A bill to amend the Internal Revenue Code of 1986 to allow the temporary expensing of equipment used in refining of liquid fuels.

Summary: Amends the Internal Revenue Code to allow a taxpayer election to expense the cost of certain fuel refinery property that meets a specified production capacity and is placed in service before January 1, 2014.

SECTION 1. TEMPORARY EXPENSING FOR EQUIPMENT USED IN REFINING OF LIQUID 
              FUELS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
179D the following new section:

``SEC. 179E. ELECTION TO EXPENSE CERTAIN REFINERIES.

    ``(a) Treatment as Expenses.--A taxpayer may elect to treat the 
cost of any qualified refinery property as an expense which is not 
chargeable to capital account. Any cost so treated shall be allowed as 
a deduction for the taxable year in which the qualified refinery is 
placed in service.
    ``(b) Election.--
            ``(1) In general.--An election under this section for any 
        taxable year shall be made on the taxpayer's return of the tax 
        imposed by this chapter for the taxable year. Such election 
        shall be made in such manner as the Secretary may by 
        regulations prescribe.
            ``(2) Election irrevocable.--Any election made under this 
        section may not be revoked except with the consent of the 
        Secretary.
    ``(c) Qualified Refinery Property.--
            ``(1) In general.--The term `qualified refinery property' 
        means any refinery or portion of a refinery--
                    ``(A) the original use of which commences with the 
                taxpayer,
                    ``(B) the construction of which--
                            ``(i) except as provided in clause (ii), is 
                        subject to a binding construction contract 
                        entered into after June 14, 2005, and before 
                        January 1, 2010, but only if there was no 
                        written binding construction contract entered 
                        into on or before June 14, 2005, or
                            ``(ii) in the case of self-constructed 
                        property, began after June 14, 2005,
                    ``(C) which is placed in service by the taxpayer 
                after the date of the enactment of this section and 
                before January 1, 2014,
                    ``(D) in the case of any portion of a refinery, 
                which meets the requirements of subsection (d), and
                    ``(E) which meets all applicable environmental laws 
                in effect on the date such refinery or portion thereof 
                was placed in service.
            ``(2) Special rule for sale-leasebacks.--For purposes of 
        paragraph (1)(A), if property is--
                    ``(A) originally placed in service after the date 
                of the enactment of this section by a person, and
                    ``(B) 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 subparagraph (B).
            ``(3) Effect of waiver under clean air act.--A waiver under 
        the Clean Air Act shall not be taken into account in 
        determining whether the requirements of paragraph (1)(E) are 
        met.
    ``(d) Production Capacity.--The requirements of this subsection are 
met if the portion of the refinery--
            ``(1) increases the rated capacity of the existing refinery 
        by 5 percent or more over the capacity of such refinery as 
        reported by the Energy Information Agency on January 1, 2005,
            ``(2) enables the existing refinery to process qualified 
        fuels (as defined in section 29(c)) at a rate which is equal to 
        or greater than 25 percent of the total throughput of such 
        refinery on an average daily basis, or
            ``(3) replaces any portion of a refinery damaged or 
        destroyed by Hurricane Katrina.
    ``(e) Election to Allocate Deduction to Cooperative Owner.--If--
            ``(1) a taxpayer to which subsection (a) applies is an 
        organization to which part I of subchapter T applies, and
            ``(2) one or more persons directly holding an ownership 
        interest in the taxpayer are organizations to which part I of 
        subchapter T apply,
the taxpayer may elect to allocate all or a portion of the deduction 
allowable under subsection (a) to such persons. Such allocation shall 
be equal to the person's ratable share of the total amount allocated, 
determined on the basis of the person's ownership interest in the 
taxpayer. The taxable income of the taxpayer shall not be reduced under 
section 1382 by reason of any amount to which the preceding sentence 
applies.
    ``(f) Ineligible Refineries.--No deduction shall be allowed under 
subsection (a) for any qualified refinery property--
            ``(1) the primary purpose of which is for use as a topping 
        plant, asphalt plant, lube oil facility, crude or product 
        terminal, or blending facility, or
            ``(2) which is built solely to comply with consent decrees 
        or projects mandated by Federal, State, or local governments.
    ``(g) Reporting.--No deduction shall be allowed under subsection 
(a) to any taxpayer for any taxable year unless such taxpayer files 
with the Secretary a report containing such information with respect to 
the operation of the refineries of the taxpayer as the Secretary shall 
require.''.
    (b) Conforming Amendments.--
            (1) Section 1245(a) of the Internal Revenue Code of 1986 is 
        amended by inserting ``179E,'' after ``179D,'' both places it 
        appears in paragraphs (2)(C) and (3)(C).
            (2) Section 263(a)(1) of such Code is amended by striking 
        ``or'' at the end of subparagraph (J), by striking the period 
        at the end of subparagraph (K) and inserting ``, or'', and by 
        inserting after subparagraph (K) the following new 
        subparagraph:
                    ``(L) expenditures for which a deduction is allowed 
                under section 179E.''.
            (3) Section 312(k)(3)(B) of such Code is amended by 
        striking ``or 179D'' each place it appears in the heading and 
        text and inserting ``179D, or 179E''.
            (4) The table of sections for part VI of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 179D the following new item:

``Sec. 179E. Election to expense certain refineries.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to properties placed in service after the date of the enactment 
of this Act.