I
107TH CONGRESS
1ST SESSION
H. R. 2485
To amend the Internal Revenue Code of 1986 to allow advanced applied
technology equipment to be expensed and to reduce the depreciation
recovery periods for certain other property.
IN THE HOUSE OF REPRESENTATIVES
JULY 12, 2001
Mr. ENGLISH (for himself, Mr. NEAL of Massachusetts, Mrs. JOHNSON of
Connecticut, Mr. TANNER, and Mr. FOLEY) 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 ad-
vanced applied technology equipment to be expensed and
to reduce the depreciation recovery periods for certain
other property.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘High Productivity Investment Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) SECRETARY.—References in this Act to the ‘‘Sec-
retary’’ are to the Secretary of the Treasury or his dele-
gate.
SEC. 2. FINDINGS; NEW COST RECOVERY SYSTEM DE-
SIGNED TO INCREASE PRODUCTIVITY AND
WAGES.
(a) FINDINGS.—The Congress finds that—
(1) capital spending on applied technology is
enabling Americans to be more productive thereby
raising their wages and causing the economy to
grow;
(2) economic growth has eliminated the deficit
and provided for long-term tax cuts, increases in
spending and debt reduction;
(3) continuing high levels of investment in the
most modern and efficient capital equipment will
preserve and magnify these gains; and
(4) the result of sustained productivity growth
will be a permanently higher standard of living for
Americans.
‘‘SEC. 168A. RAPID COST RECOVERY SYSTEM.
‘‘(a) GENERAL RULE.—Except as otherwise provided
in this section, the depreciation deduction provided by sec-
tion 167(a) for any tangible property placed in service on
or after January 1, 2002, shall be determined by using—
‘‘(1) the applicable recovery method,
‘‘(2) the applicable recovery period, and
‘‘(3) the applicable convention.
‘‘(b) APPLICABLE RECOVERY METHOD.—
‘‘(1) GENERAL RULE FOR PLANT AND EQUIP-
MENT.—Except as provided in paragraphs (2) and
(3), the applicable recovery method is—
‘‘(A) the 200 percent declining balance
method,
‘‘(B) switching to the straight line method
for the 1st taxable year for which using the
straight line method with respect to the ad-
justed basis as of the beginning of such year
will yield a larger allowance.
‘‘(2) SPECIAL
RULE
FOR
LONG-LIFED
PER-
SONAL PROPERTY.—Paragraph (1) shall be applied
by substituting ‘150 percent’ for ‘200 percent’ in the
case of—
‘‘(A) any 10-year property or 15-year
property, or
‘‘(B) any property with respect to which
the taxpayer is eligible to elect and elects under
paragraph (5) to have the provisions of this
paragraph apply.
‘‘(3) PROPERTY TO WHICH THE STRAIGHT-LINE
METHOD
APPLIES.—The applicable depreciation
method is the straight-line method in the case of the
following property:
‘‘(A) Nonresidential real property.
‘‘(B) Residential rental property.
‘‘(C) Any railroad grading or tunnel bore.
‘‘(D) Property with respect to which the
taxpayer elects under paragraph (5) to have the
provisions of this paragraph apply.
‘‘(4) SALVAGE VALUE.—Salvage value shall be
treated as zero for purposes of determining allow-
ances under this section.
‘‘(5) ELECTIONS.—
‘‘(A) STRAIGHT-LINE
METHOD.—A tax-
payer may elect to use the straight-line method
in lieu of the method otherwise required under
this subsection for 1 or more classes of property
for any taxable year.
‘‘(B) 150 Percent declining balance meth-
od.—A taxpayer may elect to use the method
described in paragraph (2) for any taxable year
for 1 or more classes of property for which the
method described in paragraph (1) otherwise
would apply.
‘‘(C) APPLICATION
OF
ELECTION.—Any
election made under this paragraph shall apply
to all property in the class for which the elec-
tion is made and, once made, shall be irrev-
ocable.
‘‘(c) APPLICABLE RECOVERY PERIOD.—The applica-
ble recovery period shall be determined in accordance with
the following table:
The applicable recovery
‘‘In the case of:
period is:
High productivity property ..........................................................
1 year
3-year property ............................................................................
3 years
5-year property ............................................................................
5 years
Electric generating assets ............................................................
7 years
10-year property ..........................................................................
10 years
15-year property ..........................................................................
10 years
Residential rental property .......................................................... 27.5 years
Nonresidential real property ........................................................
39 years
Any railroad grading or tunnel bore ............................................
50 years.
‘‘(d) APPLICABLE CONVENTION.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the applicable convention is
the half-year convention.
‘‘(2) REAL PROPERTY.—The applicable conven-
tion is the mid-month convention in the case of—
‘‘(A) residential rental property,
‘‘(B) nonresidential real property, and
‘‘(C) any railroad grading or tunnel bore.
‘‘(3) SPECIAL
RULE
WHERE
SUBSTANTIAL
PROPERTY
PLACED
IN
SERVICE
DURING
LAST
MONTHS OF TAXABLE YEAR.—Except as provided in
regulations, if during any taxable year—
‘‘(A) the aggregate bases of property to
which paragraph (1) applies (as determined
without application of this subparagraph)
placed in service during the last 3 months of
the taxable year, exceed
‘‘(B) 40 percent of the aggregate bases of
property to which paragraph (1) applies (as de-
termined without application of this subpara-
graph) placed in service during such taxable
year, the applicable convention for all property
to which paragraph (1) would apply (as deter-
mined without application of this subpara-
graph) placed in service during such taxable
year shall be the mid-quarter convention.
‘‘(4) DEFINITIONS.—
‘‘(A) HALF-YEAR CONVENTION.—The half-
year convention is a convention which treats all
property placed in service during any taxable
year (or disposed of during any taxable year) as
placed in service (or disposed of) on the mid-
point of such taxable year.
‘‘(B) 
MID-MONTH
CONVENTION.—The
mid-month convention is a convention which
treats all property placed in service during any
month (or disposed of during any month) as
placed in service (or disposed of) on the mid-
point of such month.
‘‘(C) MID-QUARTER
CONVENTION.—The
mid-quarter convention is a convention which
treats all property placed in service during any
quarter of a taxable year (or disposed of during
any quarter of a taxable year) as placed in serv-
ice (or disposed of) on the mid-point of such
quarter.
‘‘(e) CLASSIFICATION OF PROPERTY.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, property that is not high
productivity property, electric generating assets, a
railroad grading or tunnel bore, residential rental
property, or nonresidential real property shall be
classified under the following table:
Property shall be
If such property has a modified
treated as:
class life (in years) of:
3-year property .............................................................
5-year property .............................................................
10-year property ...........................................................
15-year property ...........................................................
15.
‘‘(2) HIGH PRODUCTIVITY PROPERTY.—
‘‘(A) CLASSIFICATION OF PROPERTY.—For
purposes of applying this section to high pro-
ductivity property for which an election is not
made under section 168B(a) and for purposes
of other provisions of this title that require clas-
sification of property—
‘‘(i) high productivity property which
has a modified class life of 3 years shall be
treated as 3-year property, and
‘‘(ii) all other high productivity prop-
erty shall be treated as 5-year property.
‘‘(B) DEFINITION.—The term ‘high pro-
ductivity property’ has the same meaning as the
term ‘high productivity property’ under section
168B.
‘‘(3) REAL PROPERTY.—For purposes of this
section—
‘‘(A) RESIDENTIAL RENTAL PROPERTY.—
‘‘(i) IN GENERAL.—The term ‘residen-
tial rental property’ means any building or
structure if 80 percent or more of the
gross rental income from such building or
structure for the taxable year is rental in-
come from dwelling units.
‘‘(ii) DEFINITIONS.—For purposes of
clause (i)—
‘‘(I) the term ‘dwelling unit’
means a house or apartment used to
provide living accommodations in a
building or structure, but does not in-
clude a unit in a hotel, motel, or other
establishment more than one-half of
the units in which are used on a tran-
sient basis, and
‘‘(II) if any portion of the build-
ing or structure is occupied by the
taxpayer, the gross rental income
from such building or structure shall
include the rental value of the portion
so occupied.
‘‘(B) 
NONRESIDENTIAL
REAL
PROP-
ERTY.—The term ‘nonresidential real property’
means section 1250 property which is not—
‘‘(i) residential rental property, or
‘‘(ii) property with a modified class
life.
‘‘(4) RAILROAD GRADING OR TUNNEL BORE.—
The term ‘railroad grading or tunnel bore’ means all
improvements resulting from excavations (including
tunneling), construction of embankments, clearings,
diversions of roads and streams, sodding of slopes,
and from similar work necessary to provide, con-
struct, reconstruct, alter, protect, improve, replace
or restore a roadbed or right-of-way for railroad
track.
‘‘(5) ELECTRIC
GENERATING
ASSETS.—The
term ‘electric generating assets’ means property
used in—
‘‘(A) nuclear power production,
‘‘(B) hydraulic power production,
‘‘(C) steam power production, or
‘‘(D) custom turbine production of elec-
tricity for sale to the public, other than assets
with a modified class of less than 7 years.
‘‘(f) EXCLUDED PROPERTY.—This section shall not
apply to—
‘‘(1) CERTAIN METHODS OF DEPRECIATION.—
Any property if—
‘‘(A) the taxpayer elects to exclude such
property from the application of this section,
and
‘‘(B) for the 1st taxable year for which a
depreciation deduction would be allowable with
respect to such property in the hands of the
taxpayer, the property is properly depreciated
under the unit-of-production method or any
method of depreciation not expressed in a term
of years (other than the retirement-replace-
ment-betterment method or similar method).
‘‘(2) CERTAIN
PUBLIC
UTILITY
PROPERTY.—
Any public utility property (within the meaning of
section 168(i)(10)) if the taxpayer does not use a
normalization method of accounting (as determined
under section 168(i)(9)).
‘‘(3) FILMS AND VIDEO TAPE.—Any motion pic-
ture film or video tape.
‘‘(4) SOUND RECORDINGS.—Any works which
result from the fixation of a series of musical, spo-
ken, or other sounds, regardless of the nature of the
material 
(such 
as 
discs, 
tapes, 
or 
other
phonorecordings) in which such sounds are em-
bodied.
‘‘(5) CERTAIN PROPERTY PLACED IN SERVICE
IN CHURNING TRANSACTIONS.—
‘‘(A) IN GENERAL.—This section shall not
apply to any churning property acquired by the
taxpayer after December 31, 2001, if—
‘‘(i) the property was owned or used
at any time during 2001 by the taxpayer
or a related person,
‘‘(ii) the property was owned or used
at any time during 2001, and, as part of
the transaction, the user of the property
does not change,
‘‘(iii) the taxpayer leases such prop-
erty to a person (or a person related to
such person) who owned or used such
property at any time during 2001, or
‘‘(iv) the property is acquired in a
transaction as part of which the user of
such property does not change and the
property was acquired from a person to
which clause (ii) or clause (iii) applies.
‘‘(B) CHURNING
PROPERTY.—For pur-
poses of this paragraph, the term ‘churning
property’ means any property that was first
placed in service before January 1, 2002, if the
recovery life of such property in the hands of
the transferor (determined as of the time the
property was placed in service) is greater than
the recovery life of such property in the hands
of the transferee (determined as if this para-
graph did not apply).
‘‘(C) 
APPLICABLE
COST
RECOVERY
RULES.—Section 168 shall apply to any prop-
erty to which this section does not apply by rea-
son of this paragraph.
‘‘(D) SPECIAL
RULES.—For purposes of
this paragraph—
‘‘(i) property shall not be treated as
owned before it is placed in service, and
‘‘(ii) whether the user of a property
changes will be determined in accordance
with regulations prescribed by the Sec-
retary.
‘‘(6) EXPENSED PROPERTY.—Property the ex-
penses of which are not chargeable to capital ac-
count under another provision of this chapter, except
to the extent provided in the applicable provision.
‘‘(g) ALTERNATIVE DEPRECIATION SYSTEM.—
‘‘(1) IN GENERAL.—In the case of—
‘‘(A) any tangible property which during
the taxable year is used predominantly outside
the United States,
tion 168B(b))’ for ‘qualified technological
equipment’.
‘‘(B) LEASE
OF
HIGH
PRODUCTIVITY
PROPERTY.—For purposes of applying the defi-
nition of ‘tax-exempt use property’ in section
168(h), the phrase ‘high productivity property
(as defined in section 168B(b))’ shall be sub-
stituted for ‘qualified technological equipment’
in paragraph (3) of section 168(h).
‘‘(C) ELECTRIC GENERATING ASSETS.—In
the case of electric generating assets the recov-
ery period used for purposes of paragraph (2)
of section 168(g) shall be 10 years.
‘‘(h) DEFINITIONS.—
‘‘(1) MODIFIED CLASS LIFE.—
‘‘(A) IN
GENERAL.—The term ‘modified
class life’ means the modified class life of an
item of property as set forth in a table prepared
by the Secretary in accordance with section 7 of
the High Productivity Investment Act of 2001.
‘‘(B) BEFORE PREPARATION OF TABLE.—
In the case of a taxpayer which is required to
file a return before the table described in sub-
clause (A) is published, the taxpayer shall de-
termine the modified class life of property in ac-
cordance with the principles of section 7 of the
High Productivity Investment Act of 2001.
‘‘(2) SECTION 1245 AND 1250 PROPERTY.—The
terms ‘section 1245 property’ and ‘section 1250
property’ have the meanings given such terms by
sections 1245(a)(3) and 1250(c), respectively.
‘‘(i) SPECIAL RULES.—
‘‘(1) GENERAL ASSET ACCOUNTS.—Under regu-
lations, a taxpayer may maintain 1 or more general
asset accounts for any property to which this section
applies. Except as provided in regulations, all pro-
ceeds realized on any disposition of property in a
general asset account shall be included in income as
ordinary income.
‘‘(2) CHANGES IN USE.—The Secretary shall,
by regulations, provide for the method of deter-
mining the deduction allowable under section 167(a)
with respect to any tangible property for any taxable
year (and the succeeding taxable years) during
which such property changes status under this sec-
tion but continues to be held by the same person.
‘‘(3) TREATMENTS OF ADDITIONS OR IMPROVE-
MENTS TO PROPERTY.—In the case of any addition
to (or improvement of) any property—
‘‘(A) any deduction under subsection (a)
for such addition or improvement shall be com-
puted in the same manner as the deduction for
such property would be computed if such prop-
erty had been placed in service at the same
time as such addition or improvement, and
‘‘(B) the applicable recovery period for
such addition or improvement shall begin on the
later of—
‘‘(i) the date on which such addition
(or improvement) is placed in service, or
‘‘(ii) the date on which the property
with respect to which such addition (or im-
provement) was made is placed in service.
‘‘(4) 
TREATMENT
OF
CERTAIN
TRANS-
FEREES.—
‘‘(A) IN
GENERAL.—In the case of any
property transferred in a transaction described
in subparagraph (B), the transferee shall be
treated as the transferor for purposes of com-
puting the depreciation deduction determined
under this section or section 168, as the case
may be, with respect to so much of the basis
in the hands of the transferee as does not ex-
ceed the adjusted basis in the hands of the
transferor. In any case where this section 168
as in effect before the amendments made by
section 201 of the Tax Reform Act of 1986 ap-
plied to the property in the hands of the trans-
feror, the reference in the preceding sentence
to section 168 shall be treated as a reference
to such section as so in effect.
‘‘(B) 
TRANSACTIONS
COVERED.—The
transactions described in this subparagraph
are—
‘‘(i) any transaction described in sec-
tion 332, 351, 361, 721, or 731, and
‘‘(ii) any transaction between mem-
bers of the same affiliated group during
any taxable year for which a consolidated
return is made by such group.
Subparagraph (A) shall not apply in the case of
a termination of a partnership under section
708(b)(1)(B).
‘‘(C) PROPERTY REACQUIRED BY THE TAX-
PAYER.—Under regulations, property which is
disposed of and then reacquired by the taxpayer
shall be treated for purposes of computing the
deduction allowable under subsection (a) as if
such property had not been disposed of.
‘‘(5) TREATMENT
OF
LEASEHOLD
IMPROVE-
MENTS.—
‘‘(A) IN
GENERAL.—In the case of any
building erected (or improvements made) on
leased property, if such building or improve-
ment is property to which this section applies,
the depreciation deduction shall be determined
under the provisions of this section.
‘‘(B) TREATMENT
OF
LESSOR
IMPROVE-
MENTS
WHICH
ARE
ABANDONED
AT
TERMI-
NATION OF LEASE.—An improvement—
‘‘(i) which is made by the lessor of
leased property for the lessee of such prop-
erty, and
‘‘(ii) which is irrevocably disposed of
or abandoned by the lessor at the termi-
nation of the lease by such lessee, shall be
treated for purposes of determining gain or
loss under this title as disposed of by the
lessor when so disposed of or abandoned.
‘‘(C) CROSS REFERENCE.—
‘‘For treatment of qualified long-term real prop-
erty constructed or improved in connection with
cash or rent reduction from lessor to lessee, see sec-
tion 110(b).
‘‘(6) PUBLIC UTILITY PROPERTY WHICH DOES
NOT MEET NORMALIZATION RULES.—In the case of
‘‘(b) DEFINITION OF HIGH PRODUCTIVITY PROP-
ERTY.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (3), the term ‘high productivity property’
means any—
‘‘(A) computer,
‘‘(B) computer related peripheral equip-
ment,
‘‘(C) computer based machinery,
‘‘(D) electronic diagnostic equipment,
‘‘(E) electronic control equipment,
‘‘(F) other electronic, electromechanical,
laser or computer based equipment,
‘‘(G) computer software,
‘‘(H) equipment used in the manufacture
of semiconductors,
‘‘(I) high technology medical equipment,
‘‘(J) advanced technology communications
equipment,
‘‘(K) optical fiber and photonics equip-
ment,
‘‘(L) advanced environmental products,
‘‘(M) advanced life science products, or
‘‘(N) new high productivity assets.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) COMPUTER.—The term ‘computer’
means a programmable electronically activated
device which—
‘‘(i) is capable of accepting informa-
tion, applying prescribed processes to the
information, and supplying the results of
those processes, and
‘‘(ii) consists of a central processing
unit containing extensive storage, logic,
arithmetic and control capabilities.
‘‘(B) COMPUTER
RELATED
PERIPHERAL
EQUIPMENT.—The term ‘computer related pe-
ripheral equipment’ means any auxiliary ma-
chine or other equipment (whether on-line or
off-line) which is designed to be placed under
the control of the central processing unit of a
computer (as determined without regard to
whether such machine or equipment is an inte-
gral part of other property which is not a com-
puter).
‘‘(C) COMPUTER BASED MACHINERY.—The
term ‘computer based machinery’ means any
machine which—
‘‘(i) cuts, forms, shapes, drills, bores,
mixes, paints, seals, welds, or otherwise
transforms material, or
‘‘(ii) handles, conveys, assembles, or
packages materials or products,
by responding to electronically stored informa-
tion and programmed commands.
‘‘(D) ELECTRONIC
DIAGNOSTIC
EQUIP-
MENT.—The term ‘electronic diagnostic equip-
ment’ means equipment that uses electronic
components to sense or monitor location, size,
volume, surface characteristics, pressure, tem-
perature, speed, chemical composition, or other
similar characteristics.
‘‘(E) 
ELECTRONIC
CONTROL
EQUIP-
MENT.—The term ‘electronic control equipment’
means equipment that electronically controls
pressure, temperature, size, volume, composi-
tion purity or other similar characteristics.
‘‘(F) HIGH TECHNOLOGY MEDICAL EQUIP-
MENT.—The term ‘high technology medical
equipment’ 
means 
any 
electronic,
electromechanical, or computer-based high tech-
nology equipment used in the screening, moni-
toring, observation, diagnosis, or treatment of
patients in a laboratory, medical, or hospital en-
vironment.
‘‘(G) ADVANCED
TECHNOLOGY
COMMU-
NICATIONS
EQUIPMENT.—The term ‘advanced
technology communications equipment’ means
equipment used in the transmission or reception
of voice, data, video, paging, messaging, or
other communications services that are deliv-
ered using packet technology. A packet is a unit
of data, or sequence of binary digits, that is
routed between an origin and a destination on
a packet-switched network.
‘‘(H) OPTICAL
FIBER
AND
PHOTONICS
EQUIPMENT.—The term ‘optical fiber and
photonics equipment’ means optical fiber and
the equipment and materials used to generate,
manipulate and direct light particles over such
fiber.
‘‘(I) ADVANCED
ENVIRONMENTAL
PROD-
UCTS.—The 
term 
‘advanced 
environmental
product’ means any high cell density ceramic or
other device used for the control of nitrogen
oxide and particulate emissions.
‘‘(J) ADVANCED
LIFE
SCIENCES
PROD-
UCTS.—The term ‘advanced life sciences prod-
uct’ means any polymer, ceramic or high-purity
glass product used in biological research.
‘‘(K) NEW HIGH PRODUCTIVITY ASSETS.—
‘‘(i) IN
GENERAL.—The term ‘new
high productivity assets’ means any asset
utilizing 1 or more technological or sci-
entific processes which were not in com-
mon commercial use before January 1,
2001.
‘‘(ii) 
DETERMINATIONS.—The 
Sec-
retary shall establish procedures pursuant
to which taxpayers can seek a public ruling
that a particular class of assets qualifies as
new high productivity assets. The proce-
dures shall require the Secretary to provide
a determination within 90 days of receipt
of a properly completed request for a pub-
lic ruling.
‘‘(3) EXCLUDED PROPERTY.—The term ‘high
productivity property’ shall not include—
‘‘(A) an entire car, locomotive, aircraft,
ship or other vehicle solely because the vehicle
is controlled in whole or part by a computer or
other electronic equipment,
‘‘(B) any equipment of a kind used pri-
marily for entertainment or amusement of the
user, and
‘‘(C) typewriters, calculators, copiers, du-
plication equipment, and other similar equip-
ment.
‘‘(c) ELECTION.— An election under this section for
any taxable year shall—
‘‘(1) be made on an asset by asset basis, and
‘‘(2) be made on the taxpayer’s return of the
tax imposed by this chapter for the taxable year.
‘‘(d) SPECIAL RULES.—
‘‘(1) COST.—For purposes of this section, the
cost of property does not include so much of the
basis of such property as is determined by reference
to the basis of other property held at any time by
the person acquiring such property.
‘‘(2) ANTICHURNING RULES.—
‘‘(A) IN
GENERAL.—The antichurning
rules of section 168A(f)(5) shall apply to this
section.
‘‘(B) SPECIAL
RULE.—For purposes of
apply 
the 
antichurning 
rules 
of 
section
168A(f)(5) to this section, assets to which this
section may apply but for such rule shall be
treated as having a recovery period for of 1
year.
‘‘(3) RECAPTURE
IN
CERTAIN
CASES.—The
Secretary shall, by regulations, provide for the re-
capturing the benefit under any deduction allowable
under subsection (a) with respect to any property
which is not used predominantly in a trade or busi-
ness at any time.
‘‘(4) ALTERNATIVE DEPRECIATION SYSTEM AP-
PLIES.—The election under subsection (a) may not
be made with respect to property which at any time
during the taxable year in which such property is
placed in service is—
‘‘(A) described in paragraph (1) of section
168A(g) or
‘‘(B) ‘listed property’ ‘not predominantly
used in a qualified business use’ as such terms
apply for purposes of paragraph (1) of
280F(b).’’.
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part VI of subchapter B of chapter 1 is amended
by adding after section 168 the following new items:
‘‘Sec. 168A. Rapid cost recovery system.
‘‘Sec. 168B. High productivity investment deduction.’’
SEC. 4. REPEAL OF MACRS.
(a) IN GENERAL.—Section 168 is amended by insert-
ing at the end thereof the following new subsection:
‘‘(k) REPEAL OF MACRS.—This section shall apply
to property placed in service after December 31, 2001,
only to the extent provided in section 168A.’’
SEC. 5. MODIFICATIONS TO ALTERNATIVE MINIMUM TAX.
(a) REPEAL OF DEPRECIATION PREFERENCE.—Sub-
paragraph (A) of section 56(a)(1) is amended to read as
follows:
‘‘(A) PRE-2002 PROPERTY.—
‘‘(i) CERTAIN PROPERTY PLACED IN
SERVICE
BEFORE
1999.—Except as pro-
vided in clause (iv), the depreciation deduc-
tion allowable under section 167 with re-
spect to any tangible property placed in
service after December 31, 1986, and be-
fore January 1, 1999, shall be determined
under the alternative system of section
168(g) but using the method of deprecia-
tion described in clause (iii).
‘‘(ii) CERTAIN PROPERTY PLACED IN
SERVICE
BEFORE
2002.—Except as pro-
vided in clause (iv), the method of depre-
ciation described in clause (iii) shall be
used to determine the depreciation deduc-
tion allowable under section 167 with re-
spect to—
‘‘(I) any tangible property placed
in service after December 31, 1998,
and before January 1, 2002, and
‘‘(II) any property to which sec-
tion 168A(f)(5) applies.
‘‘(iii) 150-percent declining balance
method for certain property.—Except as
provided in clause (iv), the method of de-
preciation used to determine depreciation
deductions under clauses (i) and (ii) shall
be—
‘‘(I) the 150 percent declining
balance method,
‘‘(II) switching to the straight
line method for the 1st taxable year
for which using the straight line
method with respect to the adjusted
basis as of the beginning of the year
will yield a higher allowance.
‘‘(iv) PROPERTY
DEPRECIATED
ON
THE STRAIGHT LINE BASIS.—The method
of depreciation used to determine the de-
preciation deductions under clauses (i) and
(ii) shall be the straight line method in the
case of—
‘‘(I) section 1250 property (as
defined in section 1250(c)), and
‘‘(II) other property if the depre-
ciation deduction determined under
section 168 with respect to such other
property for purposes of the regular
tax is determined using the straight
line method.’’
(b) REPEAL OF DEPRECIATION DEDUCTION FOR AD-
JUSTED CURRENT EARNINGS.—Clause (i) of section
56(g)(4)(A) (relating to the depreciation deduction for
purposes of computing adjusted current earnings) is
amended to read as follows:
‘‘(i) PROPERTY PLACED IN SERVICE
AFTER 1989.—
‘‘(I) PROPERTY PLACED IN SERV-
ICE BEFORE 1994.—The depreciation
deduction with respect to any property
placed in service before January 1,
1994, in a taxable year beginning
after 1989 shall be determined under
the alternative system of section
168(g).
‘‘(II) 
PROPERTY
PLACED
IN
SERVICE
BEFORE
2002.—The depre-
ciation deduction with respect to any
property placed in service after De-
cember 31, 1993, and before January
1, 2002 shall be determined under the
rules of subparagraph (A) of sub-
section (a)(1).
‘‘(III) PROPERTY
PLACED
IN
SERVICE AFTER 2001.—The deprecia-
tion deduction with respect to any
property placed in service after De-
cember 31, 2001, shall be the depre-
ciation deduction determined with re-
spect to such property for purposes of
the regular tax.
‘‘(IV) ANTICHURNING
RULE.—
For purposes of this clause, property
which section 168A(f)(5) applies shall
be treated as described in subclause
(III).’’
(c) TECHNICAL
AMENDMENTS.—Section 56(a)(5)
(relating to minimum tax depreciation for pollution control
equipment) is amended by striking ‘‘section 168 using the
straight line method.’’ and inserting ‘‘section 168A(a).’’.
SEC. 6. CONFORMING AMENDMENTS.
(a) REFERENCES
TO DEPRECIATION ALLOWABLE
UNDER SECTION 168.—The Code is amended by striking
‘‘168’’ and inserting ‘‘168 or 168A’’ in the following
places:
(1) Section 47(c)(2)(A)(i).
(2) Section 280F(a)(1)(B)(iv).
(3) Section 280F(a)(2)(B).
(4) Section 280F(d)(1).
(5) Section 312(k)(3)(A).
(6) Section 381(c)(6).
(7) Section 936(i)(4)(B).
(8) Section 1250(b)(5)(A).
(9) Section 1250(b)(5)(B).
(10) Section 1397C(a)(1).
(b) AMENDMENTS TO REFLECT EXPENSING.—
(1) The Code is amended by striking ‘‘179’’
and inserting ‘‘168B or 179’’ in the following places:
(A) Section 179A(e)(5).
(B) Section 280F(d)(1), including the title
of such paragraph.
(C) Section 1397C(a)(1).
(2) Paragraph (1) of section 263 is amended by
striking ‘‘; or’’ at the end of subparagraph (G) and
inserting a comma, by striking the period at the end
of subparagraph (H) and inserting ‘‘, or’’, and by in-
In the case of property to which section 168 or
168A does not apply, subparagraph (A) shall be
applied as if section 168A applies to such prop-
erty.’’
(d) OTHER CONFORMING AMENDMENTS.—
(1) Section 936(i)(4)(B)(i) is amended by in-
serting ‘‘high productivity property,’’ before ‘‘3-year
property’’.
(2) Section 936(i)(4)(B) is amended by striking
out clause (v) thereof.
SEC. 7. MODIFIED CLASS LIFE.
(a) TABLE OF MODIFIED CLASS LIVES.—
(1) IN
GENERAL.—The Secretary shall pre-
scribe a table showing classes of property and the
modified class life of each class of property. The ini-
tial table prescribed by such Secretary shall be based
on the schedule in subsection (b) with such changes
in the description of classes of property as the Sec-
retary deems appropriate, including the consolida-
tion of similar classes with identical modified class
lives.
(2) NEW
TYPES
OF
PROPERTY.—If the Sec-
retary identifies classes of property that are not de-
scribed in the schedule in subsection (b), the Sec-
retary shall modify the schedule described in para-
graph (1) by adding a new modified asset class for
such classes of property. If the Secretary determines
that any existing class of property includes assets
with distinctly different characteristics, the Sec-
retary may divide such class into 2 or more modified
asset classes. The modified class life for any class
established pursuant to this paragraph shall be the
same as the modified class life for other classes
which include assets with characteristics similar to
those of the assets in the new class.
(3) CHANGES IN LIVES OF PROPERTY.—
(A) 
DECREASE
IN
MODIFIED
CLASS
LIFE.—Upon petition from persons who place
in service assets in a particular modified asset
class, the Secretary shall examine whether the
modified class life for such class is too long (as
determined by comparing the modified class life
with the modified class life for modified asset
classes for assets which have characteristics
similar to those of the assets in the class being
examined). If the Secretary finds that the modi-
fied class life for the examined class is too long,
he shall promptly prescribe a new modified
class life for the class.
(B) INCREASE IN MODIFIED CLASS LIFE.—
If the Secretary determines that potentially
abusive transactions are occurring because the
modified class life of an asset class is shorter
than it should be (as measured by the stand-
ards set in subparagraph (A)), the Secretary
may prescribe a new modified class life for such
class after a period of notice and comment. In
no other case shall the Secretary increase the
modified class life of a class.
(b) TENTATIVE SCHEDULE.—
(1) IN GENERAL.—This subsection includes a
schedule of classes of assets and the modified class
life of each class of assets. The schedule shall form
the basis for the table to be prescribed by the Sec-
retary pursuant to subsection (a).
(2) DESCRIPTION
OF
ASSETS
CLASSES.—For
purposes of applying the schedule under this
subsection—
(A) MACRS CLASS.—If an asset class is
described in this subsection by reference to a
MACRS asset class, such asset class is the
asset class described in Internal Revenue Serv-
ice Revenue Procedure 87–56, as modified or
supplemented through the date of the enact-
ment of this Act.
(B) ASSET DESCRIBED IN TWO CLASSES.—
If an asset is described in two classes and one
of the classes is under the heading ‘‘Assets
Used in All Business Activities,’’ the asset shall
be classified in the asset class under such head-
ing. If an asset class is described in two asset
classes and one class has a specific description
and the other class has a reference to a
MACRS asset class, the asset shall be classified
in the asset class with the specific description.
(3) MODIFIED
CLASS
LIFE
SCHEDULE.—The
modified class life schedule is as follows:
Assets class and description of assets included
Modified class life (yrs)
Assets Used in All Business Activities:
1.11
Office furniture, fixtures and equipment (MACRS class
00.11) .......................................................................................
1.12
Information systems (MACRS class 00.12) .....................
1.13
Data handling equipment, except computers (MACRS
class 00.13) ..............................................................................
1.21
Noncommercial airplanes (MACRS class 00.21) ..............
1.22
Automobiles, Taxis (MACRS class 00.22) .......................
1.23
Buses (MACRS class 00.23) ............................................
1.24
Light general purpose trucks (MACRS class 00.241) .....
1.25
Heavy general purpose trucks (MACRS class 00.242) ....
1.26
Railroad cars and locomotives (MACRS class 00.25) ......
1.27
Tractor units for over-the-road use (MACRS class
00.26) .......................................................................................
1.28
Trailers and trailer mounted containers (MACRS class
00.27) .......................................................................................
1.29
Vessels, barges, etc. (MACRS class 00.28) ......................
1.31
Land improvements (MACRS class 00.3) ........................
1.41
Industrial steam and electric generation and/or distribu-
tion systems (MACRS class 00.4) ...........................................
Assets Used in the Following Activity Categories:
Agriculture:
2.1
Agriculture general (MACRS class 01.1) ...................
2.2
Cotton ginning assets (MACRS class 01.11) ..............
Assets class and description of assets included
Modified class life (yrs)
2.3
Cattle breeding or dairy (MACRS class 01.21) ..........
2.4
Young breeding work horse (MACRS class 01.221) ..
2.5
Old breeding work horse (MACRS class 01.222) .......
2.6
Young race horse (MACRS class 01.223) ..................
2.7
Old race horse (MACRS class 01.224) .......................
2.8
Other race horse (MACRS class 01.225) ...................
2.9
Hogs, breeding (MACRS class 01.23) ........................
2.10
Sheep & goats, breeding (MACRS class 01.24) ........
2.11
Farm buildings except structures (MACRS class
01.3) .................................................................................
2.12
Single purpose agricultural and horticultural struc-
tures (MACRS class 01.4) ...............................................
2.13
Tree or vine bearing fruit or nuts (any tree or vine
bearing fruits or nuts) .....................................................
Mining (MACRS class 10.0) ..................................................
Oil and Gas:
4.1
Offshore drilling (MACRS class 13.0) ........................
4.2
Drilling of oil and gas wells (MACRS class 13.1) ......
4.3
Exploration for and production of petroleum and nat-
ural gas deposits (MACRS class 13.2) ............................
4.4
Petroleum refining (MACRS class 13.3) ....................
Construction (MACRS class 15.0) ........................................
Manufacture of Food Products:
6.1
Manufacture of grain and grain mill products
(MACRS class 20.1) ........................................................
6.2
Manufacture of sugar and sugar products (MACRS
class 20.2) ........................................................................
6.3
Manufacture of vegetable oil and vegetable oil prod-
ucts (MACRS class 20.3) .................................................
6.4
Manufacture of food and other kindred products
(MACRS class 20.4) ........................................................
6.5
Manufacture of food and beverages—special handling
devices (MACRS class 20.5) ............................................
Manufacture of tobacco and tobacco products (MACRS
class 21.0) ................................................................................
Manufacture of yarn, fabrics, carpets, and apparel:
8.1
Manufacture of knitted goods (MACRS class 22.1) ...
8.2
Manufacture of yarn, thread, and woven fabric
(MACRS class 22.2) ........................................................
8.3
Manufacture of carpets and dyeing, finishing and
packaging of textile products (MACRS class 22.3, other
than assets used in the production of medical and dental
supplies) ...........................................................................
8.4
Manufacture of textured yarns (MACRS class 22.4)
8.5
Manufacture of nonwoven fabrics (MACRS class
22.5) .................................................................................
8.6
Manufacture of apparel (MACRS class 23.0) .............
Manufacture of drugs, medical and dental supplies:
9.1
Manufacture of drugs ..................................................
9.2
Manufacture of medical and dental supplies (assets
used in the production of medical and dental supplies
other than drugs and medicines [part of MACRS class
22.3]) ................................................................................
Assets class and description of assets included
Modified class life (yrs)
Timber and manufacture of wood products:
10.1
Cutting of timber (MACRS class 24.1) ....................
10.2
Sawing of dimensional stock from logs—permanent
(MACRS class 24.2) ........................................................
10.3
Sawing of dimensional stock from logs—temporary
(MACRS class 24.3) ........................................................
10.4
Manufacture of wood products and furniture
(MACRS class 24.4) ........................................................
10.5
Manufacture of pulp and paper (MACRS class
26.1) .................................................................................
10.6
Manufacture of converted paper, paperboard, and
pulp products ...................................................................
Printing, publishing and allied industries (MACRS class
27.0) .........................................................................................
Manufacture of chemicals, rubber products and plastics:
12.1
Manufacture of chemicals and allied products
(MACRS class 28.0) ........................................................
12.2
Manufacture of rubber products (MACRS class
30.1) .................................................................................
12.3
Manufacture of rubber products—special tools and
devices (MACRS class 30.11) ..........................................
12.4
Manufacture of finished plastic products (MACRS
class 30.2) ........................................................................
12.5
Manufacture of finished plastic products—special
tools (MACRS class 30.21) ..............................................
Manufacture of leather and leather products (MACRS
class 31.0) ................................................................................
Manufacture of products from sand and stone:
14.1
Manufacture of glass products (MACRS class 32.1)
14.2
Manufacture 
of 
glass 
products—special 
tools
(MACRS class 32.11) ......................................................
14.3
Manufacture of cement (MACRS class 32.2) ...........
14.4
Manufacture of other stone and clay products
(MACRS class 32.3) ........................................................
Manufacture of metals and metal products:
15.1
Manufacture of primary nonferrous metals (MACRS
class 33.2) ........................................................................
15.2
Manufacture of primary nonferrous metals—special
tools (MACRS class 33.21) ..............................................
15.3
Manufacture of foundry products (MACRS class
33.3) .................................................................................
15.4
Manufacture 
of 
primary 
steel 
mill 
products
(MACRS class 33.4) ........................................................
15.5
Manufacture of fabricated metal products (MACRS
class 34.0) ........................................................................
15.6
Manufacture of fabricated metal products—special
tools (MACRS class 34.01) ..............................................
Manufacture of electrical and nonelectrical machinery and
other mechanical products (MACRS class 35.0) .....................
Manufacture of electronic components and engines:
17.1
Manufacture of electronic components, products and
systems (MACRS class 36.0) ...........................................
17.2
Manufacture of semiconductors (MACRS class
36.1) .................................................................................
Assets class and description of assets included
Modified class life (yrs)
17.3
Manufacture of electronic internal combustion and
turbine engines (includes all manufacturing and assem-
bly assets used in the manufacture and assembly of elec-
tronic internal combustion and turbine engines greater
than 50 horsepower and replacement parts. Excludes
buildings and structural components) ..............................
Manufacture of transportation products:
18.1
Manufacture of motor vehicles (MACRS class
37.11) ...............................................................................
18.2
Manufacture 
of 
motor 
vehicles—special 
tools
(MACRS class 37.12) ......................................................
18.3
Manufacture of aerospace products (MACRS class
37.2) .................................................................................
18.4
Ship and boat building machinery and equipment
(MACRS class 37.31) ......................................................
18.5
Ship and boat building dry docks and land improve-
ments (MACRS class 37.32) ............................................
18.6
Ship and boat building—special tools (MACRS class
37.33) ...............................................................................
18.7
Manufacture of locomotives (MACRS class 37.41) ..
18.8
Manufacture of railroad cars (MACRS class 37.42)
Manufacture of personal and recreational products
(MACRS class 39.0) ................................................................
Railroad operations:
20.1
Railroad machinery and equipment (MACRS class
40.1) .................................................................................
20.2
Railroad structures and similar improvements
(MACRS class 40.2) ........................................................
20.3
Railroad wharves and docks (MACRS class 40.3) ...
20.4
Railroad track (MACRS class 40.4) .........................
20.5
Railroad hydraulic electric generating equipment
(MACRS class 40.51) ......................................................
20.6
Railroad nuclear generating equipment (MACRS
class 40.52) ......................................................................
20.7
Railroad 
steam 
electric 
generating 
equipment
(MACRS class 40.53) ......................................................
20.8
Railroad steam, compressed air and other plant
equipment (MACRS class 40.54) .....................................
Motor transport:
21.1
Motor transport-passengers (MACRS class 41.0) ....
21.2
Motor transport-freight (MACRS class 42.0) ...........
Water transportation (MACRS class 44.0) .........................
Air transport:
23.1
Air transport-general (MACRS class 45.0) ..............
23.2
Air transport (restricted) (MACRS class 45.1) ........
Pipeline transportation (MACRS class 46.0) ......................
Telephone communications:
25.1
Telephone central office buildings (MACRS class
48.11) ...............................................................................
25.2
Telephone central office equipment (MACRS class
48.12) ...............................................................................
25.3
Computer-based telephone central office switching
equipment (MACRS class 48.121) ...................................
25.4
Telephone station equipment (MACRS class 48.13)
Assets class and description of assets included
Modified class life (yrs)
25.5
Telephone distribution plant (MACRS class 48.14)
25.6
Advanced technology communications equipment
(section 168B(b)(2)(G)) ...................................................
Radio and television broadcasting (MACRS class 48.2) .....
Telegraph, ocean cable and satellite communications:
27.1
Electric power generating and distribution systems
(MACRS class 48.31) ......................................................
27.2
High frequency radio and microwave systems
(MACRS class 48.32) ......................................................
27.3
Cable and long-line systems (MACRS class 48.33)
27.4
Central office control equipment (MACRS class
48.34) ...............................................................................
27.5
Computerized switching, channeling and associated
control equipment (MACRS class 48.35) ........................
27.6
Satellite ground segment property (MACRS class
48.36) ...............................................................................
27.7
Satellite space segment property (MACRS class
48.37) ...............................................................................
27.8
Equipment 
installed 
on 
customer’s 
premises
(MACRS class 48.38) ......................................................
27.9
Support and service equipment (MACRS class
48.39) ...............................................................................
Cable television:
28.1
Headend (48.41) .......................................................
28.2
Subscriber connection and distribution systems
(MACRS class 48.42) ......................................................
28.3
Program origination (MACRS class 48.43) ..............
28.4
Service and test (MACRS class 48.44) .....................
28.5
Microwave system (MACRS class 48.45) .................
Electric services:
29.1
Electric utility hydraulic production plant (MACRS
class 49.11) ......................................................................
29.2
Electric utility nuclear production plant (MACRS
class 49.12) ......................................................................
29.3
Electric utility fuel assemblies (MACRS class
49.121) .............................................................................
29.4
Electric utility steam production plant (MACRS
class 49.13) ......................................................................
29.5
Electric utility transmission and distribution plant
(MACRS class 49.14) ......................................................
29.6
Electric utility combustion turbine production plant
(MACRS class 49.15) ......................................................
Gas distribution:
30.1
Gas utility distribution facilities (MACRS class
49.21) ...............................................................................
30.2
Gas utility manufactured gas production plants
(MACRS class 49.221) ....................................................
30.3
Gas utility substitute natural gas production plant
(MACRS class 49.222) ....................................................
30.4
Substitute natural gas-coal gasification (MACRS
class 49.223) ....................................................................
30.5
Natural gas production plant (MACRS class 49.23)
30.6
Gas utility truck pipelines and related storage facili-
ties (MACRS class 49.24) ................................................
Assets class and description of assets included
Modified class life (yrs)
30.7
Liquefied natural gas plant (MACRS class 49.25) ..
Water and steam distribution:
31.1
Water utilities (MACRS class 49.3) .........................
31.2
Central steam utility production and distribution
(MACRS class 49.4) ........................................................
Waste and sewage facilities:
32.1
Waste reduction and resource recovery plants
(MACRS class 49.5) ........................................................
32.2
Municipal wastewater treatment plant (MACRS
class 50) ...........................................................................
32.3
Municipal sewer (MACRS class 51) .........................
Wholesale and retail trade:
33.1
Distributive trades and services (MACRS class
57.0) .................................................................................
33.2
Distributive trade and services—section 1250 assets
(MACRS class 57.1; includes retail motor fuel outlets
(whether or not food or other convenience items are sold
at the outlet) ....................................................................
33.3
Rent to own property (qualified rent to own prop-
erty as defined in section 168(i)(13)) ..............................
Recreation:
34.1
Recreation (MACRS class 79.0) ...............................
34.2
Themes and amusement parks (MACRS class 80.0)
Special Assets (even if listed above):
Alternate energy assets:
35.1
Property described in section 48(a)(3)(A) (or would
be so described if ‘solar and wind’ were substituted for
‘solar’ in clause (i) thereof) determined without regard
to whether the property is public utility property ............
35.2
Biomass property (biomass property described in
section 48(l)(15) (as in effect on the day before the date
of enactment of the Revenue Reconciliation Act of 1990)
that is a qualifying small production facility with the
meaning of section 3(17)(c) of the Federal Power Act
(16 U.S.C. 796(17)(C)) as in effect on September 1,
1986 .................................................................................
35.3
Assets described in section 48(l)(3)(A)(ix) (as in ef-
fect on the day before the enactment of the Revenue
Reconciliation Act of 1990) .............................................
Research and experimentation assets:
36.1
Property used in connection with research and ex-
perimentation referred to in section 168(e)(3)(B) (as de-
termined without regard to section 168(k)) .....................
Section 1245 assets not described above .............................................
SEC. 8. TRANSITION RULES AND EFFECTIVE DATE.
(a) EFFECTIVE DATE.—The amendments made by
this Act shall be effective for property placed in service
on or after January 1, 2002, with respect to taxable years
beginning on or after or including such date.
(b) SURVIVAL OF TRANSITION RULES.—The rephras-
ing or relabeling of any provision of the Internal Revenue
Code of 1986 that occurs by reason of this Act shall not
operate to abrogate or limit any transitional rule or excep-
tion applicable to the provision that was rephrased.
Æ