or more racing events for automobiles (of any type), trucks,
or motorcycles which are open to the public for the price of admission.
(B) Ancillary and support facilities. Such term
shall include, if owned by the taxpayer who owns the complex and provided for
the benefit of patrons of the complex--
(i)
ancillary facilities and land improvements in support of the complex's
activities (including parking lots, sidewalks, waterways, bridges, fences, and
landscaping),
(ii) support facilities
(including food and beverage retailing, souvenir vending, and other nonlodging accommodations), and
(iii) appurtenances
associated with such facilities and related attractions and amusements
(including ticket booths, race track surfaces, suites and hospitality
facilities, grandstands and viewing structures, props, walls, facilities that
support the delivery of entertainment services, other special purpose
structures, facades, shop interiors, and buildings).
(C) Exception. Such term shall not include any
transportation equipment, administrative services assets, warehouses,
administrative buildings, hotels, or motels.
(D) Termination. Such term shall not include any
property placed in service after December 31, 2009.
(16)
(A) has a capacity of more than 500,000,000,000
Btu of natural gas per day, and
(B) is--
(i)
placed in service after December 31, 2013, or
(ii) treated as placed in
service on January 1, 2014, if the taxpayer who places such system in service
before January 1, 2014, elects such treatment.
Such term includes the pipe, trunk lines, related equipment,
and appurtenances used to carry natural gas, but does
not include any gas processing plant.
(17) Natural gas gathering line. The term "natural gas
gathering line" means--
(A) the pipe, equipment, and appurtenances
determined to be a gathering line by the Federal Energy Regulatory Commission,
and
(B) the pipe, equipment, and appurtenances used
to deliver natural gas from the wellhead or a commonpoint
to the point at which such gas first reaches--
(i)
a gas processing plant,
(ii) an interconnection
with a transmission pipeline for which a certificate as an interstate
transmission pipeline has been issued by the Federal Energy Regulatory
Commission,
(iii) an interconnection
with an intrastate transmission pipeline, or
(iv) a direct
interconnection with a local distribution company, a gas storage facility, or
an industrial consumer.
(18) Qualified smart electric meters.
(A) In general. The term "qualified smart
electric meter" means any smart electric meter which--
(i)
is placed in service by a taxpayer who is a supplier of electric energy or a
provider of electric energy services, and
(ii) does not have a
class life (determined without regard to subsection (e)) of less than 10 years.
(B) Smart electric meter. For purposes of
subparagraph (A), the term "smart electric meter" means any
time-based meter and related communication equipment which is capable of being
used by the taxpayer as part of a system that--
(i)
measures and records electricity usage data on a time-differentiated basis in
at least 24 separate time segments per day,
(ii) provides for the
exchange of information between supplier or provider and the customer's
electric meter in support of time-based rates or other forms of demand
response,
(iii) provides data to
such supplier or provider so that the supplier or provider can provide energy
usage information to customers electronically, and
(iv) provides net metering.
(19) Qualified smart electric grid systems.
(A) In general. The term "qualified smart
electric grid system" means any smart grid property which--
(i)
is used as part of a system for electric distribution grid communications,
monitoring, and management placed in service by a taxpayer who is a supplier of
electric energy or a provider of electric energy services, and
(ii) does not have a
class life (determined without regard to subsection (e)) of less than 10 years.
(B) Smart grid property. For the purposes of
subparagraph (A), the term "smart grid property" means electronics
and related equipment that is capable of--
(i)
sensing, collecting, and monitoring data of or from all portions of a utility's
electric distribution grid,
(ii) providing real-time,
two-way communications to monitor or manage such grid, and
(iii) providing real time
analysis of and event prediction based upon collected
data that can be used to improve electric distribution system reliability,
quality, and performance.
(j) Property on Indian reservations.
(1) In general. For purposes of subsection (a), the
applicable recovery period for qualified Indian reservation property shall be
determined in accordance with the table contained in paragraph (2) in lieu of
the table contained in subsection (c).
(2) Applicable recovery period for Indian reservation
property. For purposes of paragraph (1)--
The
applicable
In the case of:
recovery
period is:
3-year property .....................................
2 years
5-year property
.....................................
3 years
7-year property
.....................................
4 years
10-year property
....................................
6 years
15-year property
....................................
9 years
20-year property
....................................
12 years
Nonresidential real property
........................ 22 years.
(3) Deduction allowed in computing minimum tax. For purposes
of determining alternative minimum taxable income under section 55, the
deduction under subsection (a) for property to which paragraph (1) applies
shall be determined under this section without regard to any adjustment under
section 56.
(4) Qualified Indian reservation property defined. For
purposes of this subsection--
(A) In general. The term "qualified Indian
reservation property" means property which is property described in the
table in paragraph (2) and which is--
(i)
used by the taxpayer predominantly in the active conduct of a trade or business
within an Indian reservation,
(ii) not used or located
outside the Indian reservation on a regular basis,
(iii) not acquired
(directly or indirectly) by the taxpayer from a person who is related to the
taxpayer (within the meaning of section 465(b)(3)(C), and
(iv) not property (or any
portion thereof) placed in service for purposes of conducting or housing class
I, II, or III gaming (as defined in section 4 of the Indian Regulatory Act (25
U.S.C. 2703)).
(B) Exception for alternative depreciation property.
The term "qualified Indian reservation property" does not include any
property to which the alternative depreciation system under subsection (g)
applies, determined--
(i)
without regard to subsection (g)(7) (relating to
election to use alternative depreciation system), and
(ii) after the
application of section 280F(b) (relating to listed property with limited
business use).
(C) Special rule for reservation infrastructure
investment.
(i)
In general. Subparagraph (A)(ii) shall not apply to
qualified infrastructure property located outside of the Indian reservation if
the purpose of such property is to connect with qualified infrastructure
property located within the Indian reservation.
(ii) Qualified
infrastructure property. For purposes of this subparagraph, the term
"qualified infrastructure property" means qualified Indian
reservation property (determined without regard to subparagraph (A)(ii))
which--
(I) benefits
the tribal infrastructure,
(II) is
available to the general public, and
(III) is
placed in service in connection with the taxpayer's active conduct of a trade
or business within an Indian reservation.
Such term includes, but
is not limited to, roads, power lines, water systems, railroad spurs, and
communications facilities.
(5) Real estate rentals. For purposes of this subsection, the
rental to others of real property located within an Indian reservation shall be
treated as the active conduct of a trade or business within an Indian
reservation.
(6) Indian reservation defined. For purposes of this
subsection, the term "Indian reservation" means a reservation, as
defined in--
(A) section 3(d) of the Indian Financing Act of
1974 (25 U.S.C. 1452(d)), or
(B) section 4(10) of the Indian Child Welfare
Act of 1978 (25 U.S.C. 1903(10)).
For purposes of the preceding sentence, such section 3(d)
shall be applied by treating the term 'former Indian reservations in Oklahoma'
as including only lands which are within the jurisdictional area of an Oklahoma
Indian tribe (as determined by the Secretary of the Interior) and are
recognized by such Secretary as eligible for trust land status under 25 CFR
Part 151 (as in effect on the date of the enactment of this sentence).
(7) Coordination with nonrevenue laws. Any reference in this
subsection to a provision not contained in this title shall be treated for
purposes of this subsection as a reference to such provision as in effect on
the date of the enactment of this paragraph.
(8) Termination. This subsection shall not apply to property
placed in service after December 31, 2009.
(k) Special allowance for certain property acquired after December 31, 2007,
and before January 1, 2009.
(1) Additional allowance. In the case of any qualified
property--
(A) the depreciation deduction provided by
section 167(a) for the taxable year in which such property is placed in service
shall include an allowance equal to 50 percent of the adjusted basis of the
qualified property, and
(B) the adjusted basis of the qualified property
shall be reduced by the amount of such deduction before computing the amount
otherwise allowable as a depreciation deduction under this chapter for such
taxable year and any subsequent taxable year.
(2) Qualified property. For purposes of this subsection--
(A) In general. The term "qualified
property" means property--
(i)
(I) to which this section applies which has a recovery period of 20 years or
less,
(II) which
is computer software (as defined in section 167(f)(1)(B) for which a deduction
is allowable under section 167(a) without regard to this subsection,
(III) which
is water utility property, or
(IV) which
is qualified leasehold improvement property,
(ii) the original use of
which commences with the taxpayer after December 31, 2007,
(iii) which is--
(I) acquired
by the taxpayer after December 31, 2007, and before January 1, 2009, but only
if no written binding contract for the acquisition was in effect before January
1, 2008, or
(II)
acquired by the taxpayer pursuant to a written binding contract which was
entered into after December 31, 2007, and before January 1, 2009, and
(iv) which is placed in
service by the taxpayer before January 1, 2009, or, in the case of property described
in subparagraph (B) or (C), before January 1, 2010.
(B) Certain property having longer production
periods treated as qualified property.
(i)
In general. The term "qualified property" includes any property if
such property--
(I) meets
the requirements of clauses (i), (ii), (iii), and
(iv) of subparagraph (A),
(II) has a
recovery period of at least 10 years or is transportation property,
(III) is
subject to section 263A [26 USCS § 263A], and
(IV) meets
the requirements of clause (iii) of section 263A(f)(1)(B) (determined as if
such clauses also apply to property which has a long useful life (within the
meaning of section 263A(f).
(ii) Only pre-January 1,
2009, basis eligible for additional allowance. In the case of property which is
qualified property solely by reason of clause (i),
paragraph (1) shall apply only to the extent of the adjusted basis thereof
attributable to manufacture, construction, or production before January 1,
2009.
(iii) Transportation
property. For purposes of this subparagraph, the term "transportation
property" means tangible personal property used in the trade or business
of transporting persons or property.
(iv)
Application of subparagraph. This subparagraph shall not apply to any
property which is described in subparagraph (C).
(C) Certain aircraft. The term "qualified
property" includes property--
(i)
which meets the requirements of clauses (ii), (iii), and (iv) of subparagraph
(A),
(ii) which is an aircraft
which is not a transportation property (as defined in subparagraph (B)(iii))
other than for agricultural or firefighting purposes,
(iii) which is purchased
and on which such purchaser, at the time of the contract for purchase, has made
a nonrefundable deposit of the lesser of--
(I) 10
percent of the cost, or
(II) $
100,000, and
(iv) which has--
(I) an
estimated production period exceeding 4 months, and
(II) a cost
exceeding $ 200,000.
(D) Exceptions.
(i)
Alternative depreciation property. The term "qualified property"
shall not include any property to which the alternative depreciation system
under subsection (g) applies, determined--
(I) without
regard to paragraph (7) of subsection (g) (relating to election to have system
apply), and
(II) after
application of section 280F(b) (relating to listed
property with limited business use).
(ii)
Qualified New York Liberty Zone leasehold improvement property. The term
"qualified property" shall not include any qualified New York Liberty
Zone leasehold improvement property (as defined in section 1400L(c)(2).
(iii) Election out. If a
taxpayer makes an election under this clause with respect to any class of
property for any taxable year, this subsection shall not apply to all property
in such class placed in service during such taxable year.
(E) Special rules.
(i)
Self-constructed property. In the case of a taxpayer manufacturing,
constructing, or producing property for the taxpayer's own use, the
requirements of clause (iii) of subparagraph (A) shall be treated as met if the
taxpayer begins manufacturing, constructing, or producing the property after
December 31, 2007, and before January 1, 2009.
(ii) Sale-leasebacks. For
purposes of clause (iii) and subparagraph (A)(ii), if
property is--
(I)
originally placed in service after December 31, 2007, by a person, and
(II) sold
and leased back by such person within 3 months after the date such property was
originally placed in service,
such property shall be
treated as originally placed in service not earlier than the date on which such
property is used under the leaseback referred to in subclause
(II).
(iii) Syndication. For
purposes of subparagraph (A)(ii), if--
(I) property
is originally placed in service after December 31, 2007, by the lessor of such property,
(II) such
property is sold by such lessor or any subsequent
purchaser within 3 months after the date such property was originally placed in
service (or, in the case of multiple units of property subject to the same
lease, within 3 months after the date the final unit is placed in service, so
long as the period between the time the first unit is placed in service and the
time the last unit is placed in service does not exceed 12 months), and
(III) the
user of such property after the last sale during such 3-month period remains
the same as when such property was originally placed in service,
such property shall be
treated as originally placed in service not earlier than the date of such last
sale.
(iv)
Limitations related to users and related parties. The term
"qualified property" shall not include any property if--
(I) the user
of such property (as of the date on which such property is originally placed in
service) or a person which is related (within the meaning of section 267(b) or
707(b) to such user or to the taxpayer had a written binding contract in effect
for the acquisition of such property at any time on or before December 31,
2007, or
(II) in the
case of property manufactured, constructed, or produced for such user's or
person's own use, the manufacture, construction, or production of such property
began at any time on or before December 31, 2007.
(F) Coordination with section 280F [26 USCS §
280F]. For purposes of section 280F--
(i)
Automobiles. In the case of a passenger automobile (as defined in
section 280F(d)(5) which is qualified property, the
Secretary shall increase the limitation under section 280F(a)(1)(A)(i) by $ 8,000.
(ii) Listed property. The
deduction allowable under paragraph (1) shall be taken into account in
computing any recapture amount under section 280F(b)(2).
(G) Deduction allowed in computing minimum tax.
For purposes of determining alternative minimum taxable income under section 55,
the deduction under subsection (a) for qualified property shall be determined
under this section without regard to any adjustment under section 56.
(3) Qualified leasehold improvement property. For purposes of
this subsection--
(A) In general. The term "qualified
leasehold improvement property" means any improvement to an interior
portion of a building which is nonresidential real property if--
(i)
such improvement is made under or pursuant to a lease (as defined in subsection
(h)(7))--
(I) by the
lessee (or any sublessee) of such portion, or
(II) by the lessor of such portion,
(ii) such portion is to
be occupied exclusively by the lessee (or any sublessee)
of such portion, and
(iii) such improvement is
placed in service more than 3 years after the date the building was first
placed in service.
(B) Certain improvements not included. Such term
shall not include any improvement for which the expenditure is attributable
to--
(i)
the enlargement of the building,
(ii) any elevator or escalator,
(iii) any structural
component benefiting a common area, and
(iv)
the internal structural framework of the building.
(C) Definitions and special rules. For purposes
of this paragraph--
(i)
Commitment to lease treated as lease. A commitment to enter into a lease shall
be treated as a lease, and the parties to such commitment shall be treated as lessor and lessee, respectively.
(ii) Related persons. A
lease between related persons shall not be considered a lease. For purposes of
the preceding sentence, the term "related persons" means--
(I) members
of an affiliated group (as defined in section 1504), and
(II) persons
having a relationship described in subsection (b) of section 267; except that,
for purposes of this clause, the phrase "80 percent or more" shall be
substituted for the phrase "more than 50 percent" each place it
appears in such subsection.
(4) Election to accelerate the AMT and research credits in
lieu of bonus depreciation.
(A) In general. If a corporation elects to have
this paragraph apply for the first taxable year of the taxpayer ending after
March 31, 2008, in the case of such taxable year and each subsequent taxable
year--
(i)
paragraph (1) shall not apply to any eligible qualified property placed in
service by the taxpayer,
(ii) the applicable
depreciation method used under this section with respect to such property shall
be the straight line method, and
(iii) each of the
limitations described in subparagraph (B) for any such taxable year shall be
increased by the bonus depreciation amount which is--
(I)
determined for such taxable year under subparagraph (C), and
(II) allocated
to such limitation under subparagraph (E).
(B) Limitations to be increased. The limitations
described in this subparagraph are--
(i)
the limitation imposed by section 38(c), and
(ii) the limitation
imposed by section 53(c).
(C) Bonus depreciation amount. For purposes of this paragraph--
(i)
In general. The bonus depreciation amount for any taxable year is an
amount equal to 20 percent of the excess (if any) of--
(I) the
aggregate amount of depreciation which would be allowed under this section for
eligible qualified property placed in service by the taxpayer during such
taxable year if paragraph (1) applied to all such property, over
(II) the
aggregate amount of depreciation which would be allowed under this section for
eligible qualified property placed in service by the taxpayer during such
taxable year if paragraph (1) did not apply to any such property. The aggregate
amounts determined under subclauses (I) and (II)
shall be determined without regard to any election made under subsection
(b)(2)(C), (b)(3)(D), or (g)(7) and without regard to subparagraph (A)(ii).
(ii) Maximum amount. The
bonus depreciation amount for any taxable year shall not exceed the maximum
increase amount under clause (iii), reduced (but not below zero) by the sum of
the bonus depreciation amounts for all preceding taxable years.
(iii) Maximum increase
amount. For purposes of clause (ii), the term "maximum increase amount"
means, with respect to any corporation, the lesser of--
(I) $
30,000,000, or
(II) 6
percent of the sum of the business credit increase amount, and the AMT credit
increase amount, determined with respect to such corporation under subparagraph
(E).
(iv)
Aggregation rule. All corporations which are treated as a single
employer under section 52(a) shall be treated--
(I) as 1
taxpayer for purposes of this paragraph, and
(II) as
having elected the application of this paragraph if any such corporation so
elects.
(D) Eligible qualified property. For purposes of
this paragraph, the term "eligible qualified property" means
qualified property under paragraph (2), except that in applying paragraph (2)
for purposes of this paragraph--
(i)
"March 31, 2008" shall be substituted for "December 31,
2007" each place it appears in subparagraph (A) and clauses (i) and (ii) of subparagraph (E) thereof, and
(ii) only adjusted basis
attributable to manufacture, construction, or production after March 31, 2008,
and before January 1, 2009, shall be taken into account under subparagraph
(B)(ii) thereof.
(E) Allocation of bonus depreciation amounts.
(i)
In general. Subject to clauses (ii) and (iii), the taxpayer shall, at such time
and in such manner as the Secretary may prescribe, specify the portion (if any)
of the bonus depreciation amount for the taxable year which is to be allocated
to each of the limitations described in subparagraph (B) for such taxable year.
(ii) Limitation on
allocations. The portion of the bonus depreciation amount which may be
allocated under clause (i) to the limitations
described in subparagraph (B) for any taxable year shall not exceed--
(I) in the
case of the limitation described in subparagraph (B)(i),
the excess of the business credit increase amount over the bonus depreciation
amount allocated to such limitation for all preceding taxable years, and
(II) in the
case of the limitation described in subparagraph (B)(ii), the excess of the AMT
credit increase amount over the bonus depreciation amount allocated to such
limitation for all preceding taxable years.
(iii) Business credit
increase amount. For purposes of this paragraph, the term "business credit
increase amount" means the amount equal to the portion of the credit
allowable under section 38 [26 USCS § 38] (determined without regard to
subsection (c) thereof) for the first taxable year ending after March 31, 2008,
which is allocable to business credit carryforwards
to such taxable year which are--
(I) from
taxable years beginning before January 1, 2006, and
(II)
properly allocable (determined under the rules of section 38(d)) to the
research credit determined under section 41(a).
(iv) AMT credit increase
amount. For purposes of this paragraph, the term "AMT credit increase
amount" means the amount equal to the portion of the minimum tax credit
under section 53(b) for the first taxable year ending after March 31, 2008,
determined by taking into account only the adjusted minimum tax for taxable
years beginning before January 1, 2006. For purposes of the preceding sentence,
credits shall be treated as allowed on a first-in, first-out basis.
(F) Credit refundable. For purposes of section
6401(b), the aggregate increase in the credits allowable under part IV of
subchapter A for any taxable year resulting from the application of this
paragraph shall be treated as allowed under subpart C of such part (and not any
other subpart).
(G) Other rules.
(i)
Election. Any election under this paragraph (including any allocation under
subparagraph (E)) may be revoked only with the consent of the Secretary.
(ii) Partnerships with
electing partners. In the case of a corporation making an election under
subparagraph (A) and which is a partner in a partnership, for purposes of determining
such corporation's distributive share of partnership items under section 702--
(I)
paragraph (1) shall not apply to any eligible qualified property, and
(II) the
applicable depreciation method used under this section with respect to such
property shall be the straight line method.
(iii) Special rule for
passenger aircraft. In the case of any passenger aircraft, the written binding
contract limitation under paragraph (2)(A)(iii)(I)
shall not apply for purposes of subparagraphs (C)(i)(I)
and (D).
(l) Special allowance for cellulosic biofuel plant
property.
(1) Additional allowance. In the case of any qualified
cellulosic biofuel plant property--
(A) the depreciation deduction provided by section
167(a) for the taxable year in which such property is placed in service shall
include an allowance equal to 50 percent of the adjusted basis of such
property, and
(B) the adjusted basis of such property shall be
reduced by the amount of such deduction before computing the amount otherwise
allowable as a depreciation deduction under this chapter for such taxable year
and any subsequent taxable year.
(2) Qualified cellulosic biofuel
plant property. The term "qualified cellulosic biofuel
plant property" means property of a character subject to the allowance for
depreciation--
(A) which is used in the United States solely to
produce cellulosic biofuel,
(B) the original use of which commences with the
taxpayer after the date of the enactment of this subsection,
(C) which is acquired by the taxpayer by
purchase (as defined in section 179(d) after the date of the enactment of this
subsection, but only if no written binding contract for the acquisition was in
effect on or before the date of the enactment of this subsection, and
(D) which is placed in service by the taxpayer
before January 1, 2013.
(3) Cellulosic biofuel. The term
"cellulosic biofuel" means any liquid fuel
which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or
recurring basis.
(4) Exceptions.
(A) Bonus depreciation property under subsection
(k). Such term shall not include any property to which section 168(k) applies.
(B) Alternative depreciation property. Such term
shall not include any property described in section 168(k)(2)(D)(i).
(C) Tax-exempt bond-financed property. Such term
shall not include any property any portion of which is financed with the
proceeds of any obligation the interest on which is exempt from tax under
section 103.
(D) Election out. If a taxpayer makes an
election under this subparagraph with respect to any class of property for any
taxable year, this subsection shall not apply to all property in such class
placed in service during such taxable year.
(5) Special rules. For purposes of this subsection, rules
similar to the rules of subparagraph (E) of section 168(k)(2) shall apply,
except that such subparagraph shall be applied--
(A) by substituting "the date of the
enactment of subsection (l)" for "December 31, 2007" each place
it appears therein,
(B) by substituting "January 1, 2013"
for "January 1, 2009" in clause (i)
thereof, and
(C) by substituting "qualified cellulosic biofuel plant property" for "qualified
property" in clause (iv) thereof.
(6) Allowance against alternative minimum tax. For purposes
of this subsection, rules similar to the rules of section 168(k)(2)(G) shall apply.
(7) Recapture. For purposes of this subsection, rules similar
to the rules under section 179(d)(10) shall apply with
respect to any qualified cellulosic biofuel plant
property which ceases to be qualified cellulosic biofuel
plant property.
(8) Denial of double benefit. Paragraph (1) shall not apply
to any qualified cellulosic biofuel plant property
with respect to which an election has been made under section 179C (relating to
election to expense certain refineries).
(m) Special allowance for certain reuse and recycling property.
(1) In general. In the case of any qualified reuse and
recycling property--
(A) the depreciation deduction provided by
section 167(a) for the taxable year in which such property is placed in service
shall include an allowance equal to 50 percent of the adjusted basis of the
qualified reuse and recycling property, and
(B) the adjusted basis of the qualified reuse
and recycling property shall be reduced by the amount of such deduction before
computing the amount otherwise allowable as a depreciation deduction under this
chapter for such taxable year and any subsequent taxable year.
(2) Qualified reuse and recycling property. For purposes of
this subsection--
(A) In general. The term "qualified reuse
and recycling property" means any reuse and recycling property--
(i)
to which this section applies,
(ii) which has a useful
life of at least 5 years,
(iii) the original use of
which commences with the taxpayer after August 31, 2008, and
(iv) which is--
(I) acquired
by purchase (as defined in section 179(d)(2) by the taxpayer after August 31,
2008, but only if no written binding contract for the acquisition was in effect
before September 1, 2008, or
(II)
acquired by the taxpayer pursuant to a written binding contract which was
entered into after August 31, 2008.
(B) Exceptions.
(i)
Bonus depreciation property under subsection (k). The term "qualified
reuse and recycling property" shall not include any property to which
section 168(k) applies.
(ii) Alternative
depreciation property. The term "qualified reuse and recycling
property" shall not include any property to which the alternative
depreciation system under subsection (g) applies, determined without regard to
paragraph (7) of subsection (g) (relating to election to have system apply).
(iii) Election out. If a
taxpayer makes an election under this clause with respect to any class of
property for any taxable year, this subsection shall not apply to all property
in such class placed in service during such taxable year.
(C) Special rule for self-constructed property.
In the case of a taxpayer manufacturing, constructing, or producing property
for the taxpayer's own use, the requirements of clause (iv) of subparagraph (A)
shall be treated as met if the taxpayer begins manufacturing, constructing, or
producing the property after August 31, 2008.
(D) Deduction allowed in computing minimum tax.
For purposes of determining alternative minimum taxable income under section 55,
the deduction under subsection (a) for qualified reuse and recycling property
shall be determined under this section without regard to any adjustment under
section 56.
(3) Definitions. For purposes of this subsection--
(A) Reuse and recycling property.
(i)
In general. The term "reuse and recycling property" means any
machinery and equipment (not including buildings or real estate), along with
all appurtenances thereto, including software necessary to operate such
equipment, which is used exclusively to collect, distribute, or recycle
qualified reuse and recyclable materials.
(ii) Exclusion. Such term
does not include rolling stock or other equipment used to transport reuse and
recyclable materials.
(B) Qualified reuse and recyclable materials.
(i)
In general. The term "qualified reuse and recyclable materials" means
scrap plastic, scrap glass, scrap textiles, scrap rubber, scrap packaging,
recovered fiber, scrap ferrous and nonferrous metals, or electronic scrap
generated by an individual or business.
(ii) Electronic scrap.
For purposes of clause (i), the term "electronic
scrap" means--
(I) any
cathode ray tube, flat panel screen, or similar video display device with a
screen size greater than 4 inches measured diagonally, or
(II) any
central processing unit.
(C) Recycling or recycle. The term
"recycling" or "recycle" means that process (including
sorting) by which worn or superfluous materials are manufactured or processed
into specification grade commodities that are suitable for use as a replacement
or substitute for virgin materials in manufacturing tangible consumer and
commercial products, including packaging
(n) Special allowance for qualified disaster assistance property.
(1) In general. In the case of any qualified disaster
assistance property--
(A) the depreciation deduction provided by
section 167(a) for the taxable year in which such property is placed in service
shall include an allowance equal to 50 percent of the adjusted basis of the
qualified disaster assistance property, and
(B) the adjusted basis of the qualified disaster
assistance property shall be reduced by the amount of such deduction before
computing the amount otherwise allowable as a depreciation deduction under this
chapter for such taxable year and any subsequent taxable year.
(2) Qualified disaster assistance property. For purposes of
this subsection--
(A) In general. The term "qualified
disaster assistance property" means any property--
(i)
(I) which is described in subsection (k)(2)(A)(i), or
(II) which
is nonresidential real property or residential rental property,
(ii) substantially all of
the use of which is--
(I) in a
disaster area with respect to a federally declared disaster occurring before
January 1, 2010, and
(II) in the
active conduct of a trade or business by the taxpayer in such disaster area,
(iii) which--
(I)
rehabilitates property damaged, or replaces property destroyed or condemned, as
a result of such federally declared disaster, except that, for purposes of this
clause, property shall be treated as replacing property destroyed or condemned
if, as part of an integrated plan, such property replaces property which is
included in a continuous area which includes real property destroyed or
condemned, and
(II) is
similar in nature to, and located in the same county as, the property being
rehabilitated or replaced,
(iv) the original use of
which in such disaster area commences with an eligible taxpayer on or after the
applicable disaster date,
(v) which is acquired by
such eligible taxpayer by purchase (as defined in section 179(d) on or after
the applicable disaster date, but only if no written binding contract for the
acquisition was in effect before such date, and
(vi) which is placed in
service by such eligible taxpayer on or before the date which is the last day
of the third calendar year following the applicable disaster date (the fourth
calendar year in the case of nonresidential real property and residential
rental property).
(B) Exceptions.
(i)
Other bonus depreciation property. The term "qualified disaster assistance
property" shall not include--
(I) any
property to which subsection (k) (determined without regard to paragraph (4)),
(l), or (m) applies,
(II) any
property to which section 1400N(d) applies, and
(III) any
property described in section 1400N(p)(3).
(ii) Alternative
depreciation property. The term "qualified disaster assistance
property" shall not include any property to which the alternative
depreciation system under subsection (g) applies, determined without regard to
paragraph (7) of subsection (g) (relating to election to have system apply).
(iii) Tax-exempt bond
financed property. Such term shall not include any property any portion of
which is financed with the proceeds of any obligation the interest on which is
exempt from tax under section 103.
(iv)
Qualified revitalization buildings. Such term shall not include any
qualified revitalization building with respect to which the taxpayer has
elected the application of paragraph (1) or (2) of section 1400I(a).
(v) Election out. If a
taxpayer makes an election under this clause with respect to any class of
property for any taxable year, this subsection shall not apply to all property
in such class placed in service during such taxable year.
(C) Special rules. For purposes of this
subsection, rules similar to the rules of subparagraph (E) of subsection (k)(2)
shall apply, except that such subparagraph shall be applied--
(i)
by substituting "the applicable disaster date" for "December 31,
2007" each place it appears therein,
(ii) without regard to
"and before January 1, 2009" in clause (i)
thereof, and
(iii) by substituting
"qualified disaster assistance property" for "qualified
property" in clause (iv) thereof.
(D) Allowance against alternative minimum tax.
For purposes of this subsection, rules similar to the rules of subsection (k)(2)(G) shall apply.
(3) Other definitions. For purposes of this subsection--
(A) Applicable disaster date.
The term "applicable disaster date" means, with respect to any
federally declared disaster, the date on which such federally declared disaster
occurs.
(B) Federally declared disaster. The term
"federally declared disaster" has the meaning given such term under
section 165(h)(3)(C)(i).
(C) Disaster area. The term "disaster
area" has the meaning given such term under section 165(h)(3)(C)(ii).
(D) Eligible taxpayer. The term "eligible
taxpayer" means a taxpayer who has suffered an economic loss attributable
to a federally declared disaster.
(4) Recapture. For purposes of this subsection, rules similar
to the rules under section 179(d)(10) shall apply with
respect to any qualified disaster assistance property which ceases to be
qualified disaster assistance property..