II 

109TH CONGRESS 

1ST SESSION S. 1039 

To amend the Internal Revenue Code of 1986 to modify the treatment 

of depreciation of refinery property. 

IN THE SENATE OF THE UNITED STATES 

MAY 16, 2005 

Mr. HATCH introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 to modify 

the treatment of depreciation of refinery property.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Gas Price Reduction 

5 Through Increased Refinery Capacity Act of 2005’’. 

6 SEC. 2. INCENTIVES FOR INVESTMENT IN OIL REFINERIES. 

7 (a) ELECTION TO EXPENSE QUALIFIED REFIN8 ERIES.— 

9 (1) IN GENERAL.—Part VI of subchapter B of 

10 chapter 1 of the Internal Revenue Code of 1986 is 
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1 amended by inserting after section 179B the fol2 lowing new section: 

3 ‘‘SEC. 179C. ELECTION TO EXPENSE CERTAIN REFINERIES. 

4 ‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may 

5 elect to treat the cost of any qualified refinery property 

6 as an expense which is not chargeable to a capital account. 

7 Any cost so treated shall be allowed as a deduction for 

8 the taxable year in which the qualified refinery is placed 

9 in service. 

10 ‘‘(b) ELECTION.— 

11 ‘‘(1) IN GENERAL.—An election under this sec12 tion for any taxable year shall be made on the tax13 payer’s return of the tax imposed by this chapter for 

14 the taxable year. Such election shall be made in such 

15 manner as the Secretary may by regulations pre16 scribe. 

17 ‘‘(2) ELECTION IRREVOCABLE.—Any election 

18 made under this section may not be revoked except 

19 with the consent of the Secretary. 

20 ‘‘(c) QUALIFIED REFINERY PROPERTY.—The term 

21 ‘qualified refinery property’ means any refinery or portion 

22 of a refinery— 

23 ‘‘(1) with respect to the construction of which 

24 there is a binding construction contract before Janu25 ary 1, 2008, 
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1 ‘‘(2) which is placed in service by the taxpayer 

2 before January 1, 2012, 

3 ‘‘(3) in the case of any portion of a refinery, 

4 which meets the requirements of subsection (d), and 

5 ‘‘(4) which meets all applicable environmental 

6 laws in effect on the date such refinery or portion 

7 thereof was placed in service. 

8 A waiver under the Clean Air Act shall not be taken into 

9 account in determining whether the requirements of para10 graph (4) are met. 

11 ‘‘(d) PRODUCTION CAPACITY.—The requirements of 

12 this subsection are met if the portion of the refinery— 

13 ‘‘(1) increases the rated capacity of the existing 

14 refinery by 5 percent or more over the capacity of 

15 such refinery as reported by the Energy Information 

16 Agency on January 1, 2005, or 

17 ‘‘(2) enables the existing refinery to process 

18 qualified fuels (as defined in section 29(c)) at a rate 

19 which is equal to or greater than 25 percent of the 

20 total throughput of such refinery on an average daily 

21 basis. 

22 ‘‘(e) INELIGIBLE REFINERIES.—No deduction shall 

23 be allowed under subsection (a) for any qualified refinery 

24 property— 
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1 ‘‘(1) the primary purpose of which is for use as 

2 a topping plant, asphalt plant, lube oil facility, crude 

3 or product terminal, or blending facility, or 

4 ‘‘(2) which is built solely to comply with Feder5 ally mandated projects or consent decrees.’’. 

6 (2) CONFORMING AMENDMENT.—The table of 

7 sections for part VI of subchapter B of chapter 1 of 

8 the Internal Revenue Code of 1986 is amended by 

9 inserting after the item relating to section 179B the 

10 following new item:

‘‘Sec. 179C. Election to expense certain refineries.’’.

11 (b) CLASS LIFE FOR REFINERIES.— 

12 (1) IN GENERAL.—Subparagraph (B) of section 

13 168(e)(3) of the Internal Revenue Code of 1986 (re14 lating to 5-year property) is amended by striking 

15 ‘‘and’’ at the end of clause (v), by striking the pe16 riod at the end of clause (vi) and inserting ‘‘, and’’, 

17 and by adding at the end the following new clause: 

18 ‘‘(vii) any petroleum refining prop19 erty.’’. 

20 (2) PETROLEUM REFINING ASSET.—Section 

21 168(i) of such Code is amended by adding at the 

22 end the following new paragraph: 

23 ‘‘(17) PETROLEUM REFINING PROPERTY.— 

24 ‘‘(A) IN GENERAL.—The term ‘petroleum 

25 refining property’ means any asset for petro-
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1 leum refining, including assets used for the dis2 tillation, fractionation, and catalytic cracking of 

3 crude petroleum into gasoline and its other 

4 components. 

5 ‘‘(B) ASSET MUST MEET ENVIRONMENTAL

6 LAWS.—Such term shall not include any asset 

7 which does not meet all applicable environ8 mental laws in effect on the date such asset was 

9 placed in service. For purposes of the preceding 

10 sentence, a waiver under the Clean Air Act 

11 shall not be taken into account in determining 

12 whether the applicable environmental laws have 

13 been met. 

14 ‘‘(C) SPECIAL RULE FOR MERGERS AND

15 ACQUISITIONS.—Such term shall not include 

16 any asset with respect to which a deduction was 

17 taken under subsection (e)(3)(B) by any other 

18 taxpayer in any preceding year.’’. 

19 (c) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—The amendments made by 

21 this section shall apply to refineries placed in service 

22 after the date of the enactment of this Act. 

23 (2) EXCEPTION.—The amendments made by 

24 this section shall not apply to any refinery with re25 spect to which the taxpayer has entered into a bind-
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1 ing contract for the construction thereof on or before 

2 the date of the enactment of this Act.

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