1378
‘‘(4) N O REFUND OF DEFICIT REDUCTION TAX
ON FUEL USED IN TRAINS.—Fuel used in a diesel-
powered train shall be treated as a nontaxable use
for purposes of this section, except that paragraph
(1) shall not apply to so much of the tax imposed
by section 4081 as is attributable to the deficit re-
duction rate imposed by such section unless such
fuel was used by a State or any political subdivision
thereof.’’
(22) Paragraph (1) of section 9503(b) is
amended—
(A) by striking ‘‘gasoline),’’ in subpara-
graph (E) and inserting ‘‘gasoline and diesel
fuel), and’’,
(B) by striking subparagraph (F), and
(C) by redesignating subparagraph (G) as
subparagraph (F).
(23)(A) 
Subparagraph 
(B) 
of 
section
9503(b)(4) is amended by striking ‘‘, 4081, and
4091’’ and inserting ‘‘and 4081’’.
(B) Subparagraph (C) of section 9503(b)(4), as
amended by subtitle A, is amended by striking
‘‘4091’’ and inserting ‘‘4081’’.
1379
(24) Subparagraph (D) of section 9503(c)(6) is
amended by striking ‘‘, 4081, and 4091’’ and insert-
ing ‘‘and 4081’’.
(25) Paragraph (2) of section 9503(e) is
amended—
(A) by striking ‘‘, 4081, and 4091’’ and in-
serting ‘‘and 4081’’, and
(B) by striking ‘‘, 4081, or 4091’’ and in-
serting ‘‘or 4081’’.
(26) Subsection (b) of section 9508 is amend-
ed—
(A) by inserting ‘‘and diesel fuel’’ after
‘‘gasoline’’ in paragraph (2),
(B) by striking ‘‘diesel fuel and’’ in para-
graph (3), and
(C) by striking ‘‘4091’’ in the last sen-
tence, as added by subtitle A, and inserting
‘‘4081’’.
(27) The table of subparts for part III of sub-
chapter A of chapter 32 is amended by striking the
items relating to subparts A and B and inserting the
following new items:
‘‘Subpart A. Gasoline and diesel fuel.
‘‘Subpart B. Aviation fuel.’’
(d) E FFECTIVE DATE.—The amendments made by
this section shall take effect on April 1, 1994.
1380
SEC. 14243. FLOOR STOCKS TAX.
(a) I N GENERAL.—There is hereby imposed a floor
stocks tax on diesel fuel held by any person on April 1,
1994, if—
(1) no tax was imposed on such fuel under sec-
tion 4041(a) or 4091 of the Internal Revenue Code
of 1986 as in effect on the day before the date of
the enactment of this Act, and
(2) tax would have been imposed by section
4081 of such Code, as amended by this Act, on any
prior removal, entry, or sale of such fuel had such
section 4081 applied to all prior removals, entries,
and sales of such fuel.
(b) R ATE OF TAX.—The rate of the tax imposed by
subsection (a) shall be the amount of tax which would be
imposed under section 4081 of the Internal Revenue Code
of 1986 if there were a taxable sale of such fuel on such
date.
(c) LIABILITY AND PAYMENT OF TAX.—
(1) L IABILITY FOR TAX.—A person holding the
diesel fuel on April 1, 1994, to which the tax im-
posed by this section applies shall be liable for such
tax.
(2) M ETHOD OF PAYMENT.—The tax imposed
by this section shall be paid in such manner as the
Secretary shall prescribe.
1381
(3) T IME FOR PAYMENT.—The tax imposed by
this section shall be paid on or before January 31,
1995.
(d) DEFINITIONS.—For purposes of this section—
(1) D IESEL FUEL.—The term ‘‘diesel fuel’’ has
the meaning given such term by section 4083(a) of
such Code.
(2) S ECRETARY.—The term ‘‘Secretary’’ means
the Secretary of the Treasury or his delegate.
(e) EXCEPTIONS.—
(1) PERSONS
ENTITLED
TO
CREDIT
OR
RE-
FUND.—The tax imposed by this section shall not
apply to fuel held by any person exclusively for any
use to the extent a credit or refund of the tax im-
posed by section 4081 is allowable for such use.
(2) COMPLIANCE WITH DYEING REQUIRED.—
Paragraph (1) shall not apply to the holder of any
fuel if the holder of such fuel fails to comply with
any requirement imposed by the Secretary with re-
spect to dyeing and marking such fuel.
(f) OTHER LAWS APPLICABLE.—All provisions of
law, including penalties, applicable with respect to the
taxes imposed by section 4081 of such Code shall, insofar
as applicable and not inconsistent with the provisions of
this section, apply with respect to the floor stock taxes
1382
imposed by this section to the same extent as if such taxes
were imposed by such section 4081.
Subpart C—Extension of Motor Fuel Tax Rates;
Increased Deposits Into Highway Trust Fund
SEC. 14244. EXTENSION OF MOTOR FUEL TAX RATES; IN-
CREASED DEPOSITS INTO HIGHWAY TRUST
FUND.
(a) 
IN
GENERAL.—Clause 
(i) 
of 
section
4081(a)(2)(B), as amended by subpart B, is amended—
(1) by striking ‘‘11.5 cents’’ and inserting ‘‘14
cents’’, and
(2) by striking ‘‘17.5 cents’’ and inserting ‘‘20
cents’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 4081(c)(4), as
so amended, is amended to read as follows:
‘‘(A) IN
GENERAL.—In the case of the
Highway Trust Fund financing rate, the other-
wise applicable rate for gasoline in a qualified
alcohol mixture is—
‘‘(i) 8.6 cents a gallon for 10 percent
gasohol,
‘‘(ii) 9.842 cents a gallon for 7.7 per-
cent gasohol, and
1383
‘‘(iii) 10.922 cents a gallon for 5.7
percent gasohol.
In the case of a mixture none of the alcohol in which
consists of ethanol, clauses (i), (ii), and (iii) shall be
applied by substituting ‘8.0 cents’ for ‘8.6 cents’,
‘9.38 cents’ for ‘9.842 cents’, and ‘10.58 cents’ for
‘10.922’.’’
(2) Paragraph (5) of section 4081(c), as so
amended, is amended—
(A) by striking ‘‘12.1 cents’’ and inserting
‘‘14.6 cents’’, and
(B) by striking ‘‘11.5 cents’’ and inserting
‘‘14.0’’.
(3) Subparagraph (A) of section 4041(m)(1) is
amended to read as follows:
‘‘(A) under subsection (a)(2) the Highway
Trust Fund financing shall be 7 cents per gal-
lon, and’’.
(4) Paragraph (4) of section 6427(l), as amend-
ed by subpart B, is amended—
(A) by striking ‘‘the deficit reduction rate’’
and inserting ‘‘2.5 cents per gallon of the High-
way Trust Fund financing rate’’, and
1384
(B) by striking ‘‘DEFICIT
REDUCTION
TAX’’ in the heading and inserting ‘‘PORTION
OF TAX’’.
(5) Subsection (b) of section 9503 is amended
by adding at the end thereof the following new para-
graph:
‘‘(6) R ETENTION OF CERTAIN TAXES IN GEN-
ERAL FUND.—
‘‘(A) IN
GENERAL.—There shall not be
taken into account under paragraphs (1) and
(2)—
‘‘(i) the tax imposed by section 4081
on diesel fuel used in any train, and
‘‘(ii) so much of the following taxes as
are attributable to 2.5 cents of the High-
way Trust Fund financing rate:
‘‘(I) Motorboat fuel taxes (as de-
fined in subsection (c)(4)(D)).
‘‘(II) Small-engine fuel taxes (as
defined in subsection (c)(5)(B)).
‘‘(III) Nonhighway recreational
fuel taxes (as defined in subsection
(c)(6)(D)).
‘‘(B) TRANSFERS FROM HIGHWAY TRUST
FUND.—For 
purposes 
of 
determining 
the
1385
amount paid from the Highway Trust Fund
under paragraphs (4), (5), and (6) of sub-
section (c), the Highway Trust Fund financing
rates shall be treated as being 2.5 cents less
than the otherwise applicable rates.’’
(c) I NCREASE IN DEPOSITS IN MASS TRANSIT AC-
COUNT.—Paragraph (2) of section 9503(e) is amended by
striking ‘‘1.5 cents’’ and inserting ‘‘2 cents’’.
(d) REPEAL OF EXPIRED PROVISIONS.—
(1) Subparagraph (A) of section 4081(a)(2)
(relating to rate of tax), as amended by subpart B,
is amended—
(A) by adding ‘‘and’’ at the end of clause
(i),
(B) by striking ‘‘, and’’ at the end of
clause (ii) and inserting a period, and
(C) by striking clause (iii).
(2) Subparagraph (B) of section 4081(a)(2), as
so amended, is amended—
(A) by adding ‘‘and’’ at the end of clause
(i),
(B) by striking ‘‘, and’’ at the end of
clause (ii) and inserting a period, and
(C) by striking clause (iii).
1386
(3) Subsection (d) of section 4081, as so
amended, is amended by striking paragraph (3).
(4) Paragraphs (1) and (2) of section 4041(a)
(as so amended), and paragraph (3) of section
4041(c), are each amended by striking ‘‘the sum of
the Highway Trust Fund financing rate and the die-
sel fuel deficit reduction rate’’ and by inserting ‘‘the
Highway Trust Fund financing rate’’.
(5) Clause (ii) of section 4041(a)(1)(C), as so
amended, is amended—
(A) by striking ‘‘The Highway Trust Fund
financing rate’’ and inserting ‘‘So much of the
Highway Trust Fund financing rate as exceeds
2.5 cents per gallon’’, and
(B) by striking ‘‘HIGHWAY RATE’’ in the
heading and inserting ‘‘PORTION OF HIGHWAY
RATE’’.
(6) Clause (iii) of section 4041(a)(1)(C), as so
amended, is amended by striking ‘‘and the deficit re-
duction rate shall not apply’’.
(e) E FFECTIVE DATE.—The amendments made by
this section shall take effect October 1, 1995, but the
amendment made by subsection (c) shall apply only to
amounts attributable to taxes imposed on or after such
date.
1387
PART V—COMPLIANCE PROVISIONS
SEC. 14251. REPORTING REQUIRED FOR CERTAIN PAY-
MENTS TO CORPORATIONS.
(a) SECTION 6041.—Section 6041 (relating to infor-
mation at source) is amended by adding at the end thereof
the following new subsection:
‘‘(f) SPECIAL RULES FOR PAYMENTS FOR SERV-
ICES.—No payment for the performance of services shall
be exempt from the requirements of this section merely
because it is a payment to a corporation.’’
(b) S ECTION 6041A(a).—Subsection (a) of section
6041A is amended by adding at the end thereof the follow-
ing new sentence: ‘‘A payment shall not be exempt from
the requirements of this subsection merely because it is
a payment to a corporation.’’.
(c) E FFECTIVE DATE.—The amendments made by
this section shall apply to payments made after December
31, 1993.
SEC. 14252. MODIFICATIONS TO SUBSTANTIAL UNDER-
STATEMENT AND RETURN-PREPARER PEN-
ALTIES.
(a) REASONABLE BASIS REQUIRED.—
(1) SUBSTANTIAL
UNDERSTATEMENT
PEN-
ALTY.—Clause (ii) of section 6662(d)(2)(B) (relat-
ing to reduction for understatement due to position
1388
of taxpayer or disclosed item) is amended to read as
follows:
‘‘(ii) any item if—
‘‘(I) the relevant facts affecting
the item’s tax treatment are ade-
quately disclosed in the return or in a
statement attached to the return, and
‘‘(II) there is a reasonable basis
for the tax treatment of such item by
the taxpayer.’’
(2) R ETURN PREPARER PENALTY.—Paragraph
(3) of section 6694(a) (relating to understatement of
taxpayer’s liability by income tax return preparer) is
amended to read as follows:
‘‘(3) the requirements of subclauses (I) and (II)
of section 6662(d)(2)(B)(ii) are not satisfied with
respect to such position,’’.
(b) S PECIAL TAX SHELTER RULE.—Subclause (II)
of section 6662(d)(2)(C)(i) (relating to special rules for
tax shelters) is amended by inserting before the period at
the end thereof the following: ‘‘and the reasonably antici-
pated after-tax benefits from the taxpayer’s investment in
such shelter do not significantly exceed the reasonably an-
ticipated pre-tax economic profit or loss from such invest-
ment’’.
1389
(c) REASONABLE CAUSE EXCEPTION.—Paragraph
(1) of section 6664(c) is revised by striking ‘‘this part’’
and inserting ‘‘section 6662’’.
(d) E FFECTIVE DATE.—The amendments made by
this section shall apply to returns the due dates for which
(determined without regard to extensions) are after De-
cember 31, 1993.
SEC. 14253. RETURNS RELATING TO THE CANCELLATION
OF INDEBTEDNESS BY CERTAIN FINANCIAL
ENTITIES.
(a) I N GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 (relating to information concern-
ing transactions with other persons) is amended by adding
at the end thereof the following new section:
‘‘SEC. 6050P. RETURNS RELATING TO THE CANCELLATION
OF INDEBTEDNESS BY CERTAIN FINANCIAL
ENTITIES.
‘‘(a) I N GENERAL.—Any applicable financial entity
which discharges (in whole or in part) the indebtedness
of any person during any calendar year shall make a re-
turn (at such time and in such form as the Secretary may
by regulations prescribe) setting forth—
‘‘(1) the name, address, and TIN of each per-
son whose indebtedness was discharged during such
calendar year,
1390
‘‘(2) the date of the discharge and the amount
of the indebtedness discharged, and
‘‘(3) such other information as the Secretary
may prescribe.
‘‘(b) E XCEPTION.—Subsection (a) shall not apply to
any discharge of less than $600.
‘‘(c) D EFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE
FINANCIAL
ENTITY.—The
term ‘applicable financial entity’ means—
‘‘(A) any financial institution described in
section 581 or 591(a) and any credit union,
‘‘(B) the Federal Deposit Insurance Cor-
poration, the Resolution Trust Corporation, and
the National Credit Union Administration, and
any successor or subunit of any of the fore-
going, and
‘‘(C) any other corporation which is a di-
rect or indirect subsidiary of an entity referred
to in subparagraph (A) but only if, by virtue of
being affiliated with such entity, such other cor-
poration is subject to supervision and examina-
tion by a Federal or State agency which regu-
lates entities referred to in subparagraph (A).
1391
‘‘(2) GOVERNMENTAL UNITS.—In the case of
an entity described in paragraph (1)(B), any return
under this section shall be made by the officer or
employee appropriately designated for the purpose of
making such return.
‘‘(d) S TATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED
TO BE FURNISHED.—Every applicable financial entity re-
quired to make a return under subsection (a) shall furnish
to each person whose name is required to be set forth in
such return a written statement showing—
‘‘(1) the name and address of the entity re-
quired to make such return, and
‘‘(2) the information required to be shown on
the return with respect to such person.
The written statement required under the preceding sen-
tence shall be furnished to the person on or before Janu-
ary 31 of the year following the calendar year for which
the return under subsection (a) was made.’’
(b) PENALTIES.—
(1) RETURNS.—Subparagraph (B) of section
6724(d)(1) is amended by redesignating clauses
(viii) through (xv) as clauses (ix) through (xvi), re-
spectively, and by inserting after clause (vii) the fol-
lowing new clause:
1392
‘‘(viii) section 6050P (relating to re-
turns relating to the cancellation of indebt-
edness by certain financial entities),’’.
(2) STATEMENTS.—Paragraph (2) of section
6724(d) is amended by redesignating subparagraphs
(P) through (S) as subparagraphs (Q) through (T),
respectively, and by inserting after subparagraph
(O) the following new subparagraph:
‘‘(P) section 6050P(d) (relating to returns
relating to the cancellation of indebtedness by
certain financial entities),’’.
(c) C LERICAL AMENDMENT.—The table of sections
for subpart B of part III of subchapter A of chapter 61
is amended by adding at the end thereof the following new
item:
‘‘Sec. 6050P. Returns relating to the cancellation of indebtedness
by certain financial entities.’’
(d) E FFECTIVE DATE.—The amendments made by
this section shall apply to discharges of indebtedness after
the date of the enactment of this Act.
PART VI—TREATMENT OF INTANGIBLES
SEC. 14261. AMORTIZATION OF GOODWILL AND CERTAIN
OTHER INTANGIBLES.
(a) G ENERAL RULE.—Part VI of subchapter B of
chapter 1 (relating to itemized deductions for individuals
1393
and corporations) is amended by adding at the end thereof
the following new section:
‘‘SEC. 197. AMORTIZATION OF GOODWILL AND CERTAIN
OTHER INTANGIBLES.
‘‘(a) G ENERAL RULE.—A taxpayer shall be entitled
to an amortization deduction with respect to any amortiz-
able section 197 intangible. The amount of such deduction
shall be determined by amortizing the adjusted basis (for
purposes of determining gain) of such intangible ratably
over the 14-year period beginning with the month in which
such intangible was acquired.
‘‘(b) N O OTHER DEPRECIATION OR AMORTIZATION
DEDUCTION ALLOWABLE.—Except as provided in sub-
section (a), no depreciation or amortization deduction
shall be allowable with respect to any amortizable section
197 intangible.
‘‘(c) AMORTIZABLE SECTION 197 INTANGIBLE.—For
purposes of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘amortizable section
197 intangible’ means any section 197 intangible—
‘‘(A) which is acquired by the taxpayer
after the date of the enactment of this section,
and
1395
‘‘(i) workforce in place including its
composition and terms and conditions
(contractual or otherwise) of its employ-
ment,
‘‘(ii) business books and records, oper-
ating systems, or any other information
base (including lists or other information
with respect to current or prospective cus-
tomers),
‘‘(iii) any patent, copyright, formula,
process, design, pattern, knowhow, format,
or other similar item,
‘‘(iv) any customer-based intangible,
‘‘(v) any supplier-based intangible,
and
‘‘(vi) any other similar item,
‘‘(D) any license, permit, or other right
granted by a governmental unit or an agency or
instrumentality thereof,
‘‘(E) any covenant not to compete (or
other arrangement to the extent such arrange-
ment has substantially the same effect as a cov-
enant not to compete) entered into in connec-
tion with an acquisition (directly or indirectly)
1396
of an interest in a trade or business or substan-
tial portion thereof, and
‘‘(F) any franchise, trademark, or trade
name.
‘‘(2) CUSTOMER-BASED INTANGIBLE.—
‘‘(A) IN GENERAL.—The term ‘customer-
based intangible’ means—
‘‘(i) composition of market,
‘‘(ii) market share, and
‘‘(iii) any other value resulting from
future provision of goods or services pursu-
ant to relationships (contractual or other-
wise) in the ordinary course of business
with customers.
‘‘(B) SPECIAL RULE FOR FINANCIAL INSTI-
TUTIONS.—In the case of a financial institu-
tion, the term ‘customer-based intangible’ in-
cludes deposit base and similar items.
‘‘(3) S UPPLIER-BASED INTANGIBLE.—The term
‘supplier-based intangible’ means any value resulting
from future acquisitions of goods or services pursu-
ant to relationships (contractual or otherwise) in the
ordinary course of business with suppliers of goods
or services to be used or sold by the taxpayer.
1397
‘‘(e) EXCEPTIONS.—For purposes of this section, the
term ‘section 197 intangible’ shall not include any of the
following:
‘‘(1) FINANCIAL INTERESTS.—Any interest—
‘‘(A) in a corporation, partnership, trust,
or estate, or
‘‘(B) under an existing futures contract,
foreign currency contract, notional principal
contract, or other similar financial contract.
‘‘(2) LAND.—Any interest in land.
‘‘(3) COMPUTER SOFTWARE.—
‘‘(A) IN GENERAL.—Any—
‘‘(i) computer software which is read-
ily available for purchase by the general
public, is subject to a nonexclusive license,
and has not been substantially modified,
and
‘‘(ii) other computer software which is
not acquired in a transaction (or series of
related transactions) involving the acquisi-
tion of assets constituting a trade or busi-
ness or substantial portion thereof.
‘‘(B) COMPUTER
SOFTWARE
DEFINED.—
For purposes of subparagraph (A), the term
‘computer software’ means any program de-
1398
signed to cause a computer to perform a de-
sired function. Such term shall not include any
data base or similar item unless the data base
or item is in the public domain and is incidental
to the operation of otherwise qualifying com-
puter software.
‘‘(4) CERTAIN
INTERESTS
OR
RIGHTS
AC-
QUIRED SEPARATELY.—Any of the following not ac-
quired in a transaction (or series of related trans-
actions) involving the acquisition of assets constitut-
ing a trade business or substantial portion thereof:
‘‘(A) Any interest in a film, sound record-
ing, video tape, book, or similar property.
‘‘(B) Any right to receive tangible property
or services under a contract or granted by a
governmental unit or agency or instrumentality
thereof.
‘‘(C) Any interest in a patent or copyright.
‘‘(D) To the extent provided in regulations,
any right under a contract (or granted by a
governmental unit or an agency or instrumen-
tality thereof) if such right—
‘‘(i) has a fixed duration of less than
14 years, or
1399
‘‘(ii) is fixed as to amount and, with-
out regard to this section, would be recov-
erable under a method similar to the unit-
of-production method.
‘‘(5) I NTERESTS UNDER LEASES AND DEBT IN-
STRUMENTS.—Any interest under—
‘‘(A) an existing lease of tangible property,
or
‘‘(B) except as provided in subsection
(d)(2)(B), any existing indebtedness.
‘‘(6) T REATMENT OF SPORTS FRANCHISES.—A
franchise to engage in professional football, basket-
ball, baseball, or other professional sport, and any
item acquired in connection with such a franchise.
‘‘(7) C ERTAIN TRANSACTION COSTS.—Any fees
for professional services, and any transaction costs,
incurred by parties to a transaction with respect to
which any portion of the gain or loss is not recog-
nized under part III of subchapter C.
‘‘(f) SPECIAL RULES.—
‘‘(1) TREATMENT OF CERTAIN DISPOSITIONS,
ETC.—If there is a disposition of any amortizable
section 197 intangible acquired in a transaction or
series of related transactions (or any such intangible
becomes worthless) and one or more other amortiz-
1400
able section 197 intangibles acquired in such trans-
action or series of related transactions are re-
tained—
‘‘(A) no loss shall be recognized by reason
of such disposition (or such worthlessness), and
‘‘(B) appropriate adjustments to the ad-
justed bases of such retained intangibles shall
be made for any loss not recognized under sub-
paragraph (A).
All persons treated as a single taxpayer under sec-
tion 41(f)(1) shall be so treated for purposes of the
preceding sentence.
‘‘(2) TREATMENT OF CERTAIN TRANSFERS.—
‘‘(A) IN GENERAL.—In the case of any sec-
tion 197 intangible transferred in a transaction
described in subparagraph (B), the transferee
shall be treated as the transferor for purposes
of applying this section with respect to so much
of the adjusted basis in the hands of the trans-
feree as does not exceed the adjusted basis in
the hands of the transferor.
‘‘(B) 
TRANSACTIONS
COVERED.—The
transactions described in this subparagraph
are—
1401
‘‘(i) any transaction described in sec-
tion 332, 351, 361, 721, 731, 1031, or
1033, 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.
‘‘(3) TREATMENT OF AMOUNTS PAID PURSUANT
TO
COVENANTS
NOT
TO
COMPETE, 
ETC.—Any
amount paid or incurred pursuant to a covenant or
arrangement referred to in subsection (d)(1)(E)
shall be treated as an amount chargeable to capital
account.
‘‘(4) TREATMENT OF FRANCHISES, ETC.—
‘‘(A) FRANCHISE.—The term ‘franchise’
has the meaning given to such term by section
1253(b)(1).
‘‘(B) TREATMENT
OF
RENEWALS.—Any
renewal of a franchise, trademark, or trade
name (or of a license, a permit, or other right
referred to in subsection (d)(1)(D)) shall be
treated as an acquisition. The preceding sen-
tence shall only apply with respect to costs in-
curred in connection with such renewal.
1402
‘‘(C) C ERTAIN AMOUNTS NOT TAKEN INTO
ACCOUNT.—Any amount to which section
1253(d)(1) applies shall not be taken into ac-
count under this section.
‘‘(5) TREATMENT OF CERTAIN REINSURANCE
TRANSACTIONS.—In the case of any amortizable sec-
tion 197 intangible resulting from an assumption re-
insurance transaction, the amount taken into ac-
count as the adjusted basis of such intangible under
this section shall be the excess of—
‘‘(A) the amount paid or incurred by the
acquirer under the assumption reinsurance
transaction, over
‘‘(B) the amount required to be capitalized
under section 848 in connection with such
transaction.
Subsection (b) shall not apply to any amount re-
quired to be capitalized under section 848.
‘‘(6) TREATMENT OF CERTAIN SUBLEASES.—
For purposes of this section, a sublease shall be
treated in the same manner as a lease of the under-
lying property involved.
‘‘(7) T REATMENT AS DEPRECIABLE.—For pur-
poses of this chapter, any amortizable section 197
intangible shall be treated as property which is of a
1403
character subject to the allowance for depreciation
provided in section 167.
‘‘(8) T REATMENT OF CERTAIN INCREMENTS IN
VALUE.—This section shall not apply to any incre-
ment in value if, without regard to this section, such
increment is properly taken into account in deter-
mining the cost of property which is not a section
197 intangible.
‘‘(9) A NTI-CHURNING RULES.—For purposes of
this section—
‘‘(A) IN GENERAL.—The term ‘amortizable
section 197 intangible’ shall not include any
section 197 intangible which is described in
subparagraph (A) or (B) of subsection (d)(1)
(or for which depreciation or amortization
would not have been allowable but for this sec-
tion) and which is acquired by the taxpayer
after the date of the enactment of this section,
if—
‘‘(i) the intangible was held or used at
any time on or after July 25, 1991, and on
or before such date of enactment by the
taxpayer or a related person,
‘‘(ii) the intangible was acquired from
a person who held such intangible at any
1404
time on or after July 25, 1991, and on or
before such date of enactment, and, as
part of the transaction, the user of such
intangible does not change, or
‘‘(iii) the taxpayer grants the right to
use such intangible to a person (or a per-
son related to such person) who held or
used such intangible at any time on or
after July 25, 1991, and on or before such
date of enactment.
For purposes of this subparagraph, the deter-
mination of whether the user of property
changes as part of a transaction shall be deter-
mined in accordance with regulations prescribed
by the Secretary. For purposes of this subpara-
graph, deductions allowable under section
1253(d) shall be treated as deductions allowable
for amortization.
‘‘(B) EXCEPTION
WHERE
GAIN
RECOG-
NIZED.—If—
‘‘(i) subparagraph (A) would not
apply to an intangible acquired by the tax-
payer but for the last sentence of subpara-
graph (C)(i), and
1405
‘‘(ii) the person from whom the tax-
payer acquired the intangible elects, not-
withstanding any other provision of this
title—
‘‘(I) to recognize gain on the dis-
position of the intangible, and
‘‘(II) to pay a tax on such gain
which, when added to any other in-
come tax on such gain under this title,
equals such gain multiplied by the
highest rate of income tax applicable
to such person under this title,
then subparagraph (A) shall apply to the
intangible only to the extent that the tax-
payer’s adjusted basis in the intangible ex-
ceeds the gain recognized under clause
(ii)(I).
‘‘(C) RELATED
PERSON
DEFINED.—For
purposes of this paragraph—
‘‘(i) RELATED
PERSON.—A person
(hereinafter in this paragraph referred to
as the ‘related person’) is related to any
person if—
‘‘(I) the related person bears a
relationship to such person specified
1406
in section 267(b) or section 707(b)(1),
or
‘‘(II) the related person and such
person are engaged in trades or busi-
nesses under common control (within
the meaning of subparagraphs (A)
and (B) of section 41(f)(1)).
For purposes of subclause (I), in applying
section 267(b) or 707(b)(1), ‘20 percent’
shall be substituted for ‘50 percent’.
‘‘(ii) TIME FOR MAKING DETERMINA-
TION.—A person shall be treated as related
to another person if such relationship ex-
ists immediately before or immediately
after the acquisition of the intangible in-
volved.
‘‘(D) 
ACQUISITIONS
BY
REASON
OF
DEATH.—Subparagraph (A) shall not apply to
the acquisition of any property by the taxpayer
if the basis of the property in the hands of the
taxpayer is determined under section 1014(a).
‘‘(E) 
SPECIAL
RULE
FOR
PARTNER-
SHIPS.—With respect to any increase in the
basis of partnership property under section 732,
734, or 743, determinations under this para-
1407
graph shall be made at the partner level and
each partner shall be treated as having owned
and used such partner’s proportionate share of
the partnership assets.
‘‘(F) A NTI-ABUSE RULES.—The term ‘am-
ortizable section 197 intangible’ does not in-
clude any section 197 intangible acquired in a
transaction, one of the principal purposes of
which is to avoid the requirement of subsection
(c)(1) that the intangible be acquired after the
date of the enactment of this section or to avoid
the provisions of subparagraph (A).
‘‘(g) R EGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out the
purposes of this section, including such regulations as may
be appropriate to prevent avoidance of the purposes of this
section through related persons or otherwise.’’
(b) MODIFICATIONS TO DEPRECIATION RULES.—
(1) TREATMENT OF CERTAIN PROPERTY EX-
CLUDED FROM SECTION 197.—Section 167 (relating
to depreciation deduction) is amended by redesignat-
ing subsection (f) as subsection (g) and by inserting
after subsection (e) the following new subsection:
‘‘(f) TREATMENT OF CERTAIN PROPERTY EXCLUDED
FROM SECTION 197.—
1408
‘‘(1) COMPUTER SOFTWARE.—
‘‘(A) IN GENERAL.—If a depreciation de-
duction is allowable under subsection (a) with
respect to any computer software, such deduc-
tion shall be computed by using the straight
line method and a useful life of 36 months.
‘‘(B) COMPUTER
SOFTWARE.—For pur-
poses of this section, the term ‘computer soft-
ware’ has the meaning given to such term by
section 197(e)(3)(B); except that such term
shall not include any such software which is an
amortizable section 197 intangible.
‘‘(2) CERTAIN
INTERESTS
OR
RIGHTS
AC-
QUIRED SEPARATELY.—If a depreciation deduction
is allowable under subsection (a) with respect to any
property described in subparagraph (B), (C), or (D)
of section 197(e)(4), such deduction shall be com-
puted in accordance with regulations prescribed by
the Secretary.’’
(2) A LLOCATION OF BASIS IN CASE OF LEASED
PROPERTY.—Subsection (c) of section 167 is amend-
ed to read as follows:
‘‘(c) BASIS FOR DEPRECIATION.—
‘‘(1) IN GENERAL.—The basis on which exhaus-
tion, wear and tear, and obsolescence are to be al-
1409
lowed in respect of any property shall be the ad-
justed basis provided in section 1011, for the pur-
pose of determining the gain on the sale or other
disposition of such property.
‘‘(2) SPECIAL RULE FOR PROPERTY SUBJECT
TO LEASE.—If any property is acquired subject to a
lease—
‘‘(A) no portion of the adjusted basis shall
be allocated to the leasehold interest, and
‘‘(B) the entire adjusted basis shall be
taken into account in determining the deprecia-
tion deduction (if any) with respect to the prop-
erty subject to the lease.’’
(c) AMENDMENTS TO SECTION 1253.—Subsection
(d) of section 1253 is amended by striking paragraphs (2),
(3), (4), and (5) and inserting the following:
‘‘(2) O THER PAYMENTS.—Any amount paid or
incurred on account of a transfer, sale, or other dis-
position of a franchise, trademark, or trade name to
which paragraph (1) does not apply shall be treated
as an amount chargeable to capital account.
‘‘(3) R ENEWALS, ETC.—For purposes of deter-
mining the term of a transfer agreement under this
section, there shall be taken into account all renewal
1410
options (and any other period for which the parties
reasonably expect the agreement to be renewed).’’
(d) A MENDMENT TO SECTION 848.—Subsection (g)
of section 848 is amended by striking ‘‘this section’’ and
inserting ‘‘this section or section 197’’.
(e) AMENDMENTS TO SECTION 1060.—
(1) Paragraph (1) of section 1060(b) is amend-
ed by striking ‘‘goodwill or going concern value’’ and
inserting ‘‘section 197 intangibles’’.
(2) Paragraph (1) of section 1060(d) is amend-
ed by striking ‘‘goodwill or going concern value (or
similar items)’’ and inserting ‘‘section 197 intangi-
bles’’.
(f) T ECHNICAL AND CONFORMING AMENDMENTS.—
(1) Subsection (g) of section 167 (as redesig-
nated by subsection (b)) is amended to read as fol-
lows:
‘‘(g) CROSS REFERENCES.—
‘‘(1) For additional rule applicable to depreciation
of improvements in the case of mines, oil and gas
wells, other natural deposits, and timber, see sec-
tion 611.
‘‘(2) For amortization of goodwill and certain
other intangibles, see section 197.’’
(2) Subsection (f) of section 642 is amended by
striking ‘‘section 169’’ and inserting ‘‘sections 169
and 197’’.
1411
(3) Subsection (a) of section 1016 is amended
by striking paragraph (19) and by redesignating the
following paragraphs accordingly.
(4) Subparagraph (C) of section 1245(a)(2) is
amended by striking ‘‘193, or 1253(d) (2) or (3)’’
and inserting ‘‘or 193’’.
(5) Paragraph (3) of section 1245(a) is amend-
ed by striking ‘‘section 185 or 1253(d) (2) or (3)’’.
(6) The table of sections for part VI of sub-
chapter B of chapter 1 is amended by adding at the
end thereof the following new item:
‘‘Sec. 197. Amortization of goodwill and certain other intangi-
bles.’’.
(g) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply with respect to property ac-
quired after the date of the enactment of this Act.
(2) E LECTION TO HAVE AMENDMENTS APPLY
TO PROPERTY ACQUIRED AFTER JULY 25, 1991.—
(A) IN
GENERAL.—If an election under
this paragraph applies to the taxpayer—
(i) the amendments made by this sec-
tion shall apply to property acquired by the
taxpayer after July 25, 1991,