I
106TH CONGRESS
2D SESSION
H. R. 5343
To amend the Internal Revenue Code of 1986 to allow taxpayers using
the income forecast method of depreciation to treat costs contingent
on income in the same manner as fixed costs to the extent determined
by reference to the estimated income under such method, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 28, 2000
Mr. THOMAS 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 tax-
payers using the income forecast method of depreciation
to treat costs contingent on income in the same manner
as fixed costs to the extent determined by reference
to the estimated income under such method, and for
other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. MODIFICATION OF APPLICATION OF INCOME
FORECAST METHOD OF DEPRECIATION IN
CERTAIN CASES.
(a) TREATMENT OF INCOME-CONTINGENT COSTS.—
Subsection (g) of section 167 of the Internal Revenue
Code of 1986 (relating to depreciation under income fore-
cast method) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(7) TREATMENT
OF
INCOME-CONTINGENT
COSTS.—
‘‘(A) IN GENERAL.—In the case of prop-
erty for which the depreciation deduction allow-
able under this section is determined under this
subsection, the taxpayer may determine the ad-
justed basis of such property solely for purposes
of this section by including the estimated in-
come-contingent costs with respect to such
property in such basis for the taxable year in
which such property is placed in service. Depre-
ciation computed under this paragraph shall be
allowable as a deduction notwithstanding sec-
tions 404 and 419.
‘‘(B) 
ESTIMATED
INCOME-CONTINGENT
COSTS.—For purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘esti-
mated income-contingent costs’ means,
with respect to any property, the amount
which would be the income-contingent
costs with respect to such property if the
income estimated (for purposes of this sub-
section) to be earned in connection with
the property before the close of the 10th
taxable year referred to in paragraph
(1)(A) were earned as of the close of the
taxable year in which such property is
placed in service.
‘‘(ii) INCOME-CONTINGENT
COSTS.—
The term ‘income-contingent costs’ means,
with respect to any property, costs the
amount of which by contract varies with
the amount of income earned in connection
with such property.
‘‘(C) SPECIAL
RULE
RELATING
TO
RE-
COMPUTATION YEARS.—If the adjusted basis of
any property is determined under this para-
graph, paragraph (4) shall be applied by sub-
stituting ‘for each taxable year in such period’
for ‘for such period’.
‘‘(D) BASIS
ADJUSTMENTS.—The Sec-
retary shall prescribe appropriate adjustments
to the basis of property for the additional
amounts allowable as a deduction solely by rea-
son of this paragraph.
‘‘(E) 
COORDINATION
WITH
SECTION
461(H).—For purposes of section 461(h), eco-
nomic performance with respect to income-con-
tingent costs occurs as the services or property
are provided to the taxpayer.’’
(b) ADDITIONAL
RECOMPUTATION
YEAR.—Para-
graph (4) of section 167(g) of such Code is amended—
(1) by striking ‘‘the 3d and the 10th’’ and in-
serting ‘‘the 3d, 7th, and 10th’’, and
(2) by striking ‘‘3d or’’ and inserting ‘‘3d, 7th,
or’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
Æ