II

106TH CONGRESS

1ST SESSION S. 962

To allow a deduction from gross income for year 2000 computer conversion

costs of small businesses.

IN THE SENATE OF THE UNITED STATES

MAY 5, 1999

Mr. LEAHY (for himself and Mr. DODD) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To allow a deduction from gross income for year 2000

computer conversion costs of small businesses.

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 ‘‘Small Business Y2K

5 Compliance Act of 1999’’.

6 SEC. 2. DEDUCTION FOR COSTS OF MAKING COMPUTERS

7 AND COMPUTER SOFTWARE YEAR 2000 COM8 PLIANT.

9 (a) IN GENERAL.—
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1 (1) PROPERTY PLACED IN SERVICE IN 1999.—

2 A taxpayer may elect to treat the cost of a business

3 Y2K asset placed in service during the taxpayer’s

4 first taxable year beginning in 1999 as an expense

5 which is not chargeable to capital account. The cost

6 so treated shall be allowed as a deduction from gross

7 income for purposes of the Internal Revenue Code of

8 1986.

9 (2) PROPERTY PLACED IN SERVICE IN 1997 OR

10 1998.—A taxpayer may elect to deduct from gross in11 come an amount equal to the unrecovered basis of

12 a business Y2K asset placed in service during the 2

13 taxable years preceding the first taxable year begin14 ning in 1999 and which is otherwise subject to de15 preciation under such Code.

16 (b) LIMITATIONS.—

17 (1) IN GENERAL.—The aggregate amount al18 lowed as a deduction under subsection (a) shall not

19 exceed $40,000.

20 (2) APPLICATION OF BUSINESS LIMITATIONS OF

21 SECTION 179.—Rules similar to the rules of para22 graphs (2), (3), and (4) of section 179(b) of such

23 Code shall apply for purposes of this section. For

24 purposes of the preceding sentence, the cost of prop-
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1 erty to which the limitation in paragraph (2) of such

2 section 179(b) applies shall be the sum of—

3 (A) the amounts elected under subsection

4 (a)(1) with respect to property placed in service

5 during the taxpayer’s first taxable year begin6 ning in 1999, and

7 (B) the amounts elected under subsection

8 (a)(2) with respect to the unrecovered basis of

9 business Y2K assets placed in service during

10 the 2 taxable years preceding the first taxable

11 year beginning in 1999.

12 (c) DEFINITIONS.—For purposes of this section—

13 (1) BUSINESS Y2K ASSET.—The term ‘‘business

14 Y2K asset’’ means an asset acquired by purchase for

15 use in the active conduct of a trade or business

16 which is—

17 (A) any computer acquired to replace a

18 computer where such replacement is necessary

19 because of the year 2000 computer conversion

20 problem, and

21 (B) any of the following items which are of

22 a character subject to the allowance for depre23 ciation under such Code:
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1 (i) the modification of computer soft2 ware to address the year 2000 computer

3 conversion problem, and

4 (ii) computer software which is year

5 2000 compliant acquired to replace com6 puter software which is not so compliant.

7 (2) COMPUTER.—The term ‘‘computer’’ means

8 a computer or peripheral equipment (as defined by

9 section 168(i)(2)(B)) of such Code.

10 (3) COMPUTER SOFTWARE.—The term ‘‘com11 puter software’’ has the meaning given to such term

12 by section 167(f) of such Code.

13 (4) UNRECOVERED BASIS.—The term ‘‘unre14 covered basis’’ means the adjusted basis of the busi15 ness Y2K asset determined as of the close of the last

16 taxable year beginning before January 1, 1999.

17 (d) SPECIAL RULES.—

18 (1) IN GENERAL.—Rules similar to the rules of

19 subsections (c) and (d) (other than paragraph (1)

20 thereof) of section 179 of such Code shall apply for

21 purposes of this section.

22 (2) TREATMENT AS DEDUCTION UNDER SEC23 TION 179.—For purposes of the Internal Revenue

24 Code of 1986, the deduction allowed under this sec-
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1 tion shall be treated in the same manner as a deduc2 tion allowed under section 179 of such Code.

3 (3) ORDERING RULE.—For purposes of section

4 179 of such Code, subsection (b)(3)(C) of such sec5 tion shall be applied without regard to the deduction

6 allowed under this section.

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