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H.R. 4718 (113th): To amend the Internal Revenue Code of 1986 to modify and make permanent bonus depreciation.

The text of the bill below is as of Jul 15, 2014 (Placed on Calendar in the Senate).


II

Calendar No. 465

113th CONGRESS

2d Session

H. R. 4718

IN THE SENATE OF THE UNITED STATES

July 14, 2014

Received; read the first time

July 15, 2014

Read the second time and placed on the calendar

AN ACT

To amend the Internal Revenue Code of 1986 to modify and make permanent bonus depreciation.

1.

Bonus depreciation modified and made permanent

(a)

Made permanent; inclusion of qualified retail improvement property

Section 168(k)(2) of the Internal Revenue Code of 1986 is amended to read as follows:

(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,

(IV)

which is qualified leasehold improvement property, or

(V)

which is qualified retail improvement property, and

(ii)

the original use of which commences with the taxpayer.

(B)

Exception for 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).

(C)

Special rules

(i)

Sale-leasebacks

For purposes of clause (ii) and subparagraph (A)(ii), if property is—

(I)

originally placed in service 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).
(ii)

Syndication

For purposes of subparagraph (A)(ii), if—

(I)

property is originally placed in service 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.
(D)

Coordination with section 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).

(iii)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2014, the $8,000 amount in clause (i) shall be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the automobile price inflation adjustment determined under section 280F(d)(7)(B)(i) for the calendar year in which such taxable year begins by substituting 2013 for 1987 in subclause (II) thereof.

If any increase under the preceding sentence is not a multiple of $100, such increase shall be rounded to the nearest multiple of $100.
(E)

Deduction allowed in computing minimum tax

For purposes of determining alternative minimum taxable income under section 55, the deduction under section 167 for qualified property shall be determined without regard to any adjustment under section 56.

.

(b)

Expansion of election to accelerate amt credits in lieu of bonus depreciation

Section 168(k)(4) of such Code is amended to read as follows:

(4)

Election to accelerate amt credits in lieu of bonus depreciation

(A)

In general

If a corporation elects to have this paragraph apply for any taxable year—

(i)

paragraphs (1)(A), (2)(D)(i), and (5)(A)(i) shall not apply for such taxable year,

(ii)

the applicable depreciation method used under this section with respect to any qualified property shall be the straight line method, and

(iii)

the limitation imposed by section 53(c) for such taxable year shall be increased by the bonus depreciation amount which is determined for such taxable year under subparagraph (B).

(B)

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 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 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)(D), (b)(3)(D), or (g)(7) and without regard to subparagraph (A)(ii).
(ii)

Limitation

The bonus depreciation amount for any taxable year shall not exceed the lesser of—

(I)

50 percent of the minimum tax credit under section 53(b) for the first taxable year ending after December 31, 2013, or

(II)

the minimum tax credit under section 53(b) for such taxable year determined by taking into account only the adjusted net minimum tax for taxable years ending before January 1, 2014 (determined by treating credits as allowed on a first-in, first-out basis).

(iii)

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.

(C)

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).

(D)

Other rules

(i)

Election

Any election under this paragraph may be revoked only with the consent of the Secretary.

(ii)

Partnerships with electing partners

In the case of a corporation which is a partner in a partnership and which makes an election under subparagraph (A) for the taxable year, for purposes of determining such corporation’s distributive share of partnership items under section 702 for such taxable year—

(I)

paragraphs (1)(A), (2)(D)(i), and (5)(A)(i) shall not apply, and

(II)

the applicable depreciation method used under this section with respect to any qualified property shall be the straight line method.

(iii)

Certain partnerships

In the case of a partnership in which more than 50 percent of the capital and profits interests are owned (directly or indirectly) at all times during the taxable year by 1 corporation (or by corporations treated as 1 taxpayer under subparagraph (B)(iii)), each partner shall compute its bonus depreciation amount under clause (i) of subparagraph (B) by taking into account its distributive share of the amounts determined by the partnership under subclauses (I) and (II) of such clause for the taxable year of the partnership ending with or within the taxable year of the partner.

.

(c)

Special rules for trees and vines bearing fruits and nuts

Section 168(k) of such Code is amended—

(1)

by striking paragraph (5), and

(2)

by inserting after paragraph (4) the following new paragraph:

(5)

Special rules for trees and vines bearing fruits and nuts

(A)

In general

In the case of any tree or vine bearing fruits or nuts which is planted, or is grafted to a plant that has already been planted, by the taxpayer in the ordinary course of the taxpayer’s farming business (as defined in section 263A(e)(4))—

(i)

a depreciation deduction equal to 50 percent of the adjusted basis of such tree or vine shall be allowed under section 167(a) for the taxable year in which such tree or vine is so planted or grafted, and

(ii)

the adjusted basis of such tree or vine shall be reduced by the amount of such deduction.

(B)

Election out

If a taxpayer makes an election under this subparagraph for any taxable year, this paragraph shall not apply to any tree or vine planted or grafted during such taxable year. An election under this subparagraph may be revoked only with the consent of the Secretary.

(C)

Additional depreciation may be claimed only once

If this paragraph applies to any tree or vine, such tree or vine shall not be treated as qualified property in the taxable year in which placed in service.

(D)

Coordination with election to accelerate AMT credits

If a corporation makes an election under paragraph (4) for any taxable year, the amount under paragraph (4)(B)(i)(I) for such taxable year shall be increased by the amount determined under subparagraph (A)(i) for such taxable year.

(E)

Deduction allowed in computing minimum tax

Rules similar to the rules of paragraph (2)(E) shall apply for purposes of this paragraph.

.

(d)

Conforming amendments

(1)

Section 168(e)(8) of such Code is amended by striking subparagraph (D).

(2)

Section 168(k) of such Code is amended by adding at the end the following new paragraph:

(6)

Election out

If a taxpayer makes an election under this paragraph 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 (or, in the case of paragraph (5), planted or grafted) during such taxable year. An election under this paragraph may be revoked only with the consent of the Secretary.

.

(3)

Section 168(l)(5) of such Code is amended by striking section 168(k)(2)(G) and inserting section 168(k)(2)(E) .

(4)

Section 263A(c) of such Code is amended by adding at the end the following new paragraph:

(7)

Coordination with section 168(k)(5)

This section shall not apply to any amount allowable as a deduction by reason of section 168(k)(5) (relating to special rules for trees and vines bearing fruits and nuts).

.

(5)

Section 460(c)(6)(B) of such Code is amended by striking which— and all that follows and inserting which has a recovery period of 7 years or less..

(6)

Section 168(k) of such Code is amended by striking acquired after December 31, 2007, and before January 1, 2014 in the heading thereof.

(e)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to property placed in service after December 31, 2013.

(2)

Expansion of election to accelerate amt credits in lieu of bonus depreciation

(A)

In general

The amendment made by subsection (b) (other than so much of such amendment as relates to section 168(k)(4)(D)(iii) of such Code, as added by such amendment) shall apply to taxable years ending after December 31, 2013.

(B)

Transitional rule

In the case of a taxable year beginning before January 1, 2014, and ending after December 31, 2013, the bonus depreciation amount determined under section 168(k)(4) of such Code for such year shall be the sum of—

(i)

such amount determined without regard to the amendments made by this section and—

(I)

by taking into account only property placed in service before January 1, 2014, and

(II)

by multiplying the limitation under section 168(k)(4)(C)(ii) of such Code (determined without regard to the amendments made by this section) by a fraction the numerator of which is the number of days in the taxable year before January 1, 2014, and the denominator of which is the number of days in the taxable year, and

(ii)

such amount determined after taking into account the amendments made by this section and—

(I)

by taking into account only property placed in service after December 31, 2013, and

(II)

by multiplying the limitation under section 168(k)(4)(B)(ii) of such Code (as amended by this section) by a fraction the numerator of which is the number of days in the taxable year after December 31, 2013, and the denominator of which is the number of days in the taxable year.

(3)

Special rules for certain trees and vines

The amendment made by subsection (c)(2) shall apply to trees and vines planted or grafted after December 31, 2013.

2.

Budgetary effects

(a)

Statutory Pay-As-You-Go Scorecards

The budgetary effects of this Act shall not be entered on either PAYGO scorecard maintained pursuant to section 4(d) of the Statutory Pay-As-You-Go Act of 2010.

(b)

Senate PAYGO Scorecards

The budgetary effects of this Act shall not be entered on any PAYGO scorecard maintained for purposes of section 201 of S. Con. Res. 21 (110th Congress).

Passed the House of Representatives July 11, 2014.

Karen L. Haas,

Clerk

July 15, 2014

Read the second time and placed on the calendar