I
107TH CONGRESS
2D SESSION
H. R. 5278
To amend the Internal Revenue Code of 1986 to encourage investment in
high productivity property, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 26, 2002
Mr. ENGLISH (for himself and Mr. NEAL of Massachusetts) 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 encourage
investment in high productivity property, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘High Productivity and
Economic Growth Act of 2002’’.
SEC. 2. ADOPTION OF THE HIGH PRODUCTIVITY INVEST-
MENT DEDUCTION.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
itemized deductions for individuals and corporations) is
‘‘(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.—This section shall not
apply to any property acquired by the taxpayer
after September 10, 2002, if—
‘‘(i) the property was owned or used
at any time during the period beginning on
January 1, 2001, and ending on Sep-
tember 10, 2002, by the taxpayer or a re-
lated person,
‘‘(ii) the property was owned or used
at any time during the period described in
clause (i), 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 the period de-
scribed in clause (i), 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) 
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.
‘‘(C) 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.
‘‘(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 of such
Code is amended by adding after section 168 the following
new item:
‘‘Sec. 168A. High productivity investment deduction.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
September 10, 2002, with respect to taxable years begin-
ning after such date.
SEC. 3. 30 PERCENT EXPENSING FOR CERTAIN PROPERTY
ACQUIRED AFTER SEPTEMBER 10, 2001, MADE
PERMANENT.
(a) REPEAL OF LIMITATIONS.—
(1) 
ACQUISITION
LIMITATION.—Section
168(k)(2) of the Internal Revenue Code of 1986 is
amended by striking ‘‘, and before September 11,
2004’’ each place it appears in subparagraphs
(A)(iii) and (D)(i).
(2) PLACED
IN
SERVICE
LIMITATION.—Sub-
paragraph (A) of section 168(k)(2) of such Code is
amended by inserting ‘‘and’’ at the end of clause
(ii), by striking ‘‘, and’’ at the end of clause (iii) and
inserting a period, and by striking clause (iv).
(3) BASIS
LIMITATION
FOR
CERTAIN
PROP-
ERTY.—Subparagraph (B) of section 168(k)(2) of
such Code is amended by striking clause (ii) and re-
designating clause (iii) as clause (ii).
(b) SYNDICATIONS.—Subparagraph (D) of section
168(k)(2) of such Code (relating to special rules) is
amended by adding at the end the following:
‘‘(iii) SYNDICATIONS.—For purposes
of subparagraph (A)(ii), if property—
‘‘(I) is treated as originally
placed in service after September 10,
2001, either directly or by a lessor of
such property or pursuant to subpara-
graph (D)(ii), and
‘‘(II) is sold within 6 months
after such property is so placed in
service,
such property shall be treated as originally
placed in service not earlier than the date
of such sale.’’.
(c) CONFORMING AMENDMENT.—The heading of
subsection (k) of section 168 of such Code is amended by
striking ‘‘, AND BEFORE SEPTEMBER 11, 2004’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to property placed in service after Sep-
tember 10, 2002, in taxable years beginning after
such date.
(2) SUBSECTION (b).—The amendment made
by subsection (b) shall take effect as if included in
the amendments made by section 101 of the Job
Creation and Worker Assistance Act of 2002.
SEC. 4. DEPRECIATION RULES NOT MODIFIED FOR PUR-
POSES OF ALTERNATIVE MINIMUM TAX.
(a) DETERMINATION OF ALTERNATIVE TAXABLE IN-
COME.—Paragraph (1) of section 56(a) of the Internal
Revenue Code of 1986 (relating to depreciation) is amend-
ed by adding at the end the following new subparagraph:
‘‘(E) 
TERMINATION.—This 
paragraph
shall not apply to property placed in service
after September 10, 2002, in taxable years be-
ginning after such date.’’.
(b) DETERMINATION OF ADJUSTED CURRENT EARN-
INGS.—Subparagraph (A) of section 56(g)(4) of such
Code (relating to depreciation) is amended by adding at
the end the following new clause:
‘‘(vi) TERMINATION.—This subpara-
graph shall not apply to property placed in
service after September 10, 2002, in tax-
able years beginning after such date.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
September 10, 2002, in taxable years beginning after such
date.
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