To amend the Internal Revenue Code of 1986 to allow taxpayers to expense property eligible for bonus depreciation.

SECTION 1. EXPENSING OF PROPERTY ELIGIBLE FOR BONUS DEPRECIATION.

    (a) In General.--So much of subsection (k) of section 168 of the 
Internal Revenue Code of 1986 (relating to special allowance for 
certain property acquired after September 10, 2001, and before January 
1, 2005) as precedes paragraph (2)(D) thereof is amended to read as 
follows:
    ``(k) Expensing of Certain Property Acquired After May 12, 2005.--
            ``(1) In general.--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 100 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 May 12, 2005,
                            ``(iii) which is acquired by the taxpayer 
                        after such date, but only if no written binding 
                        contract for the acquisition was in effect on 
                        or before such date.
                    ``(B) Certain aircraft.--The term `qualified 
                property' includes property--
                            ``(i) which meets the requirements of 
                        clauses (ii) and (iii) of subparagraph (A),
                            ``(ii) which is an aircraft which is not 
                        used in the trade or business of transporting 
                        persons or property 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.''.
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 168(k) of such Code is amended 
        by redesignating subparagraphs (D), (E), (F), and (G) as 
        subparagraphs (C), (D), (E), and (F), respectively.
            (2) Subparagraph (C) of section 168(k)(2) of such Code, as 
        redesignated by paragraph (1), is amended by striking the last 
        sentence of clause (iii), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (3) Clause (i) of section 168(k)(2)(D) of such Code, as so 
        redesignated, is amended by striking ``and before January 1, 
        2005''.
            (4) Subparagraph (D) of section 168(k)(2) of such Code, as 
        so redesignated, is amended by striking ``September 10, 2001'' 
        each place it appears and inserting.
            (5) Clause (i) of section 168(k)(2)(E) of such Code, as so 
        redesignated, is amended by striking ``$4,600'' and inserting 
        ``$14,540''.
            (6) Section 168(k) of such Code is amended by striking 
        paragraph (4).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after May 12, 2005.

SEC. 2. LONG-TERM CONTRACT ACCOUNTING.

    (a) In General.--Section 168(k)(2) of the Internal Revenue Code of 
1986 is amended by adding after subparagraph (F), as redesignated by 
section 1, the following new subparagraph:
                    ``(F) Long-term contract accounting.--The 
                percentage of completion method under section 460 shall 
                be applied as if this subsection had not been 
                enacted.''.

SEC. 3. ELECTION TO INCREASE MINIMUM TAX CREDIT LIMITATION IN LIEU OF 
              BONUS DEPRECIATION.

    (a) In General.--Section 53 of the Internal Revenue Code of 1986 
(relating to credit for prior year minimum tax liability) is amended by 
adding at the end of the following new subsection:
    ``(e) Additional Credit in Lieu of Bonus Depreciation.--
            ``(1) In general.--In the case of a corporation making an 
        election under this subsection for a taxable year, the 
        limitation under subsection (c) shall be increased by an amount 
        equal to the bonus depreciation amount.
            ``(2) Bonus depreciation amount.--For purposes of paragraph 
        (1), the bonus depreciation amount for any taxable year is an 
        amount equal to the product of--
                    ``(A) 35 percent, and
                    ``(B) the excess (if any) of--
                            ``(i) the aggregate amount of depreciation 
                        which would be determined under section 167 for 
                        property placed in service during such taxable 
                        year if no election under this subsection were 
                        made, over
                            ``(ii) the aggregate allowance for 
                        depreciation allowable with respect to such 
                        property placed in service for such taxable 
                        year.
            ``(3) Election.--Section 168(k) (other than paragraph 
        (2)(E) thereof) shall not apply to any property placed in 
        service during a taxable year by a corporation making an 
        election under this subsection for such taxable year. An 
        election under this subsection may only be revoked with the 
        consent of the Secretary.
            ``(4) Credit refundable.--The aggregate increase in the 
        credit allowed by this section for any taxable year by reason 
        of this subsection shall for purposes of this title (other than 
        subsection (b)(2) of this section) be treated as a credit 
        allowed to the taxpayer under subpart C.''.
    (b) Conforming Amendments.--Subsection (k) of section 168 of such 
Code is amended by adding at the end the following new paragraph:
            ``(4) Cross reference.--For an election to claim certain 
        minimum tax credits in lieu of the allowance determined under 
        this subsection, see section 53(e).''.

SEC. 4. EFFECTIVE DATE.

    The amendments made by this Act shall apply to taxable years ending 
after May 12, 2005.

Summary: Amends the Internal Revenue Code to allow a tax deduction in the current taxable year for the entire adjusted basis of certain qualified property eligible for bonus depreciation allowances. Defines qualified property to include: (1) computer software, water utility property, or qualified leasehold improvement property that has a depreciation recovery period of 20 years or less and that was acquired after May 12, 2005. And (2) certain noncommercial aircraft acquired after May 12, 2005. Permits the use of the percentage of completion accounting method for computing certain depreciation allowances. Allows corporate taxpayers to elect an increased refundable alternative minimum tax credit in lieu of a bonus depreciation deduction.