II 

109TH CONGRESS 

1ST SESSION S. 1693 

To amend the Internal Revenue Code of 1986 to allow the temporary 

expensing of equipment used in refining of liquid fuels. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 13, 2005 

Mr. KYL 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 allow the 

temporary expensing of equipment used in refining of 

liquid fuels. 

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

3 SECTION 1. TEMPORARY EXPENSING FOR EQUIPMENT 

4 USED IN REFINING OF LIQUID FUELS. 

5 (a) IN GENERAL.—Part VI of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 is amended 

7 by inserting after section 179D the following new section: 

8 ‘‘SEC. 179E. ELECTION TO EXPENSE CERTAIN REFINERIES. 

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

10 elect to treat the cost of any qualified refinery property 
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1 as an expense which is not chargeable to capital account. 

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

3 the taxable year in which the qualified refinery is placed 

4 in service. 

5 ‘‘(b) ELECTION.— 

6 ‘‘(1) IN GENERAL.—An election under this sec7 tion for any taxable year shall be made on the tax8 payer’s return of the tax imposed by this chapter for 

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

10 manner as the Secretary may by regulations pre11 scribe. 

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

13 made under this section may not be revoked except 

14 with the consent of the Secretary. 

15 ‘‘(c) QUALIFIED REFINERY PROPERTY.— 

16 ‘‘(1) IN GENERAL.—The term ‘qualified refin17 ery property’ means any refinery or portion of a re18 finery— 

19 ‘‘(A) the original use of which commences 

20 with the taxpayer, 

21 ‘‘(B) the construction of which— 

22 ‘‘(i) except as provided in clause (ii), 

23 is subject to a binding construction con24 tract entered into after June 14, 2005, 

25 and before January 1, 2010, but only if 
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1 there was no written binding construction 

2 contract entered into on or before June 14, 

3 2005, or 

4 ‘‘(ii) in the case of self-constructed 

5 property, began after June 14, 2005, 

6 ‘‘(C) which is placed in service by the tax7 payer after the date of the enactment of this 

8 section and before January 1, 2014, 

9 ‘‘(D) in the case of any portion of a refin10 ery, which meets the requirements of subsection 

11 (d), and 

12 ‘‘(E) which meets all applicable environ13 mental laws in effect on the date such refinery 

14 or portion thereof was placed in service. 

15 ‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.— 

16 For purposes of paragraph (1)(A), if property is— 

17 ‘‘(A) originally placed in service after the 

18 date of the enactment of this section by a per19 son, and 

20 ‘‘(B) sold and leased back by such person 

21 within 3 months after the date such property 

22 was originally placed in service, 

23 such property shall be treated as originally placed in 

24 service not earlier than the date on which such prop-
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1 erty is used under the leaseback referred to in sub2 paragraph (B). 

3 ‘‘(3) EFFECT OF WAIVER UNDER CLEAN AIR

4 ACT.—A waiver under the Clean Air Act shall not be 

5 taken into account in determining whether the re6 quirements of paragraph (1)(E) are met. 

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

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

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

10 refinery by 5 percent or more over the capacity of 

11 such refinery as reported by the Energy Information 

12 Agency on January 1, 2005, 

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

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

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

16 total throughput of such refinery on an average daily 

17 basis, or 

18 ‘‘(3) replaces any portion of a refinery damaged 

19 or destroyed by Hurricane Katrina. 

20 ‘‘(e) ELECTION TO ALLOCATE DEDUCTION TO COOP21 ERATIVE OWNER.—If— 

22 ‘‘(1) a taxpayer to which subsection (a) applies 

23 is an organization to which part I of subchapter T 

24 applies, and 
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1 ‘‘(2) one or more persons directly holding an 

2 ownership interest in the taxpayer are organizations 

3 to which part I of subchapter T apply, 

4 the taxpayer may elect to allocate all or a portion of the 

5 deduction allowable under subsection (a) to such persons. 

6 Such allocation shall be equal to the person’s ratable share 

7 of the total amount allocated, determined on the basis of 

8 the person’s ownership interest in the taxpayer. The tax9 able income of the taxpayer shall not be reduced under 

10 section 1382 by reason of any amount to which the pre11 ceding sentence applies. 

12 ‘‘(f) INELIGIBLE REFINERIES.—No deduction shall 

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

14 property— 

15 ‘‘(1) the primary purpose of which is for use as 

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

17 or product terminal, or blending facility, or 

18 ‘‘(2) which is built solely to comply with consent 

19 decrees or projects mandated by Federal, State, or 

20 local governments. 

21 ‘‘(g) REPORTING.—No deduction shall be allowed 

22 under subsection (a) to any taxpayer for any taxable year 

23 unless such taxpayer files with the Secretary a report con24 taining such information with respect to the operation of 
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1 the refineries of the taxpayer as the Secretary shall re2 quire.’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 1245(a) of the Internal Revenue 

5 Code of 1986 is amended by inserting ‘‘179E,’’ after 

6 ‘‘179D,’’ both places it appears in paragraphs (2)(C) 

7 and (3)(C). 

8 (2) Section 263(a)(1) of such Code is amended 

9 by striking ‘‘or’’ at the end of subparagraph (J), by 

10 striking the period at the end of subparagraph (K) 

11 and inserting ‘‘, or’’, and by inserting after subpara12 graph (K) the following new subparagraph: 

13 ‘‘(L) expenditures for which a deduction is 

14 allowed under section 179E.’’. 

15 (3) Section 312(k)(3)(B) of such Code is 

16 amended by striking ‘‘or 179D’’ each place it ap17 pears in the heading and text and inserting ‘‘179D, 

18 or 179E’’. 

19 (4) The table of sections for part VI of sub20 chapter B of chapter 1 of such Code is amended by 

21 inserting after the item relating to section 179D the 

22 following new item: 

‘‘Sec. 179E. Election to expense certain refineries.’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to properties placed in service after 

3 the date of the enactment of this Act. 

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