H. R. 4520—233
SEC. 900. MODIFICATION OF DEFINITION OF CONTROLLED GROUP OF
CORPORATIONS.
(a) IN GENERAL.—Section 1563(a)(2) (relating to brother-sister
controlled group) is amended by striking ‘‘possessing—’’ and all
that follows through ‘‘(B)’’ and inserting ‘‘possessing’’.
(b) APPLICATION OF EXISTING RULES TO OTHER CODE PROVI-
SIONS.—Section 1563(f) (relating to other definitions and rules) is
amended by adding at the end the following new paragraph:
‘‘(5) BROTHER-SISTER CONTROLLED GROUP DEFINITION FOR
PROVISIONS OTHER THAN THIS PART.—
‘‘(A) IN GENERAL.—Except as specifically provided in
an applicable provision, subsection (a)(2) shall be applied
to an applicable provision as if it read as follows:
‘‘(2) BROTHER-SISTER
CONTROLLED
GROUP.—Two or more
corporations if 5 or fewer persons who are individuals, estates,
or trusts own (within the meaning of subsection (d)(2) stock
possessing—
‘‘(A) at least 80 percent of the total combined voting
power of all classes of stock entitled to vote, or at least
80 percent of the total value of shares of all classes of
stock, of each corporation, and
‘‘(B) more than 50 percent of the total combined voting
power of all classes of stock entitled to vote or more than
50 percent of the total value of shares of all classes of
stock of each corporation, taking into account the stock
ownership of each such person only to the extent such
stock ownership is identical with respect to each such cor-
poration.’
‘‘(B) APPLICABLE PROVISION.—For purposes of this para-
graph, an applicable provision is any provision of law (other
than this part) which incorporates the definition of con-
trolled group of corporations under subsection (a).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after the date of the enact-
ment of this Act.
SEC. 901. CLASS LIVES FOR UTILITY GRADING COSTS.
(a) GAS UTILITY PROPERTY.—Section 168(e)(3)(E) (defining 15-
year property), as amended by this Act, is amended by striking
‘‘and’’ at the end of clause (iv), by striking the period at the end
of clause (v) and inserting ‘‘, and’’, and by adding at the end
the following new clause:
‘‘(vi) initial clearing and grading land improve-
ments with respect to gas utility property.’’.
(b) ELECTRIC UTILITY PROPERTY.—Section 168(e)(3) is amended
by adding at the end the following new subparagraph:
‘‘(F) 20-YEAR PROPERTY.—The term ‘20-year property’
means initial clearing and grading land improvements with
respect to any electric utility transmission and distribution
plant.’’.
(c) CONFORMING AMENDMENT.—The table contained in section
168(g)(3)(B), as amended by this Act, is amended by inserting
after the item relating to subparagraph (E)(v) the following new
items:
‘‘(E)(vi) ...............................................................................................
20’’.
‘‘(F) .....................................................................................................
25’’.
H. R. 4520—234
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act.
SEC. 902. CONSISTENT AMORTIZATION OF PERIODS FOR INTANGIBLES.
(a) START-UP EXPENDITURES.—
(1) ALLOWANCE OF DEDUCTION.—Paragraph (1) of section
195(b) (relating to start-up expenditures) is amended to read
as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—If a taxpayer elects the
application of this subsection with respect to any start-up
expenditures—
‘‘(A) the taxpayer shall be allowed a deduction for
the taxable year in which the active trade or business
begins in an amount equal to the lesser of—
‘‘(i) the amount of start-up expenditures with
respect to the active trade or business, or
‘‘(ii) $5,000, reduced (but not below zero) by the
amount by which such start-up expenditures exceed
$50,000, and
‘‘(B) the remainder of such start-up expenditures shall
be allowed as a deduction ratably over the 180-month
period beginning with the month in which the active trade
or business begins.’’.
(2) CONFORMING
AMENDMENT.—Subsection (b) of section
195 is amended by striking ‘‘AMORTIZE’’ and inserting ‘‘DEDUCT’’
in the heading.
(b) ORGANIZATIONAL EXPENDITURES.—Subsection (a) of section
248 (relating to organizational expenditures) is amended to read
as follows:
‘‘(a) ELECTION TO DEDUCT.—If a corporation elects the applica-
tion of this subsection (in accordance with regulations prescribed
by the Secretary) with respect to any organizational expenditures—
‘‘(1) the corporation shall be allowed a deduction for the
taxable year in which the corporation begins business in an
amount equal to the lesser of—
‘‘(A) the amount of organizational expenditures with
respect to the taxpayer, or
‘‘(B) $5,000, reduced (but not below zero) by the amount
by which such organizational expenditures exceed $50,000,
and
‘‘(2) the remainder of such organizational expenditures
shall be allowed as a deduction ratably over the 180-month
period beginning with the month in which the corporation
begins business.’’.
(c) TREATMENT OF ORGANIZATIONAL AND SYNDICATION FEES OR
PARTNERSHIPS.—
(1) IN GENERAL.—Section 709(b) (relating to amortization
of organization fees) is amended by redesignating paragraph
(2) as paragraph (3) and by amending paragraph (1) to read
as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—If a taxpayer elects the
application of this subsection (in accordance with regulations
prescribed by the Secretary) with respect to any organizational
expenses—
H. R. 4520—235
‘‘(A) the taxpayer shall be allowed a deduction for
the taxable year in which the partnership begins business
in an amount equal to the lesser of—
‘‘(i) the amount of organizational expenses with
respect to the partnership, or
‘‘(ii) $5,000, reduced (but not below zero) by the
amount by which such organizational expenses exceed
$50,000, and
‘‘(B) the remainder of such organizational expenses
shall be allowed as a deduction ratably over the 180-month
period beginning with the month in which the partnership
begins business.
‘‘(2) 
DISPOSITIONS
BEFORE
CLOSE
OF
AMORTIZATION
PERIOD.—In any case in which a partnership is liquidated before
the end of the period to which paragraph (1)(B) applies, any
deferred expenses attributable to the partnership which were
not allowed as a deduction by reason of this section may be
deducted to the extent allowable under section 165.’’.
(2) CONFORMING
AMENDMENT.—Subsection (b) of section
709 is amended by striking ‘‘AMORTIZATION’’ and inserting
‘‘DEDUCTION’’ in the heading.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 903. FREEZE OF PROVISIONS REGARDING SUSPENSION OF
INTEREST WHERE SECRETARY FAILS TO CONTACT TAX-
PAYER.
(a) IN GENERAL.—Section 6404(g) (relating to suspension of
interest and certain penalties where Secretary fails to contact tax-
payer) is amended by striking ‘‘1-year period (18-month period
in the case of taxable years beginning before January 1, 2004)’’
both places it appears and inserting ‘‘18-month period’’.
(b) EXCEPTION FOR GROSS MISSTATEMENT.—Section 6404(g)(2)
(relating to exceptions) is amended by striking ‘‘or’’ at the end
of subparagraph (C), by redesignating subparagraph (D) as subpara-
graph (E), and by inserting after subparagraph (C) the following
new subparagraph:
‘‘(D) any interest, penalty, addition to tax, or additional
amount with respect to any gross misstatement; or’’.
(c) EXCEPTION FOR LISTED AND REPORTABLE TRANSACTIONS.—
Section 6404(g)(2) (relating to exceptions), as amended by subsection
(b), is amended by striking ‘‘or’’ at the end of subparagraph (D),
by redesignating subparagraph (E) as subparagraph (F), and by
inserting after subparagraph (D) the following new subparagraph:
‘‘(E) any interest, penalty, addition to tax, or additional
amount with respect to any reportable transaction with
respect to which the requirement of section 6664(d)(2)(A)
is not met and any listed transaction (as defined in
6707A(c)); or’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2003.
(2) EXCEPTION FOR REPORTABLE OR LISTED TRANSACTIONS.—
The amendments made by subsection (c) shall apply with
respect to interest accruing after October 3, 2004.
H. R. 4520—236
SEC. 904. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL WAGE
PAYMENTS IN EXCESS OF $1,000,000.
(a) IN GENERAL.—If an employer elects under Treasury Regula-
tion 31.3402(g)–1 to determine the amount to be deducted and
withheld from any supplemental wage payment by using a flat
percentage rate, the rate to be used in determining the amount
to be so deducted and withheld shall not be less than 28 percent
(or the corresponding rate in effect under section 1(i)(2) of the
Internal Revenue Code of 1986 for taxable years beginning in
the calendar year in which the payment is made).
(b) SPECIAL RULE FOR LARGE PAYMENTS.—
(1) IN
GENERAL.—Notwithstanding subsection (a), if the
supplemental wage payment, when added to all such payments
previously made by the employer to the employee during the
calendar year, exceeds $1,000,000, the rate used with respect
to such excess shall be equal to the maximum rate of tax
in effect under section 1 of such Code for taxable years begin-
ning in such calendar year.
(2) AGGREGATION.—All persons treated as a single employer
under subsection (a) or (b) of section 52 of the Internal Revenue
Code of 1986 shall be treated as a single employer for purposes
of this subsection.
(c) CONFORMING AMENDMENT.—Section 13273 of the Revenue
Reconciliation Act of 1993 (Public Law 103–66) is repealed.
(d) EFFECTIVE DATE.—The provisions of, and the amendment
made by, this section shall apply to payments made after December
31, 2004.
SEC. 905. TREATMENT OF SALE OF STOCK ACQUIRED PURSUANT TO
EXERCISE OF STOCK OPTIONS TO COMPLY WITH CON-
FLICT-OF-INTEREST REQUIREMENTS.
(a) IN GENERAL.—Section 421 (relating to general rules for
certain stock options) is amended by adding at the end the following
new subsection:
‘‘(d) CERTAIN SALES TO COMPLY WITH CONFLICT-OF-INTEREST
REQUIREMENTS.—If—
‘‘(1) a share of stock is transferred to an eligible person
(as defined in section 1043(b)(1)) pursuant to such person’s
exercise of an option to which this part applies, and
‘‘(2) such share is disposed of by such person pursuant
to a certificate of divestiture (as defined in section 1043(b)(2)),
such disposition shall be treated as meeting the requirements of
section 422(a)(1) or 423(a)(1), whichever is applicable.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to sales after the date of the enactment of this Act.
SEC. 906. APPLICATION OF BASIS RULES TO NONRESIDENT ALIENS.
(a) IN GENERAL.—Section 72 (relating to annuities and certain
proceeds of endowment and life insurance contracts) is amended
by redesignating subsection (w) as subsection (x) and by inserting
after subsection (v) the following new subsection:
‘‘(w) APPLICATION OF BASIS RULES TO NONRESIDENT ALIENS.—
‘‘(1) IN GENERAL.—Notwithstanding any other provision of
this section, for purposes of determining the portion of any
distribution which is includible in gross income of a distributee
who is a citizen or resident of the United States, the investment
H. R. 4520—237
in the contract shall not include any applicable nontaxable
contributions or applicable nontaxable earnings.
‘‘(2) APPLICABLE NONTAXABLE CONTRIBUTION.—For purposes
of this subsection, the term ‘applicable nontaxable contribution’
means any employer or employee contribution—
‘‘(A) which was made with respect to compensation—
‘‘(i) for labor or personal services performed by
an employee who, at the time the labor or services
were performed, was a nonresident alien for purposes
of the laws of the United States in effect at such
time, and
‘‘(ii) which is treated as from sources without the
United States, and
‘‘(B) which was not subject to income tax (and would
have been subject to income tax if paid as cash compensa-
tion when the services were rendered) under the laws
of the United States or any foreign country.
‘‘(3) APPLICABLE NONTAXABLE EARNINGS.—For purposes of
this subsection, the term ‘applicable nontaxable earnings’
means earnings—
‘‘(A) which are paid or accrued with respect to any
employer or employee contribution which was made with
respect to compensation for labor or personal services per-
formed by an employee,
‘‘(B) with respect to which the employee was at the
time the earnings were paid or accrued a nonresident alien
for purposes of the laws of the United States, and
‘‘(C) which were not subject to income tax under the
laws of the United States or any foreign country.
‘‘(4) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary to carry out the provisions
of this subsection, including regulations treating contributions
and earnings as not subject to tax under the laws of any
foreign country where appropriate to carry out the purposes
of this subsection.’’.
(b) BASIS.—Section 83 (relating to property transferred in
connection with the performance of services is amended by adding
after paragraph (3) of subsection (c) the following new paragraph:
‘‘(4) For purposes of determining an individual’s basis in
property transferred in connection with the performance of
services, rules similar to the rules of section 72(w) shall apply.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to distributions on or after the date of the enactment
of this Act.
SEC. 907. LIMITATION OF EMPLOYER DEDUCTION FOR CERTAIN
ENTERTAINMENT EXPENSES.
(a) IN GENERAL.—Paragraph (2) of section 274(e) (relating to
expenses treated as compensation) is amended to read as follows:
‘‘(2) EXPENSES TREATED AS COMPENSATION.—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), expenses for goods, services, and facilities, to the extent
that the expenses are treated by the taxpayer, with respect
to the recipient of the entertainment, amusement, or recre-
ation, as compensation to an employee on the taxpayer’s
return of tax under this chapter and as wages to such
H. R. 4520—238
employee for purposes of chapter 24 (relating to with-
holding of income tax at source on wages).
‘‘(B) SPECIFIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of a recipient who
is a specified individual, subparagraph (A) and para-
graph (9) shall each be applied by substituting ‘to
the extent that the expenses do not exceed the amount
of the expenses which’ for ‘to the extent that the
expenses’.
‘‘(ii) SPECIFIED INDIVIDUAL.—For purposes of clause
(i), the term ‘specified individual’ means any individual
who—
‘‘(I) is subject to the requirements of section
16(a) of the Securities Exchange Act of 1934 with
respect to the taxpayer, or
‘‘(II) would be subject to such requirements
if the taxpayer were an issuer of equity securities
referred to in such section.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to expenses incurred after the date of the enactment
of this Act.
SEC. 908. RESIDENCE AND SOURCE RULES RELATING TO UNITED
STATES POSSESSIONS.
(a) RESIDENCE
AND SOURCE RULES.—Subpart D of part III
of subchapter N of chapter 1 (relating to possessions of the United
States) is amended by adding at the end the following new section:
‘‘SEC. 937. RESIDENCE AND SOURCE RULES INVOLVING POSSESSIONS.
‘‘(a) BONA FIDE RESIDENT.—For purposes of this subpart, sec-
tion 865(g)(3), section 876, section 881(b), paragraphs (2) and (3)
of section 901(b), section 957(c), section 3401(a)(8)(C), and section
7654(a), except as provided in regulations, the term ‘bona fide
resident’ means a person—
‘‘(1) who is present for at least 183 days during the taxable
year in Guam, American Samoa, the Northern Mariana Islands,
Puerto Rico, or the Virgin Islands, as the case may be, and
‘‘(2) who does not have a tax home (determined under
the principles of section 911(d)(3) without regard to the second
sentence thereof) outside such specified possession during the
taxable year and does not have a closer connection (determined
under the principles of section 7701(b)(3)(B)(ii)) to the United
States or a foreign country than to such specified possession.
For purposes of paragraph (1), the determination as to whether
a person is present for any day shall be made under the principles
of section 7701(b).
‘‘(b) SOURCE RULES.—Except as provided in regulations, for
purposes of this title—
‘‘(1) except as provided in paragraph (2), rules similar to
the rules for determining whether income is income from
sources within the United States or is effectively connected
with the conduct of a trade or business within the United
States shall apply for purposes of determining whether income
is from sources within a possession specified in subsection
(a)(1) or effectively connected with the conduct of a trade or
business within any such possession, and
‘‘(2) any income treated as income from sources within
the United States or as effectively connected with the conduct
H. R. 4520—239
of a trade or business within the United States shall not be
treated as income from sources within any such possession
or as effectively connected with the conduct of a trade or busi-
ness within any such possession.
‘‘(c) REPORTING REQUIREMENT.—
‘‘(1) IN GENERAL.—If, for any taxable year, an individual
takes the position for United States income tax reporting pur-
poses that the individual became, or ceases to be, a bona
fide resident of a possession specified in subsection (a)(1), such
individual shall file with the Secretary, at such time and in
such manner as the Secretary may prescribe, notice of such
position.
‘‘(2) TRANSITION
RULE.—If, for any of an individual’s 3
taxable years ending before the individual’s first taxable year
ending after the date of the enactment of this subsection, the
individual took a position described in paragraph (1), the indi-
vidual shall file with the Secretary, at such time and in such
manner as the Secretary may prescribe, notice of such posi-
tion.’’.
(b) PENALTY.—Section 6688 is amended—
(1) by inserting ‘‘under section 937(c) or’’ before ‘‘by regula-
tions’’, and
(2) by striking ‘‘$100’’ and inserting ‘‘$1,000’’.
(c) CONFORMING AND CLERICAL AMENDMENTS.—
(1) Section 931(d) is amended to read as follows:
‘‘(d) EMPLOYEES OF THE UNITED STATES.—Amounts paid for
services performed as an employee of the United States (or any
agency thereof) shall be treated as not described in paragraph
(1) or (2) of subsection (a).’’.
(2) Section 932 is amended by striking ‘‘at the close of
the taxable year’’ and inserting ‘‘during the entire taxable year’’
each place it appears.
(3) Section 934(b)(4) is amended by striking ‘‘the Virgin
Islands or’’ each place it appears.
(4) Section 935, as in effect before the effective date of
its repeal, is amended—
(A) by striking ‘‘for the taxable year who’’ in subsection
(a) and inserting ‘‘who, during the entire taxable year’’,
(B) by inserting ‘‘bona fide’’ before ‘‘resident’’ in sub-
section (a)(1),
(C) in subsection (b)(1)—
(i) by inserting ‘‘(other a bona fide resident of
Guam during the entire taxable year)’’ after ‘‘United
States’’ in subparagraph (A), and
(ii) by inserting ‘‘bona fide’’ before ‘‘resident’’ in
subparagraph (B), and
(D) in subsection (b)(2) by striking ‘‘residence and’’.
(5) Section 957(c) is amended—
(A) in paragraph (2)(B) by striking ‘‘conduct of an
active’’ and inserting ‘‘active conduct of a’’, and
(B) in the last sentence by striking ‘‘derived from
sources within a possession, was effectively connected with
the conduct of a trade or business within a possession,
or’’.
H. R. 4520—240
(6) The table of sections of subpart D of part III of sub-
chapter N of chapter 1 is amended by adding at the end
the following new item:
‘‘Sec. 937. Residence and source rules involving possessions.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to
taxable years ending after the date of the enactment of this
Act.
(2) 183-DAY RULE.—Section 937(a)(1) of the Internal Rev-
enue Code of 1986 (as added by this section) shall apply to
taxable years beginning after the date of the enactment of
this Act.
(3) SOURCING.—Section 937(b)(2) of such Code (as so added)
shall apply to income earned after the date of the enactment
of this Act.
SEC. 909. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY
REGULATORY 
COMMISSION 
OR 
STATE 
ELECTRIC
RESTRUCTURING POLICY.
(a) IN GENERAL.—Section 451 (relating to general rule for tax-
able year of inclusion) is amended by adding at the end the following
new subsection:
‘‘(i) SPECIAL RULE FOR SALES OR DISPOSITIONS TO IMPLEMENT
FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC
RESTRUCTURING POLICY.—
‘‘(1) IN GENERAL.—In the case of any qualifying electric
transmission transaction for which the taxpayer elects the
application of this section, qualified gain from such transaction
shall be recognized—
‘‘(A) in the taxable year which includes the date of
such transaction to the extent the amount realized from
such transaction exceeds—
‘‘(i) the cost of exempt utility property which is
purchased by the taxpayer during the 4-year period
beginning on such date, reduced (but not below zero)
by
‘‘(ii) any portion of such cost previously taken into
account under this subsection, and
‘‘(B) ratably over the 8-taxable year period beginning
with the taxable year which includes the date of such
transaction, in the case of any such gain not recognized
under subparagraph (A).
‘‘(2) QUALIFIED GAIN.—For purposes of this subsection, the
term ‘qualified gain’ means, with respect to any qualifying
electric transmission transaction in any taxable year—
‘‘(A) any ordinary income derived from such transaction
which would be required to be recognized under section
1245 or 1250 for such taxable year (determined without
regard to this subsection), and
‘‘(B) any income derived from such transaction in excess
of the amount described in subparagraph (A) which is
required to be included in gross income for such taxable
year (determined without regard to this subsection).
‘‘(3) QUALIFYING ELECTRIC TRANSMISSION TRANSACTION.—
For purposes of this subsection, the term ‘qualifying electric
H. R. 4520—241
transmission transaction’ means any sale or other disposition
before January 1, 2007, of—
‘‘(A) property used in the trade or business of providing
electric transmission services, or
‘‘(B) any stock or partnership interest in a corporation
or partnership, as the case may be, whose principal trade
or business consists of providing electric transmission serv-
ices,
but only if such sale or disposition is to an independent trans-
mission company.
‘‘(4) INDEPENDENT TRANSMISSION COMPANY.—For purposes
of this subsection, the term ‘independent transmission company’
means—
‘‘(A) an independent transmission provider approved
by the Federal Energy Regulatory Commission,
‘‘(B) a person—
‘‘(i) who the Federal Energy Regulatory Commis-
sion determines in its authorization of the transaction
under section 203 of the Federal Power Act (16 U.S.C.
824b) or by declaratory order is not a market partici-
pant within the meaning of such Commission’s rules
applicable to independent transmission providers, and
‘‘(ii) whose transmission facilities to which the elec-
tion under this subsection applies are under the oper-
ational control of a Federal Energy Regulatory
Commission-approved independent transmission pro-
vider before the close of the period specified in such
authorization, but not later than the close of the period
applicable under subsection (a)(2)(B) as extended under
paragraph (2), or
‘‘(C) in the case of facilities subject to the jurisdiction
of the Public Utility Commission of Texas—
‘‘(i) a person which is approved by that Commission
as consistent with Texas State law regarding an inde-
pendent transmission provider, or
‘‘(ii) a political subdivision or affiliate thereof
whose transmission facilities are under the operational
control of a person described in clause (i).
‘‘(5) EXEMPT UTILITY PROPERTY.—For purposes of this sub-
section:
‘‘(A) IN GENERAL.—The term ‘exempt utility property’
means property used in the trade or business of—
‘‘(i) generating, transmitting, distributing, or
selling electricity, or
‘‘(ii) producing, transmitting, distributing, or
selling natural gas.
‘‘(B) NONRECOGNITION OF GAIN BY REASON OF ACQUISI-
TION
OF
STOCK.—Acquisition of control of a corporation
shall be taken into account under this subsection with
respect to a qualifying electric transmission transaction
only if the principal trade or business of such corporation
is a trade or business referred to in subparagraph (A).
‘‘(6) SPECIAL RULE FOR CONSOLIDATED GROUPS.—In the case
of a corporation which is a member of an affiliated group
filing a consolidated return, any exempt utility property pur-
chased by another member of such group shall be treated
H. R. 4520—242
as purchased by such corporation for purposes of applying
paragraph (1)(A).
‘‘(7) TIME FOR ASSESSMENT OF DEFICIENCIES.—If the tax-
payer has made the election under paragraph (1) and any
gain is recognized by such taxpayer as provided in paragraph
(1)(B), then—
‘‘(A) the statutory period for the assessment of any
deficiency, for any taxable year in which any part of the
gain on the transaction is realized, attributable to such
gain shall not expire prior to the expiration of 3 years
from the date the Secretary is notified by the taxpayer
(in such manner as the Secretary may by regulations pre-
scribe) of the purchase of exempt utility property or of
an intention not to purchase such property, and
‘‘(B) such deficiency may be assessed before the expira-
tion of such 3-year period notwithstanding any law or
rule of law which would otherwise prevent such assess-
ment.
‘‘(8) PURCHASE.—For purposes of this subsection, the tax-
payer shall be considered to have purchased any property if
the unadjusted basis of such property is its cost within the
meaning of section 1012.
‘‘(9) ELECTION.—An election under paragraph (1) shall be
made at such time and in such manner as the Secretary may
require and, once made, shall be irrevocable.
‘‘(10) NONAPPLICATION
OF
INSTALLMENT
SALES
TREAT-
MENT.—Section 453 shall not apply to any qualifying electric
transmission transaction with respect to which an election to
apply this subsection is made.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to transactions occurring after the date of the enactment
of this Act, in taxable years ending after such date.
SEC. 910. EXPANSION OF LIMITATION ON DEPRECIATION OF CERTAIN
PASSENGER AUTOMOBILES.
(a) IN GENERAL.—Section 179(b) (relating to limitations) is
amended by adding at the end the following new paragraph:
‘‘(6) LIMITATION ON COST TAKEN INTO ACCOUNT FOR CERTAIN
PASSENGER VEHICLES.—
‘‘(A) IN GENERAL.—The cost of any sport utility vehicle
for any taxable year which may be taken into account
under this section shall not exceed $25,000.
‘‘(B) SPORT UTILITY VEHICLE.—For purposes of subpara-
graph (A)—
‘‘(i) IN GENERAL.—The term ‘sport utility vehicle’
means any 4-wheeled vehicle—
‘‘(I) which is primarily designed or which can
be used to carry passengers over public streets,
roads, or highways (except any vehicle operated
exclusively on a rail or rails),
‘‘(II) which is not subject to section 280F, and
‘‘(III) which is rated at not more than 14,000
pounds gross vehicle weight.
‘‘(ii) CERTAIN
VEHICLES
EXCLUDED.—Such term
does not include any vehicle which—
‘‘(I) is designed to have a seating capacity of
more than 9 persons behind the driver’s seat,
H. R. 4520—243
‘‘(II) is equipped with a cargo area of at least
6 feet in interior length which is an open area
or is designed for use as an open area but is
enclosed by a cap and is not readily accessible
directly from the passenger compartment, or
‘‘(III) has an integral enclosure, fully enclosing
the driver compartment and load carrying device,
does not have seating rearward of the driver’s
seat, and has no body section protruding more
than 30 inches ahead of the leading edge of the
windshield.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to property placed in service after the date of the
enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.