I
106TH CONGRESS
2D SESSION
H. R. 4184
To amend the Internal Revenue Code of 1986 to implement the recommenda-
tion of the National Taxpayer Advocate that the depreciable life of
computer software correspond to its actual useful life.
IN THE HOUSE OF REPRESENTATIVES
APRIL 5, 2000
Mr. COX (for himself, Mr. DREIER, Mr. DAVIS of Virginia, and Mr. SAM
JOHNSON of Texas) 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 implement
the recommendation of the National Taxpayer Advocate
that the depreciable life of computer software correspond
to its actual useful life.
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 ‘‘Fairness in Amortiza-
tion of Software Tax Act of 2000’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds that:
(1) Current tax law requires off-the-shelf or
downloaded computer software to be depreciated
over 3 years, and all other software to be amortized
over 15 years; but in reality software must be up-
graded constantly.
(2) The current tax policy discourages busi-
nesses from making necessary upgrades to computer
software and inhibits their competing effectively in
the new economy.
(3) The National Taxpayer Advocate’s Annual
Report to Congress for 1999 recommends amending
section 179 of the tax code to allow taxpayers to de-
duct software purchases in the year in which the
software is placed in service.
(4) Allowing taxpayers engaged in a trade or
business to expense software will significantly ease
the administrative burdens that the current law im-
poses, since records of software purchases and their
depreciable lives will correspond to the software’s ac-
tual useful life.
(5) The National Taxpayer Advocate has re-
ported to Congress that as a result of the complexity
of existing tax law, the existing 3-year depreciation
period is overlooked by many taxpayers. Simplifying
deductions for business software would also have the
beneficial effect of increasing taxpayer compliance.
(b) PURPOSE.—It is the purpose of this Act to—
(1) provide immediate expensing of software, up
to the $20,000 limit now provided in section 179 of
the tax code, and
(2) provide a 3-year depreciation period for all
other software, down from the current 15 years.
SEC. 3. ALL COMPUTER SOFTWARE ELIGIBLE FOR EXPENS-
ING.
(a) IN GENERAL.—The heading and first sentence of
paragraph (1) of section 179(d) of the Internal Revenue
Code of 1986 (relating to section 179 property) are
amended to read as follows:
‘‘(1) SECTION 179 PROPERTY.—For purposes of
this section, the term ‘section 179 property’ means
property—
‘‘(A) which is—
‘‘(i) tangible property (to which sec-
tion 168 applies), or
‘‘(ii) computer software (as defined in
section 197(e)(3)(B)) to which section 167
applies,
‘‘(B) which is section 1245 property (as
defined in section 1245(a)(3)), and
‘‘(C) which is acquired by purchase for use
in the active conduct of a trade or business.’’.
(b) NO COMPUTER SOFTWARE INCLUDED AS SEC-
TION 197 INTANGIBLE.—
(1) IN GENERAL.—Subparagraph (A) of section
197(e)(3) of such Code is amended to read as fol-
lows:
‘‘(A) IN
GENERAL.—Any computer soft-
ware.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(B) of section 167(f)(1) of such Code is amended by
striking ‘‘; except that such term shall not include
any such software which is an amortizable section
197 intangible’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2000.
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