H. R. 6—421
determining whether the requirements of paragraph (1)(D) are 
met. 
‘‘(d) QUALIFIED REFINERY.—For purposes of this section, the 
term ‘qualified refinery’ means any refinery located in the United 
States which is designed to serve the primary purpose of processing 
liquid fuel from crude oil or qualified fuels (as defined in section 
45K(c)). 
‘‘(e) PRODUCTION CAPACITY.—The requirements of this sub-
section are met if the portion of the qualified refinery— 
‘‘(1) enables the existing qualified refinery to increase total 
volume output (determined without regard to asphalt or lube 
oil) by 5 percent or more on an average daily basis, or 
‘‘(2) enables the existing qualified refinery to process quali-
fied fuels (as defined in section 45K(c)) at a rate which is 
equal to or greater than 25 percent of the total throughput 
of such qualified refinery on an average daily basis. 
‘‘(f) INELIGIBLE REFINERY PROPERTY.—No deduction shall be 
allowed under subsection (a) for any qualified refinery property— 
‘‘(1) the primary purpose of which is for use as a topping 
plant, asphalt plant, lube oil facility, crude or product terminal, 
or blending facility, or 
‘‘(2) which is built solely to comply with consent decrees 
or projects mandated by Federal, State, or local governments. 
‘‘(g) ELECTION
TO
ALLOCATE
DEDUCTION
TO
COOPERATIVE 
OWNER.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) a taxpayer to which subsection (a) applies is an 
organization to which part I of subchapter T applies, and 
‘‘(B) one or more persons directly holding an ownership 
interest in the taxpayer are organizations to which part 
I of subchapter T apply, 
the taxpayer may elect to allocate all or a portion of the deduc-
tion allowable under subsection (a) to such persons. Such alloca-
tion shall be equal to the person’s ratable share of the total 
amount allocated, determined on the basis of the person’s 
ownership interest in the taxpayer. The taxable income of the 
taxpayer shall not be reduced under section 1382 by reason 
of any amount to which the preceding sentence applies. 
‘‘(2) FORM AND EFFECT OF ELECTION.—An election under 
paragraph (1) for any taxable year shall be made on a timely 
filed return for such year. Such election, once made, shall 
be irrevocable for such taxable year. 
‘‘(3) WRITTEN NOTICE TO OWNERS.—If any portion of the 
deduction available under subsection (a) is allocated to owners 
under paragraph (1), the cooperative shall provide any owner 
receiving an allocation written notice of the amount of the 
allocation. Such notice shall be provided before the date on 
which the return described in paragraph (2) is due. 
‘‘(h) REPORTING.—No deduction shall be allowed under sub-
section (a) to any taxpayer for any taxable year unless such taxpayer 
files with the Secretary a report containing such information with 
respect to the operation of the refineries of the taxpayer as the 
Secretary shall require.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1245(a) is amended by inserting ‘‘179C,’’ after 
‘‘179B,’’ both places it appears in paragraphs (2)(C) and (3)(C).
H. R. 6—422
(2) Section 263(a)(1) is amended by striking ‘‘or’’ at the 
end of subparagraph (H), by striking the period at the end 
of subparagraph (I) and inserting ‘‘, or’’, and by inserting after 
subparagraph (I) the following new subparagraph: 
‘‘(J) expenditures for which a deduction is allowed 
under section 179C.’’. 
(3) Section 312(k)(3)(B) is amended by striking ‘‘179 179A, 
or 179B’’ each place it appears in the heading and text and 
inserting ‘‘179, 179A, 179B, or 179C’’. 
(4) The table of sections for part VI of subchapter B of 
chapter 1 is amended by inserting after the item relating to 
section 179B the following new item:
‘‘Sec. 179C. Election to expense certain refineries.’’.
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to properties placed in service after the date of the 
enactment of this Act. 
SEC. 1324. PASS THROUGH TO OWNERS OF DEDUCTION FOR CAPITAL 
COSTS INCURRED BY SMALL REFINER COOPERATIVES 
IN COMPLYING WITH ENVIRONMENTAL PROTECTION 
AGENCY SULFUR REGULATIONS. 
(a) IN GENERAL.—Section 179B (relating to deduction for capital 
costs incurred in complying with Environmental Protection Agency 
sulfur regulations) is amended by adding at the end the following 
new subsection: 
‘‘(e) ELECTION
TO
ALLOCATE
DEDUCTION
TO
COOPERATIVE 
OWNER.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) a small business refiner to which subsection (a) 
applies is an organization to which part I of subchapter 
T applies, and 
‘‘(B) one or more persons directly holding an ownership 
interest in the refiner are organizations to which part 
I of subchapter T apply, 
the refiner may elect to allocate all or a portion of the deduction 
allowable under subsection (a) to such persons. Such allocation 
shall be equal to the person’s ratable share of the total amount 
allocated, determined on the basis of the person’s ownership 
interest in the taxpayer. The taxable income of the refiner 
shall not be reduced under section 1382 by reason of any 
amount to which the preceding sentence applies. 
‘‘(2) FORM AND EFFECT OF ELECTION.—An election under 
paragraph (1) for any taxable year shall be made on a timely 
filed return for such year. Such election, once made, shall 
be irrevocable for such taxable year. 
‘‘(3) WRITTEN NOTICE TO OWNERS.—If any portion of the 
deduction available under subsection (a) is allocated to owners 
under paragraph (1), the cooperative shall provide any owner 
receiving an allocation written notice of the amount of the 
allocation. Such notice shall be provided before the date on 
which the return described in paragraph (2) is due.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in the amendment made by section 
338(a) of the American Jobs Creation Act of 2004.
H. R. 6—423
SEC. 1325. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR 
PROPERTY. 
(a) IN GENERAL.—Section 168(e)(3)(E) (defining 15-year prop-
erty), as amended by this Act, is amended by striking ‘‘and’’ at 
the end of clause (vi), by striking the period at the end of clause 
(vii) and by inserting ‘‘, and’’, and by adding at the end the following 
new clause: 
‘‘(viii) any natural gas distribution line the original 
use of which commences with the taxpayer after April 
11, 2005, and which is placed in service before January 
1, 2011.’’. 
(b) ALTERNATIVE SYSTEM.—The table contained in section 
168(g)(3)(B) (relating to special rule for certain property assigned 
to classes), as amended by this Act, is amended by inserting after 
the item relating to subparagraph (E)(vii) the following new item:
‘‘(E)(viii) .......................................................................................................
35’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to property placed in service after April 11, 2005. 
(2) EXCEPTION.—The amendments made by this section 
shall not apply to any property with respect to which the 
taxpayer or a related party has entered into a binding contract 
for the construction thereof on or before April 11, 2005, or, 
in the case of self-constructed property, has started construction 
on or before such date. 
SEC. 1326. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
PROPERTY. 
(a) IN
GENERAL.—Subparagraph (C) of section 168(e)(3) 
(relating to classification of certain property) is amended by striking 
‘‘and’’ at the end of clause (iii), by redesignating clause (iv) as 
clause (v), and by inserting after clause (iii) the following new 
clause: 
‘‘(iv) any natural gas gathering line the original 
use of which commences with the taxpayer after April 
11, 2005, and’’. 
(b) NATURAL GAS GATHERING LINE.—Subsection (i) of section 
168 is amended by inserting after paragraph (16) the following 
new paragraph: 
‘‘(17) NATURAL GAS GATHERING LINE.—The term ‘natural 
gas gathering line’ means— 
‘‘(A) the pipe, equipment, and appurtenances deter-
mined to be a gathering line by the Federal Energy Regu-
latory Commission, and 
‘‘(B) the pipe, equipment, and appurtenances used to 
deliver natural gas from the wellhead or a commonpoint 
to the point at which such gas first reaches— 
‘‘(i) a gas processing plant, 
‘‘(ii) an interconnection with a transmission pipe-
line for which a certificate as an interstate trans-
mission pipeline has been issued by the Federal Energy 
Regulatory Commission,
H. R. 6—424
‘‘(iii) an interconnection with an intrastate trans-
mission pipeline, or 
‘‘(iv) a direct interconnection with a local distribu-
tion company, a gas storage facility, or an industrial 
consumer.’’. 
(c) ALTERNATIVE
SYSTEM.—The table contained in section 
168(g)(3)(B) (relating to special rule for certain property assigned 
to classes), as amended by this Act, is amended by inserting after 
the item relating to subparagraph (C)(iii) the following new item:
‘‘(C)(iv) .........................................................................................................
14’’. 
(d) ALTERNATIVE MINIMUM TAX EXCEPTION.—Subparagraph (B) 
of section 56(a)(1) is amended by inserting before the period the 
following: ‘‘, or in section 168(e)(3)(C)(iv)’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to property placed in service after April 11, 2005. 
(2) EXCEPTION.—The amendments made by this section 
shall not apply to any property with respect to which the 
taxpayer or a related party has entered into a binding contract 
for the construction thereof on or before April 11, 2005, or, 
in the case of self-constructed property, has started construction 
on or before such date. 
SEC. 1327. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR 
NATURAL GAS. 
(a) IN GENERAL.—Subsection (b) of section 148 (relating to 
higher yielding investments) is amended by adding at the end 
the following new paragraph: 
‘‘(4) SAFE HARBOR FOR PREPAID NATURAL GAS.— 
‘‘(A) IN GENERAL.—The term ‘investment-type property’ 
does not include a prepayment under a qualified natural 
gas supply contract. 
‘‘(B) QUALIFIED NATURAL GAS SUPPLY CONTRACT.—For 
purposes of this paragraph, the term ‘qualified natural 
gas supply contract’ means any contract to acquire natural 
gas for resale by a utility owned by a governmental unit 
if the amount of gas permitted to be acquired under the 
contract by the utility during any year does not exceed 
the sum of— 
‘‘(i) the annual average amount during the testing 
period of natural gas purchased (other than for resale) 
by customers of such utility who are located within 
the service area of such utility, and 
‘‘(ii) the amount of natural gas to be used to trans-
port the prepaid natural gas to the utility during such 
year. 
‘‘(C) NATURAL GAS USED TO GENERATE ELECTRICITY.—
Natural gas used to generate electricity shall be taken 
into account in determining the average under subpara-
graph (B)(i)— 
‘‘(i) only if the electricity is generated by a utility 
owned by a governmental unit, and