II

103D CONGRESS

1ST SESSION S. 1109

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 SENATE OF THE UNITED STATES

JUNE 15, 1993

Mr. PRESSLER 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

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,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Investment Tax Incen5 tive Act of 1993’’.
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1 SEC. 2. DEPRECIATION ADJUSTMENT FOR CERTAIN PROP2 ERTY PLACED IN SERVICE IN TAXABLE

3 YEARS BEGINNING AFTER DECEMBER 31,

4 1992.

5 (a) IN GENERAL.—Section 168 of the Internal Reve6 nue Code of 1986 (relating to accelerated cost recovery

7 system) is amended by adding at the end thereof the fol8 lowing new subsection:

9 ‘‘(j) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA10 LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED

11 IN SERVICE IN TAXABLE YEARS BEGINNING AFTER DE12 CEMBER 31, 1992.—

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

14 property placed in service in a taxable year begin15 ning after December 31, 1992, the deduction allow16 able under this section with respect to such property

17 for any taxable year (after the taxable year during

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

19 ‘‘(A) the amount so allowable for such tax20 able year without regard to this subsection,

21 multiplied by

22 ‘‘(B) the applicable neutral cost recovery

23 ratio for such taxable year.

24 For purposes of subparagraph (A), paragraphs (1)

25 and (2) of section 168(b) shall be applied by sub26 stituting ‘150 percent’ for ‘200 percent’.
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1 ‘‘(2) APPLICABLE NEUTRAL COST RECOVERY

2 RATIO.—For purposes of paragraph (1), the applica3 ble neutral cost recovery ratio for any taxable year

4 is the number determined by—

5 ‘‘(A) dividing—

6 ‘‘(i) the gross national product

7 deflator for the calendar quarter ending in

8 such taxable year which corresponds to the

9 calendar quarter during which the property

10 was placed in service by the taxpayer, by

11 ‘‘(ii) the gross national product

12 deflator for the calendar quarter during

13 which the property was placed in service by

14 the taxpayer, and

15 ‘‘(B) then multiplying the number deter16 mined under subparagraph (A) by the number

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

18 number of full years in the period beginning on

19 the 1st day of the calendar quarter during

20 which the property was placed in service by the

21 taxpayer and ending on the day before the be22 ginning of the corresponding calendar quarter

23 ending during such taxable year.

24 The applicable neutral cost recovery ratio shall not

25 be taken into account unless it is greater than 1.
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1 The applicable neutral cost recovery ratio shall be

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

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

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

5 product deflator for any calendar quarter is the im6 plicit price deflator for the gross national product

7 for such quarter (as shown in the first revision

8 thereof).

9 ‘‘(4) ELECTION NOT TO HAVE SUBSECTION

10 APPLY.—This subsection shall not apply to any

11 property if the taxpayer elects not to have this sub12 section apply to such property. Such an election,

13 once made, shall be irrevocable.’’

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

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

16 end thereof the following new subparagraph:

17 ‘‘(E) USE OF NEUTRAL COST RECOVERY

18 RATIO.—In the case of tangible property placed

19 in service in a taxable year beginning after De20 cember 31, 1992, the deduction allowable under

21 this paragraph with respect to such property

22 for any taxable year (after the taxable year dur23 ing which the property is placed in service)

24 shall be—
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1 ‘‘(i) the amount so allowable for such

2 taxable year without regard to this sub3 paragraph, multiplied by

4 ‘‘(ii) the applicable neutral cost recov5 ery ratio for such taxable year (as deter6 mined under section 168(j)).

7 This subparagraph shall not apply to any prop8 erty with respect to which there is an election

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

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

11 this section shall apply to taxable years beginning after

12 December 31, 1992.

13 SEC. 3. REPEAL OF SPECIAL DEPRECIATION RULES APPLI14 CABLE UNDER THE ADJUSTED CURRENT

15 EARNINGS PROVISIONS OF THE MINIMUM

16 TAX.

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

18 56(g)(4) of the Internal Revenue Code of 1986 (relating

19 to adjustments) is amended to read as follows:

20 ‘‘(A) DEPRECIATION.—

21 ‘‘(i) IN GENERAL.—The depreciation

22 deduction with respect to any property for

23 any taxable year beginning after December

24 31, 1992, shall be the same as the depre25 ciation deduction allowable in computing
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1 alternative minimum taxable income for

2 such taxable year.

3 ‘‘(ii) BASIS RULES.—Notwithstanding

4 clause (i), the adjusted basis of any depre5 ciable property held by the taxpayer as of

6 the beginning of the taxpayer’s first tax7 able year beginning after December 31,

8 1992, shall be determined as if the provi9 sions of clause (i) had also applied to tax10 able years beginning in 1990, 1991, and

11 1992.

12 ‘‘(iii) LOST BASIS RECOVERED OVER 5

13 YEARS.—The amount determined under

14 clause (iv) shall be allowed as a deduction

15 ratably over the 60-month period begin16 ning with the first month of the taxpayer’s

17 first taxable year beginning after Decem18 ber 31, 1992.

19 ‘‘(iv) AMOUNT OF LOST BASIS.—The

20 amount determined under this clause is the

21 excess of—

22 ‘‘(I) the aggregate adjusted bases

23 of depreciable property held by the

24 taxpayer as of the beginning of the

25 taxpayer’s first taxable year beginning
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1 after December 31, 1992, which

2 would have been determined (as of

3 such time) under clause (i) without

4 regard to clause (ii), over

5 ‘‘(II) the aggregate adjusted

6 bases of such property (as of such

7 time) as determined under the rules of

8 clause (ii).’’

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

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

11 December 31, 1992.

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