I

103D CONGRESS

1ST SESSION H. R. 539

To amend the Internal Revenue Code of 1986 to provide that the deduction

for depreciation shall be computed on a neutral cost recovery basis,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 21, 1993

Mr. SMITH of Michigan (for himself, Mr. ARMEY, Mr. BACCHUS of Florida,

Mr. BACHUS of Alabama, Mr. BAKER of Louisiana, Mr. BARCIA, Mr.

BARTLETT, Mr. BLUTE, Mr. BONILLA, Mr. BURTON of Indiana, Mr.

BUYER, Mr. CALVERT, Mr. CANADY, Mr. CRAPO, Mr. CUNNINGHAM, Mr.

DELAY, Mr. DOOLITTLE, Mr. DORNAN, Ms. DUNN, Mr. EVERETT, Ms.

FOWLER, Mr. GOODLATTE, Mr. GRAMS, Mr. GREENWOOD, Mr. HUTCHINSON, Mr. HUNTER, Mr. ISTOOK, Mr. KASICH, Mr. KIM, Mr.

KNOLLENBERG, Mr. LINDER, Mr. MCCOLLUM, Mr. MCHUGH, Mr.

MCINNIS, Mr. MANZULLO, Mr. MICA, Ms. MOLINARI, Mr. PAXON, Mr.

POMBO, Mr. RAVENEL, Mr. ROHRABACHER, Mr. SCHIFF, Mr. SENSENBRENNER, Mr. SKEEN, Mr. SOLOMON, Mr. TORKILDSEN, Mr. UPTON,

Mr. WOLF, Mr. FRANKS of New Jersey, Mr. CAMP, Mr. QUINN, and Mr.

ZELIFF) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

that the deduction for depreciation shall be computed

on a neutral cost recovery basis, and for other purposes.

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

2 This Act may be cited as the ‘‘Investment Tax Incen3 tive Act of 1993’’.

4 SEC. 2. DEPRECIATION ADJUSTMENT FOR CERTAIN PROP5 ERTY PLACED IN SERVICE IN TAXABLE

6 YEARS BEGINNING AFTER DECEMBER 31,

7 1992.

8 (a) IN GENERAL.—Section 168 of the Internal Reve9 nue Code of 1986 (relating to accelerated cost recovery

10 system) is amended by adding at the end thereof the fol11 lowing new subsection:

12 ‘‘(j) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA13 LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED

14 IN SERVICE IN TAXABLE YEARS BEGINNING AFTER DE15 CEMBER 31, 1992.—

16 ‘‘(1) IN GENERAL.—In the case of tangible

17 property placed in service in a taxable year begin18 ning after December 31, 1992, the deduction allow19 able under this section with respect to such property

20 for any taxable year (after the taxable year during

21 which the property is placed in service) shall be—

22 ‘‘(A) the amount so allowable for such tax23 able year without regard to this subsection,

24 multiplied by

25 ‘‘(B) the applicable neutral cost recovery

26 ratio for such taxable year.
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1 For purposes of subparagraph (A), paragraphs (1)

2 and (2) of section 168(b) shall be applied by sub3 stituting ‘150 percent’ for ‘200 percent’.

4 ‘‘(2) APPLICABLE NEUTRAL COST RECOVERY

5 RATIO.—For purposes of paragraph (1), the applica6 ble neutral cost recovery ratio for any taxable year

7 is the number determined by—

8 ‘‘(A) dividing—

9 ‘‘(i) the gross national product

10 deflator for the calendar quarter ending in

11 such taxable year which corresponds to the

12 calendar quarter during which the property

13 was placed in service by the taxpayer, by

14 ‘‘(ii) the gross national product

15 deflator for the calendar quarter during

16 which the property was placed in service by

17 the taxpayer, and

18 ‘‘(B) then multiplying the number deter19 mined under subparagraph (A) by the number

20 equal to 1.035 to the nth power where ‘n’ is the

21 number of full years in the period beginning on

22 the 1st day of the calendar quarter during

23 which the property was placed in service by the

24 taxpayer and ending on the day before the be-
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1 ginning of the corresponding calendar quarter

2 ending during such taxable year.

3 The applicable neutral cost recovery ratio shall not

4 be taken into account unless it is greater than 1.

5 The applicable neutral cost recovery ratio shall be

6 rounded to the nearest one-tenth of 1 percent.

7 ‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—

8 For purposes of paragraph (2), the gross national

9 product deflator for any calendar quarter is the im10 plicit price deflator for the gross national product

11 for such quarter (as shown in the first revision

12 thereof).

13 ‘‘(4) ELECTION NOT TO HAVE SUBSECTION

14 APPLY.—This subsection shall not apply to any

15 property if the taxpayer elects not to have this sub16 section apply to such property. Such an election,

17 once made, shall be irrevocable.’’

18 (b) MINIMUM TAX TREATMENT.—Paragraph (1) of

19 section 56(a) of such Code is amended by adding at the

20 end thereof the following new subparagraph:

21 ‘‘(E) USE OF NEUTRAL COST RECOVERY

22 RATIO.—In the case of tangible property placed

23 in service in a taxable year beginning after De24 cember 31, 1992, the deduction allowable under

25 this paragraph with respect to such property
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1 for any taxable year (after the taxable year dur2 ing which the property is placed in service)

3 shall be—

4 ‘‘(i) the amount so allowable for such

5 taxable year without regard to this sub6 paragraph, multiplied by

7 ‘‘(ii) the applicable neutral cost recov8 ery ratio for such taxable year (as deter9 mined under section 168(j)).

10 This subparagraph shall not apply to any prop11 erty with respect to which there is an election

12 in effect not to have section 168(j) apply.’’

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 1992.

16 SEC. 3. REPEAL OF SPECIAL DEPRECIATION RULES APPLI17 CABLE UNDER THE ADJUSTED CURRENT

18 EARNINGS PROVISIONS OF THE MINIMUM

19 TAX.

20 (a) IN GENERAL.—Subparagraph (A) of section

21 56(g)(4) of the Internal Revenue Code of 1986 (relating

22 to adjustments) is amended to read as follows:

23 ‘‘(A) DEPRECIATION.—

24 ‘‘(i) IN GENERAL.—The depreciation

25 deduction with respect to any property for
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1 any taxable year beginning after December

2 31, 1992, shall be the same as the depre3 ciation deduction allowable in computing

4 alternative minimum taxable income for

5 such taxable year.

6 ‘‘(ii) BASIS RULES.—Notwithstanding

7 subparagraph (I), the adjusted basis of

8 any depreciable property held by the tax9 payer as of the beginning of the taxpayer’s

10 first taxable year beginning after Decem11 ber 31, 1992, shall be determined as if the

12 provisions of clause (i) had also applied to

13 taxable years beginning in 1990, 1991, or

14 1992.

15 ‘‘(iii) LOST BASIS RECOVERED OVER 5

16 YEARS.—The amount determined under

17 clause (iv) shall be allowed as a deduction

18 ratably over the 60-month period begin19 ning with the first month of the taxpayer’s

20 first taxable year beginning after Decem21 ber 31, 1992.

22 ‘‘(iv) AMOUNT OF LOST BASIS.—The

23 amount determined under this clause is the

24 excess of—
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1 ‘‘(I) the aggregate adjusted bases

2 of depreciable property held by the

3 taxpayer as of the beginning of the

4 taxpayer’s first taxable year beginning

5 after December 31, 1992, which

6 would have been determined (as of

7 such time) under subparagraph (I)

8 without regard to clause (ii), over

9 ‘‘(II) the aggregate adjusted

10 bases of such property (as of such

11 time) as determined under the rules of

12 clause (ii).’’

13 (b) EFFECTIVE DATE.—The amendment made by

14 subsection (a) shall apply to taxable years beginning after

15 December 31, 1992.

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