To amend the Internal Revenue Code of 1986 to provide tax incentives for oil refineries, oil and gas pipelines, and petroleum storage facilities.

Summary: Refinery Expansion Act of 2005 - Amends the Internal Revenue Code to: (1) revise the tax deduction for certain liquid fuels refinery property to allow expensing of the entire cost of such property if the property allows for a production capacity increase of five percent or more on an average daily basis; (2) allow, in lieu of such expensing deduction, a five-year recovery period for the depreciation of such refinery property; (3) allow a seven-year recovery period for the depreciation of certain oil and gas distribution lines; and (4) allow a five-year recovery period for the depreciation of certain petroleum storage facilities.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Refinery Expansion Act of 2005''.

SEC. 2. 100 PERCENT EXPENSING OR 5-YEAR DEPRECIATION OF COSTS OF 
              REFINERY PROPERTY WHICH INCREASE REFINERY OUTPUT BY AT 
              LEAST 5 PERCENT.

    (a) Expensing.--Subsection (a) of section 179C of the Internal 
Revenue Code of 1986 (relating to election to expense certain 
refineries) is amended to read as follows:
    ``(a) Treatment as Expenses.--
            ``(1) In general.--Except in the case of refinery property 
        to which subsection (e) applies, a taxpayer may elect to treat 
        50 percent of the cost of 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 property is placed in service.
            ``(2) Property to which subsection (e) applies.--In the 
        case of refinery property to which subsection (e) applies, a 
        taxpayer may elect to treat 100 percent of the cost of such 
        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 such cost is paid or incurred by 
        the taxpayer.''.
    (b) 5-Year Depreciation.--Subparagraph (B) of section 168(e)(3) of 
such Code (relating to classification of property) is amended by 
striking ``and'' at the end of clause (v), by striking the period at 
the end clause (vi) and inserting ``, and'', and by inserting after 
clause (vi) the following new clause:
                            ``(vii) refinery property the cost of which 
                        would have been eligible for expensing under 
                        section 179C(a)(2) but for the absence of an 
                        election under section 179C.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 1323 of the 
Energy Policy Act of 2005.

SEC. 3. DEPRECIATION RECOVERY PERIOD FOR OIL AND GAS PIPELINES REDUCED 
              TO 7 YEARS.

    (a) In General.--Subparagraph (C) of section 168(e)(3) of the 
Internal Revenue Code of 1986 (relating to classification of property) 
is amended by striking ``and'' at the end of clause (iv), by 
redesignating clause (v) as clause (vi), and by inserting after clause 
(iv) the following new clause:
                            ``(v) any oil or 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''.
    (b) Conforming Amendments.--
            (1) Subparagraph (E) of section 168(e)(3) of such Code is 
        amended by adding ``and'' at the end of clause (vi), by 
        striking ``, and'' at the end of clause (vii) and inserting a 
        period, and by striking clause (viii).
            (2) The table contained in section 168(g)(3)(B) of such 
        Code (relating to special rule for certain property assigned to 
        classes) is amended--
                    (A) by striking the item relating to subparagraph 
                (E)(viii), and
                    (B) by inserting after the item relating to 
                subparagraph (C)(vii) the following new item:

``(C)(v)....................................................      35''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in section 1325 of the Energy Policy Act of 2005.

SEC. 4. 5-YEAR DEPRECIATION RECOVERY PERIOD FOR PETROLEUM STORAGE 
              FACILITIES.

    (a) In General.--Subparagraph (B) of section 168(e)(3) of the 
Internal Revenue Code of 1986 (relating to classification of property), 
as amended by section 2, is amended by striking ``and'' at the end of 
clause (vi), by striking the period at the end clause (vii) and 
inserting ``, and'', and by inserting after clause (vii) the following 
new clause:
                            ``(viii) a storage facility (not including 
                        a building and its structural components) used 
                        in connection with the distribution of 
                        petroleum or any primary product of petroleum 
                        if--
                                    ``(I) the original use of such 
                                facility commences with the taxpayer 
                                after the date of the enactment of this 
                                clause, and
                                    ``(II) such facility is placed in 
                                service before January 1, 2011.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to property placed in service after the date of the 
        enactment of this Act.
            (2) Exception.--The amendments made by this section shall 
        not apply to any property with respect to which the taxpayer or 
        a related party has entered into a binding contract for the 
        construction thereof on or before such date, or, in the case of 
        self-constructed property, has started construction on or 
        before such date.

SEC. 5. TEMPORARY SUSPENSION OF DEPRECIATION RECAPTURE ON SECTION 1245 
              REFINERY PROPERTY.

    (a) In General.--Subsection (b) of section 1245 of the Internal 
Revenue Code of 1986 (relating to exceptions and limitations) is 
amended by adding at the end the following new paragraph:
            ``(9) Refinery property being upgraded.--Subsection (a) 
        shall not apply to property--
                    ``(A) which, before the date of the enactment of 
                this paragraph, was used by the taxpayer in the 
                processing liquid fuel from crude oil or qualified 
                fuels (as defined in section 45K(c)) at a refinery 
                located in the United States,
                    ``(B) which is disposed of before January 1, 2012, 
                and
                    ``(C) which is replaced by the taxpayer with 
                upgraded equipment which increases the refinery's 
                overall output, decreases the refinery's pollution 
                output, or results in cleaner-burning fuel.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dispositions after the date of the enactment of this Act in taxable 
years ending after such date.