To amend the Internal Revenue Code of 1986 to enhance the competitiveness of the United States leasing industry.

Summary: Amends Internal Revenue Code provisions concerning the accelerated cost recovery system to provide that the alternative depreciation system shall be used for tangible property leased to a foreign person or entity.

SECTION 1. TREATMENT OF EXPORT LEASES.

    (a) Property Leased to Foreign Persons.--Section 168(g)(1) of the 
Internal Revenue Code of 1986 is amended by redesignating subparagraphs 
(B), (C), (D), and (E) as subparagraphs (C), (D), (E), and (F), 
respectively, and by inserting after subparagraph (A) the following new 
subparagraph:
                    ``(B) any tangible property leased to a foreign 
                person or entity,''.
    (b) Foreign Person or Entity.--Section 168(g) of such Code is 
amended by redesignating paragraphs (5), (6), and (7) as paragraphs 
(6), (7), and (8), respectively, and by inserting after paragraph (4) 
the following new paragraph:
            ``(5) Tangible property leased to a foreign person or 
        entity.--
                    ``(A) Tangible property.--For purposes of paragraph 
                (1)(B), the term `tangible property' means any tangible 
                property other than--
                            ``(i) nonresidential real property as 
                        defined under subsection (h)(1)(E) to the 
                        extent it is not subject to a disqualified 
                        lease determined under rules similar to the 
                        rules of subsection (h)(1)(B),
                            ``(ii) property used by a foreign person or 
                        entity if more than 50 percent of the gross 
                        income for the taxable year derived by the 
                        foreign person or entity from the use of such 
                        property is--
                                    ``(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, and
                            ``(iii) property determined under rules 
                        similar to the rules of subsection (h)(3).
                For purposes of clause (ii), 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.
                    ``(B) Foreign person or entity.--For purposes of 
                this paragraph and paragraph (1)(B)--
                            ``(i) In general.--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 
                                United States person.
                        Such term does not include any foreign 
                        partnership or other foreign pass-thru entity.
                            ``(ii) Other pass-thru entities; tiered 
                        entities.--In the case of property leased to or 
                        owned by a partnership or other pass-thru 
                        entity and in the case of tiered partnerships 
                        and other entities, rules similar to the rules 
                        of paragraphs (5) and (6) of subsection (h) 
                        shall apply. For purposes of the preceding 
                        sentence, 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 United States persons.''
    (c) Tax-Exempt Entity.--Section 168(h)(2)(A) of such Code is 
amended by adding ``and'' at the end of clause (i), by striking ``, 
and'' at the end of clause (ii) and inserting a period, and by striking 
clause (iii).
    (d) Conforming Amendments.--
            (1) Section 168(g)(6)(A) of such Code is amended by 
        striking ``paragraph (1)(D)'' and inserting ``paragraph 
        (1)(E)''.
            (2) Section 168(h)(2) of such Code is amended by striking 
        subparagraphs (B) and (C) and redesignating subparagraphs (D) 
        and (E) as subparagraphs (B) and (C), respectively.
            (3) Section 168(h)(5) of such Code is amended by striking 
        subparagraph (C).
            (4) Section 168(h)(7) of such Code is amended by inserting 
        ``subsection (g) and '' before ``this subsection''.
            (5) Section 168(j)(4)(B)(i) of such Code is amended by 
        striking ``subsection (g)(7)'' and inserting ``subsection 
        (g)(8)''.
            (6) Section 50(b)(4)(A)(ii) of such Code is amended by 
        striking ``section 168(h)(2)(C)), but only with respect to 
        property to which section 168(h)(2)(A)(iii) applies (determined 
        after the application of section 168(h)(2)(B))'' and inserting 
        ``section 168(g)(5)(B)), but only with respect to property to 
        which section 168(g)(5) applies''.
    (e) Effective Date.--The amendments made by this section shall 
apply to leases entered into after the date of the enactment of this 
Act.