I
103D CONGRESS
1ST SESSION
H. R. 539
To amend the Internal Revenue Code of 1986 to provide that the deduction
for depreciation shall be computed on a neutral cost recovery basis,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 21, 1993
Mr. SMITH of Michigan (for himself, Mr. ARMEY, Mr. BACCHUS of Florida,
Mr. BACHUS of Alabama, Mr. BAKER of Louisiana, Mr. BARCIA, Mr.
BARTLETT, Mr. BLUTE, Mr. BONILLA, Mr. BURTON of Indiana, Mr.
BUYER, Mr. CALVERT, Mr. CANADY, Mr. CRAPO, Mr. CUNNINGHAM, Mr.
DELAY, Mr. DOOLITTLE, Mr. DORNAN, Ms. DUNN, Mr. EVERETT, Ms.
FOWLER, Mr. GOODLATTE, Mr. GRAMS, Mr. GREENWOOD, Mr. HUTCH-
INSON, Mr. HUNTER, Mr. ISTOOK, Mr. KASICH, Mr. KIM, Mr.
KNOLLENBERG, Mr. LINDER, Mr. MCCOLLUM, Mr. MCHUGH, Mr.
MCINNIS, Mr. MANZULLO, Mr. MICA, Ms. MOLINARI, Mr. PAXON, Mr.
POMBO, Mr. RAVENEL, Mr. ROHRABACHER, Mr. SCHIFF, Mr. SENSEN-
BRENNER, Mr. SKEEN, Mr. SOLOMON, Mr. TORKILDSEN, Mr. UPTON,
Mr. WOLF, Mr. FRANKS of New Jersey, Mr. CAMP, Mr. QUINN, and Mr.
ZELIFF) introduced the following bill; which was referred to the Commit-
tee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
that the deduction for depreciation shall be computed
on a neutral cost recovery basis, 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 ‘‘Investment Tax Incen-
tive Act of 1993’’.
SEC. 2. DEPRECIATION ADJUSTMENT FOR CERTAIN PROP-
ERTY 
PLACED 
IN 
SERVICE 
IN 
TAXABLE
YEARS BEGINNING AFTER DECEMBER 31,
1992.
(a) IN GENERAL.—Section 168 of the Internal Reve-
nue Code of 1986 (relating to accelerated cost recovery
system) is amended by adding at the end thereof the fol-
lowing new subsection:
‘‘(j) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE IN TAXABLE YEARS BEGINNING AFTER DE-
CEMBER 31, 1992.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service in a taxable year begin-
ning after December 31, 1992, the deduction allow-
able under this section with respect to such property
for any taxable year (after the taxable year during
which the property is placed in service) shall be—
‘‘(A) the amount so allowable for such tax-
able year without regard to this subsection,
multiplied by
‘‘(B) the applicable neutral cost recovery
ratio for such taxable year.
For purposes of subparagraph (A), paragraphs (1)
and (2) of section 168(b) shall be applied by sub-
stituting ‘150 percent’ for ‘200 percent’.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
RATIO.—For purposes of paragraph (1), the applica-
ble neutral cost recovery ratio for any taxable year
is the number determined by—
‘‘(A) dividing—
‘‘(i) 
the 
gross 
national 
product
deflator for the calendar quarter ending in
such taxable year which corresponds to the
calendar quarter during which the property
was placed in service by the taxpayer, by
‘‘(ii) 
the 
gross 
national 
product
deflator for the calendar quarter during
which the property was placed in service by
the taxpayer, and
‘‘(B) then multiplying the number deter-
mined under subparagraph (A) by the number
equal to 1.035 to the nth power where ‘n’ is the
number of full years in the period beginning on
the 1st day of the calendar quarter during
which the property was placed in service by the
taxpayer and ending on the day before the be-
ginning of the corresponding calendar quarter
ending during such taxable year.
The applicable neutral cost recovery ratio shall not
be taken into account unless it is greater than 1.
The applicable neutral cost recovery ratio shall be
rounded to the nearest one-tenth of 1 percent.
‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—
For purposes of paragraph (2), the gross national
product deflator for any calendar quarter is the im-
plicit price deflator for the gross national product
for such quarter (as shown in the first revision
thereof).
‘‘(4) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—This subsection shall not apply to any
property if the taxpayer elects not to have this sub-
section apply to such property. Such an election,
once made, shall be irrevocable.’’
(b) MINIMUM TAX TREATMENT.—Paragraph (1) of
section 56(a) of such Code is amended by adding at the
end thereof the following new subparagraph:
‘‘(E) USE OF NEUTRAL COST RECOVERY
RATIO.—In the case of tangible property placed
in service in a taxable year beginning after De-
cember 31, 1992, the deduction allowable under
this paragraph with respect to such property
for any taxable year (after the taxable year dur-
ing which the property is placed in service)
shall be—
‘‘(i) the amount so allowable for such
taxable year without regard to this sub-
paragraph, multiplied by
‘‘(ii) the applicable neutral cost recov-
ery ratio for such taxable year (as deter-
mined under section 168(j)).
This subparagraph shall not apply to any prop-
erty with respect to which there is an election
in effect not to have section 168(j) apply.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 3. REPEAL OF SPECIAL DEPRECIATION RULES APPLI-
CABLE UNDER THE ADJUSTED CURRENT
EARNINGS PROVISIONS OF THE MINIMUM
TAX.
(a) IN GENERAL.—Subparagraph (A) of section
56(g)(4) of the Internal Revenue Code of 1986 (relating
to adjustments) is amended to read as follows:
‘‘(A) DEPRECIATION.—
‘‘(i) IN GENERAL.—The depreciation
deduction with respect to any property for
any taxable year beginning after December
31, 1992, shall be the same as the depre-
ciation deduction allowable in computing
alternative minimum taxable income for
such taxable year.
‘‘(ii) BASIS RULES.—Notwithstanding
subparagraph (I), the adjusted basis of
any depreciable property held by the tax-
payer as of the beginning of the taxpayer’s
first taxable year beginning after Decem-
ber 31, 1992, shall be determined as if the
provisions of clause (i) had also applied to
taxable years beginning in 1990, 1991, or
1992.
‘‘(iii) LOST BASIS RECOVERED OVER 5
YEARS.—The amount determined under
clause (iv) shall be allowed as a deduction
ratably over the 60-month period begin-
ning with the first month of the taxpayer’s
first taxable year beginning after Decem-
ber 31, 1992.
‘‘(iv) AMOUNT OF LOST BASIS.—The
amount determined under this clause is the
excess of—
‘‘(I) the aggregate adjusted bases
of depreciable property held by the
taxpayer as of the beginning of the
taxpayer’s first taxable year beginning
after December 31, 1992, which
would have been determined (as of
such time) under subparagraph (I)
without regard to clause (ii), over
‘‘(II) 
the 
aggregate 
adjusted
bases of such property (as of such
time) as determined under the rules of
clause (ii).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1992.
Æ