II 

109TH CONGRESS 

1ST SESSION S. 1632 

To amend the Internal Revenue Code of 1986 to provide a special depreciation 

allowance for certain property acquired during the 3-year period beginning August 29, 2005. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 8, 2005 

Mr. SMITH 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 provide 

a special depreciation allowance for certain property acquired during the 3-year period beginning August 29, 

2005. 

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

3 SECTION 1. SPECIAL DEPRECIATION ALLOWANCE FOR 

4 CERTAIN PROPERTY ACQUIRED AFTER AU5 GUST 28, 2005, AND BEFORE DECEMBER 31, 

6 2008. 

7 (a) IN GENERAL.—Section 168 of the Internal Rev8 enue Code of 1986 (relating to accelerated cost recovery 
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1 system) is amended by adding at the end the following 

2 new subsection: 

3 ‘‘(l) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY

4 ACQUIRED AFTER AUGUST 28, 2005, AND BEFORE DE5 CEMBER 31, 2008.— 

6 ‘‘(1) ADDITIONAL ALLOWANCE.—In the case of 

7 any qualified property— 

8 ‘‘(A) the depreciation deduction provided 

9 by section 167(a) for the taxable year in which 

10 such property is placed in service shall include 

11 an allowance equal to 30 percent of the ad12 justed basis of the qualified property, and 

13 ‘‘(B) the adjusted basis of the qualified 

14 property shall be reduced by the amount of 

15 such deduction before computing the amount 

16 otherwise allowable as a depreciation deduction 

17 under this chapter for such taxable year and 

18 any subsequent taxable year. 

19 ‘‘(2) QUALIFIED PROPERTY.—For purposes of 

20 this subsection— 

21 ‘‘(A) IN GENERAL.—The term ‘qualified 

22 property’ means property— 

23 ‘‘(i)(I) to which this section applies 

24 which has a recovery period of 20 years or 

25 less, 
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1 ‘‘(II) which is water utility property, 

2 or 

3 ‘‘(III) which is computer software (as 

4 defined in section 167(f)(1)(B)) for which 

5 a deduction is allowable under section 

6 167(a) without regard to this subsection, 

7 ‘‘(ii) the original use of which com8 mences with the taxpayer after August 28, 

9 2005, 

10 ‘‘(iii) which is— 

11 ‘‘(I) acquired by the taxpayer 

12 after August 28, 2005, and before De13 cember 31, 2008, but only if no writ14 ten binding contract for the acquisi15 tion was in effect before August 29, 

16 2005, or 

17 ‘‘(II) acquired by the taxpayer 

18 pursuant to a written binding contract 

19 which was entered into after August 

20 28, 2005, and before December 31, 

21 2008, and 

22 ‘‘(iv) which is placed in service by the 

23 taxpayer before January 1, 2009, or, in 

24 the case of property described in subpara25 graph (B), before January 1, 2010. 
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1 ‘‘(B) CERTAIN PROPERTY HAVING LONGER

2 DEPRECIATION PERIODS TREATED AS QUALI3 FIED PROPERTY.— 

4 ‘‘(i) IN GENERAL.—The term ‘quali5 fied property’ includes property— 

6 ‘‘(I) which meets the require7 ments of clauses (i), (ii), and (iii) of 

8 subparagraph (A), 

9 ‘‘(II) which has a recovery period 

10 of at least 10 years or is transpor11 tation property, 

12 ‘‘(III) which is subject to section 

13 263A, and 

14 ‘‘(IV) meets the requirements of 

15 clause (ii) or (iii) of subsection 

16 (f)(1)(B) (determined as if such 

17 clauses also apply to property which 

18 has a long useful life (within the 

19 meaning of section 263A(f))). 

20 ‘‘(ii) ONLY PRE-DECEMBER 31, 2008, 

21 BASIS ELIGIBLE FOR ADDITIONAL ALLOW22 ANCE.—In the case of property which is 

23 qualified property solely by reason of 

24 clause (i), paragraph (1) shall apply only 

25 to the extent of the adjusted basis thereof 
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1 attributable to manufacture, construction, 

2 or production before December 31, 2008. 

3 ‘‘(iii) TRANSPORTATION PROPERTY.— 

4 For purposes of this subparagraph, the 

5 term ‘transportation property’ means tan6 gible personal property used in the trade 

7 or business of transporting persons or 

8 property. 

9 ‘‘(C) EXCEPTIONS.— 

10 ‘‘(i) ALTERNATIVE DEPRECIATION

11 PROPERTY.—The term ‘qualified property’ 

12 shall not include any property to which the 

13 alternative depreciation system under sub14 section (g) applies, determined— 

15 ‘‘(I) without regard to paragraph 

16 (7) of subsection (g) (relating to elec17 tion to have system apply), and 

18 ‘‘(II) after application of section 

19 280F(b) (relating to listed property 

20 with limited business use). 

21 ‘‘(ii) ELECTION OUT.—If a taxpayer 

22 makes an election under this clause with 

23 respect to any class of property for any 

24 taxable year, this subsection shall not 
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1 apply to all property in such class placed 

2 in service during such taxable year. 

3 ‘‘(iii) QUALIFIED LEASEHOLD IM4 PROVEMENT PROPERTY.—The term ‘quali5 fied property’ shall not include any quali6 fied leasehold improvement property (as 

7 defined in section 168(e)(6)). 

8 ‘‘(D) SPECIAL RULES.— 

9 ‘‘(i) SELF-CONSTRUCTED PROP10 ERTY.—In the case of a taxpayer manufac11 turing, constructing, or producing property 

12 for the taxpayer’s own use, the require13 ments of clause (iii) of subparagraph (A) 

14 shall be treated as met if the taxpayer be15 gins manufacturing, constructing, or pro16 ducing the property after August 28, 2005, 

17 and before December 31, 2008. 

18 ‘‘(ii) SALE-LEASEBACKS.—For pur19 poses of subparagraph (A)(ii), if prop20 erty— 

21 ‘‘(I) is originally placed in service 

22 after August 28, 2005, by a person, 

23 and 

24 ‘‘(II) sold and leased back by 

25 such person within 3 months after the 
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1 date such property was originally 

2 placed in service, 

3 such property shall be treated as originally 

4 placed in service not earlier than the date 

5 on which such property is used under the 

6 leaseback referred to in subclause (II). 

7 ‘‘(E) COORDINATION WITH SECTION

8 280F.—For purposes of section 280F— 

9 ‘‘(i) AUTOMOBILES.—In the case of a 

10 passenger automobile (as defined in section 

11 280F(d)(5)) which is qualified property, 

12 the Secretary shall increase the limitation 

13 under section 280F(a)(1)(A)(i) by $4,600. 

14 ‘‘(ii) LISTED PROPERTY.—The deduc15 tion allowable under paragraph (1) shall be 

16 taken into account in computing any re17 capture amount under section 280F(b)(2). 

18 ‘‘(F) DEDUCTION ALLOWED IN COMPUTING

19 MINIMUM TAX.—For purposes of determining 

20 alternative minimum taxable income under sec21 tion 55, the deduction under subsection (a) for 

22 qualified property shall be determined under 

23 this section without regard to any adjustment 

24 under section 56.’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to property placed in service after 

3 August 28, 2005, in taxable years ending after such date. 

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