I
104TH CONGRESS
1ST SESSION
H. R. 199
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 HOUSE OF REPRESENTATIVES
JANUARY 4, 1995
Mr. SMITH of Michigan (for himself, Mr. BLUTE, Mr. CUNNINGHAM, Mr. EV-
ERETT, Mr. ISTOOK, Mr. KASICH, Mr. KNOLLENBERG, Mr. LINDER, Mr.
MANZULLO, and Mr. CHRYSLER) 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 provide
that the deduction for depreciation shall be computed
on a neutral cost recovery basis, 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. SHORT TITLE.
This Act may be cited as the ‘‘Neutral Cost Recovery
Act of 1995’’.
SEC. 2. NEUTRAL COST RECOVERY DEPRECIATION ADJUST-
MENT FOR CERTAIN PROPERTY PLACED IN
SERVICE AFTER DECEMBER 31, 1994.
(a) IN GENERAL.—Section 168 of the Internal Reve-
nue Code of 1986 (relating to accelerated cost recovery
system) is amended by adding at the end thereof the fol-
lowing new subsection:
‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE AFTER DECEMBER 31, 1994.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service after December 31, 1994,
the deduction under this section with respect to such
property—
‘‘(A) shall be determined by substituting
‘150 percent’ for ‘200 percent’ in subsection
(b)(1) in the case of property to which the 200
percent declining balance method would other-
wise apply, and
‘‘(B) for any taxable year after the taxable
year during which the property is placed in
service shall be—
‘‘(i) the amount determined under this
section for such taxable year without re-
gard to this subparagraph, multiplied by
‘‘(ii) the applicable neutral cost recov-
ery ratio for such taxable year.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
RATIO.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—The applicable neutral
cost recovery ratio for the property for any tax-
able year is the number determined by—
‘‘(i) dividing—
‘‘(I) the gross domestic product
deflator for the calendar quarter end-
ing in such taxable year which cor-
responds to the calendar quarter dur-
ing which the property was placed in
service by the taxpayer, by
‘‘(II) the gross domestic product
deflator for the calendar quarter dur-
ing which the property was placed in
service by the taxpayer, and
‘‘(ii) then multiplying the number de-
termined under clause (i) by the number
equal to 1.035 to the nth power where ‘n’
is the number of full years in the period
beginning on the 1st day of the calendar
quarter during which the property was
placed in service by the taxpayer and end-
ing on the day before the beginning of the
corresponding calendar quarter ending
during such taxable year.
The applicable neutral cost recovery ratio shall
never be less than 1. The applicable neutral
cost recovery ratio shall be rounded to the near-
est 1⁄1000.
‘‘(B) SPECIAL RULE FOR CERTAIN PROP-
ERTY.—In the case of property described in
paragraph (2) or (3) of subsection (b) or in
subsection (g), the applicable neutral cost recov-
ery ratio shall be determined without regard to
subparagraph (A)(ii).
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—
For purposes of paragraph (2), the gross domestic
product deflator for any calendar quarter is the im-
plicit price deflator for the gross domestic product
for such quarter (as shown in the first revision
thereof).
‘‘(4) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—This subsection shall not apply to any
property if the taxpayer elects not to have this sub-
section apply to such property. Such an election,
once made, shall be irrevocable.
the additional deduction allowable by rea-
son of section 168(k).’’
(c) COORDINATION WITH DEPRECIATION LIMITA-
TION ON CERTAIN AUTOMOBILES.—Clause (i) of section
280F(a)(1)(B) of such Code is amended by adding at the
end the following new sentence: ‘‘For purposes of this
clause, the unrecovered basis of any passenger automobile
shall be treated as including the additional amount deter-
mined under section 168 by reason of subsection (k) there-
of to the extent not allowed as a deduction by reason of
this paragraph for any taxable year in the recovery pe-
riod.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
SEC. 3. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) GENERAL RULE.—Paragraph (1) of section
179(b) of the Internal Revenue Code of 1986 (relating to
dollar limitation) is amended by striking ‘‘$17,500’’ and
inserting ‘‘$25,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
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