II 

109TH CONGRESS 

2D SESSION S. 3974 

To permit a special amortization deduction for intangible assets acquired 

from eligible small businesses to take account of the actual economic 

useful life of such assets and to encourage growth in industries for 

which intangible assets are an important source of revenue. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 28, 2006 

Mr. BUNNING (for himself and Mr. CONRAD) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To permit a special amortization deduction for intangible 

assets acquired from eligible small businesses to take 

account of the actual economic useful life of such assets 

and to encourage growth in industries for which intangible assets are an important source of revenue. 

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


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•S 3974 IS

1 SECTION 1. SPECIAL AMORTIZATION DEDUCTION FOR CER2 TAIN INTANGIBLE PROPERTY ACQUIRED 

3 FROM ELIGIBLE SMALL BUSINESSES AFTER 

4 DECEMBER 31, 2005. 

5 (a) IN GENERAL.—Section 197 of the Internal Rev6 enue Code of 1986 (relating to amortization of goodwill 

7 and certain other intangibles) is amended by redesignating 

8 subsection (g) as subsection (h) and inserting after sub9 section (f) the following new subsection: 

10 ‘‘(g) SPECIAL DEDUCTION FOR CERTAIN PROPERTY

11 ACQUIRED FROM ELIGIBLE SMALL BUSINESSES AFTER

12 DECEMBER 31, 2005.— 

13 ‘‘(1) SPECIAL DEDUCTION.—In the case of any 

14 amortizable section 197 intangible— 

15 ‘‘(A) the amortization deduction provided 

16 by subsection (a) for the taxable year in which 

17 such property is acquired shall include an allow18 ance equal to 100 percent of the adjusted basis 

19 of the taxpayer’s qualified section 197 intan20 gible property, and 

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

22 section 197 intangible property shall be reduced 

23 by the amount of such deduction before com24 puting the amount otherwise allowable as an 

25 amortization deduction under subsection (a) for 


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•S 3974 IS

1 such taxable year and any subsequent taxable 

2 year. 

3 ‘‘(2) QUALIFIED SECTION 197 INTANGIBLE

4 PROPERTY.—For purposes of this subsection, the 

5 term ‘qualified section 197 intangible property’ 

6 means any amortizable section 197 intangible which 

7 is acquired in a transaction (or series of trans8 actions) involving the acquisition of assets consti9 tuting a trade or business or substantial portion 

10 thereof from an eligible small business (as defined in 

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

12 ‘‘(3) LIMITATIONS.— 

13 ‘‘(A) MAXIMUM DOLLAR AMOUNT.—The 

14 aggregate amount of adjusted basis of qualified 

15 section 197 intangible property which a tax16 payer may take into account under this sub17 section for any taxable year shall not exceed 

18 $5,000,000 ($2,500,000 in the case of a sepa19 rate return of a married individual (as defined 

20 in section 7703)). 

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

22 ‘‘(i) CONTROLLED GROUP.—For pur23 poses of applying the dollar limitation 

24 under subparagraph (A)— 


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1 ‘‘(I) all component members of a 

2 controlled group shall be treated as 

3 one taxpayer, and 

4 ‘‘(II) the Secretary shall, under 

5 regulations prescribed by him, appor6 tion such dollar limitation among the 

7 component members of such con8 trolled group. 

9 For purposes of the preceding sentence, 

10 the term ‘controlled group’ has the mean11 ing assigned to it by section 1563(a), ex12 cept that the phrase ‘more than 50 per13 cent’ shall be substituted for the phrase ‘at 

14 least 80 percent’ each place it appears in 

15 section 1563(a)(1). 

16 ‘‘(ii) PARTNERSHIPS AND S CORPORA17 TIONS.—In the case of a partnership, the 

18 dollar limitation contained in subparagraph 

19 (A) shall apply with respect to the partner20 ship and with respect to each partner. A 

21 similar rule shall apply in the case of an 

22 S corporation and its shareholders. 

23 ‘‘(C) SUBSECTION NOT TO APPLY TO

24 TRUSTS.—This subsection shall not apply to 

25 trusts. 


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•S 3974 IS

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

2 deduction provided by this subsection shall be 

3 allowed to estates in the same manner as in the 

4 case of an individual. The allowable deduction 

5 shall be apportioned between the income bene6 ficiary and the fiduciary under regulations pre7 scribed by the Secretary. Any amount so appor8 tioned to a beneficiary shall be taken into ac9 count for purposes of determining the amount 

10 allowable as a deduction under this subsection 

11 to such beneficiary.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2005. 

Æ 


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