I 

109TH CONGRESS 

2D SESSION H. R. 4960 

To amend the Internal Revenue Code of 1986 to allow 5-year amortization 

of goodwill and other section 197 intangibles that are acquired from 

a small business. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 15, 2006 

Mr. CANTOR (for himself and Mr. POMEROY) 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 allow 5- 

year amortization of goodwill and other section 197 intangibles that are acquired from a small business. 

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 ‘‘Tax Fairness for Small 

5 Business Act of 2006’’. 


sroberts on PROD1PC70 with BILLS
2 

•HR 4960 IH 

1 SEC. 2. 5-YEAR AMORTIZATION OF CERTAIN INTANGIBLES 

2 ACQUIRED FROM ELIGIBLE SMALL BUSI3 NESSES AFTER DECEMBER 31, 2005. 

4 (a) IN GENERAL.—Section 197 of the Internal Rev5 enue Code of 1986 (relating to amortization of goodwill 

6 and certain other intangibles) is amended by redesignating 

7 subsection (g) as subsection (h) and inserting after sub8 section (f) the following new subsection: 

9 ‘‘(g) 5-YEAR AMORTIZATION OF INTANGIBLES AC10 QUIRED FROM ELIGIBLE SMALL BUSINESSES AFTER DE11 CEMBER 31, 2005.— 

12 ‘‘(1) IN GENERAL.—In the case of any qualified 

13 amortizable section 197 intangible, subsection (a) 

14 shall be applied by substituting ‘5-year period’ for 

15 ‘15-year period’. 

16 ‘‘(2) QUALIFIED AMORTIZABLE SECTION 197 IN17 TANGIBLE.—For purposes of this subsection, the 

18 term ‘qualified amortizable section 197 intangible’ 

19 means any amortizable section 197 intangible which 

20 is acquired in a transaction (or series of trans21 actions) involving the acquisition of assets consti22 tuting a trade or business or substantial portion 

23 thereof from an eligible small business (as defined in 

24 section 474(c)) after December 31, 2005. 

25 ‘‘(3) MAXIMUM AMOUNT PER BUSINESS.— 


sroberts on PROD1PC70 with BILLS
3 

•HR 4960 IH 

1 ‘‘(A) IN GENERAL.—The aggregate ad2 justed basis of qualified amortizable section 197 

3 intangibles of each eligible small business which 

4 the taxpayer may amortize under paragraph (1) 

5 shall not exceed $5,000,000. 

6 ‘‘(B) ALLOCATION OF DOLLAR AMOUNT.— 

7 ‘‘(i) CONTROLLED GROUP.—For pur8 poses of applying the dollar limitations in 

9 subparagraph (A)— 

10 ‘‘(I) all component members of a 

11 controlled group shall be treated as 

12 one taxpayer, and 

13 ‘‘(II) such dollar limitations shall 

14 be allocated among the component 

15 members of such controlled group in 

16 such manner as the Secretary pre17 scribes. 

18 For purposes of the preceding sentence, 

19 the term ‘controlled group’ has the mean20 ing given to such term by section 1563(a), 

21 except that ‘more than 50 percent’ shall be 

22 substituted for ‘at least 80 percent’ each 

23 place it appears in section 1563(a)(1). 

24 ‘‘(ii) PARTNERSHIPS AND S CORPORA25 TIONS.—In the case of a partnership, the 


sroberts on PROD1PC70 with BILLS
4 

•HR 4960 IH 

1 dollar limitations in subparagraph (A) 

2 shall apply with respect to the partnership 

3 and with respect to each partner. A similar 

4 rule shall apply in the case of an S cor5 poration and its shareholders. 

6 ‘‘(C) SUBSECTION NOT TO APPLY TO

7 TRUSTS.—This subsection shall not apply to 

8 trusts. 

9 ‘‘(D) ESTATES.—The benefit of the special 

10 deduction provided by this subsection shall be 

11 allowed to estates in the same manner as in the 

12 case of an individual. The allowable deduction 

13 shall be apportioned between the income bene14 ficiary and the fiduciary in the manner pre15 scribed by the Secretary. Any amount so appor16 tioned to a beneficiary shall be taken into ac17 count for purposes of determining the amount 

18 allowable as a deduction under this subsection 

19 to such beneficiary.’’. 

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

21 this section shall apply to acquisitions of qualified amortiz22 able section 197 intangibles (as defined in section 

23 197(g)(2) of the Internal Revenue Code of 1986, as added 

24 by this section) after December 31, 2005. 

Æ 


sroberts on PROD1PC70 with BILLS