To amend the Internal Revenue Code of 1986 to provide incentives to restore and increase oil and natural gas production.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Winter Readiness Act of 2005''.

SEC. 2. TEMPORARY EXPENSING OF OIL AND NATURAL GAS EXPLORATION AND 
              PRODUCTION PROPERTY AND OF COSTS TO REPAIR DAMAGES TO 
              SUCH PROPERTY FROM 2005 HURRICANES.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
179D the following new section:

``SEC. 179E. TEMPORARY EXPENSING OF OIL AND NATURAL GAS EXPLORATION AND 
              PRODUCTION PROPERTY AND OF COSTS TO REPAIR DAMAGES TO 
              SUCH PROPERTY FROM 2005 HURRICANES.

    ``(a) Treatment as Expenses.--At the election of the taxpayer, 
there shall be allowed as a deduction an amount equal to the cost paid 
or incurred by the taxpayer during the taxable year--
            ``(1) for qualified oil and gas production property, and
            ``(2) for repairs to property described in subsection 
        (b)(1)(B) on account of hurricane-related damage arising from 
        any Presidentially declared disaster (as defined in section 
        1033(h)(3)(A)) during 2005.
The deduction under paragraph (1) with respect to any property shall be 
allowed for the taxable year in which such property is placed in 
service.
    ``(b) Qualified Oil and Gas Production Property.--For purposes of 
this section--
            ``(1) In general.--The term `qualified oil and gas 
        production property' means any property--
                    ``(A) the original use of which begins with the 
                taxpayer, and
                    ``(B) which is described in any of the following 
                assets classes under Revenue Procedure 87-56:
                            ``(i) 13.0 (relating to assets used in 
                        offshore drilling for oil and gas).
                            ``(ii) 13.1 (relating to drilling of oil 
                        and gas wells).
                            ``(iii) 13.2 (relating to exploration for 
                        and production of petroleum and natural gas 
                        deposits).
            ``(2) Application of section.--This section shall apply to 
        any property only if--
                    ``(A)(i) no written binding contract for the 
                construction of such property was in effect on or 
                before [date of introduction], or
                    ``(ii) in the case of self-constructed property, 
                the construction of such property did not commence on 
                or before such date, and
                    ``(B) such property is placed in service before 
                January 1, 2009.
            ``(3) Special rule for sale-leasebacks.--For purposes of 
        paragraph (1)(A), if property is--
                    ``(A) originally placed in service after the date 
                of the enactment of this section by a person, and
                    ``(B) sold and leased back by such person within 3 
                months after the date such property was originally 
                placed in service,
        such property shall be treated as originally placed in service 
        not earlier than the date on which such property is used under 
        the leaseback referred to in subparagraph (B).
    ``(c) Basis Reduction.--
            ``(1) In general.--For purposes of this title, the basis of 
        any property shall be reduced by the portion of the cost of 
        such property taken into account under subsection (a).
            ``(2) Ordinary income recapture.--For purposes of section 
        1245, the amount of the deduction allowable under subsection 
        (a) with respect to any property which is of a character 
        subject to the allowance for depreciation shall be treated as a 
        deduction allowed for depreciation under section 167.
    ``(d) Election.--
            ``(1) In general.--An election under this section for any 
        taxable year shall be made on the taxpayer's return of the tax 
        imposed by this chapter for the taxable year.
            ``(2) Election irrevocable.--Any election made under this 
        section may not be revoked except with the consent of the 
        Secretary.
    ``(e) Election to Allocate Deduction to Cooperative Owner.--A rule 
similar to the rule of section 179C(g) shall apply for purposes of this 
section.''.
    (b) Conforming Amendments.--
            (1) Section 263(a)(1) of such Code is amended by striking 
        ``or'' at the end of subparagraph (J), by striking the period 
        at the end of subparagraph (K) and inserting ``, or'', and by 
        inserting after subparagraph (K) the following new 
        subparagraph:
                    ``(L) expenditures for which a deduction is allowed 
                under section 179E.''.
            (2) Section 263A(c)(3)(B) of such Code is amended by 
        inserting ``179E,'' after ``179B,''.
            (3) Section 312(k)(3)(B) of such Code is amended by 
        striking ``or 179D'' each place it appears in the heading and 
        text and inserting ``179D, or 179E''.
            (4) Section 1016(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (36), by striking the period at 
        the end of paragraph (37) and inserting ``, or'', and by adding 
        at the end the following new paragraph:
            ``(38) to the extent provided in section 179E(c).''.
            (5) Section 1245(a) of such Code is amended by inserting 
        ``179E,'' after ``179D,'' both places it appears in paragraphs 
        (2)(C) and (3)(C).
            (6) The table of sections for part VI of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 179C the following new item:

``Sec. 179E. Temporary expensing of oil and natural gas exploration and 
                            production property and of costs to repair 
                            damages to such property from 2005 
                            hurricanes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred after the date of the enactment of this 
Act in taxable years ending after such date.

SEC. 3. 10-YEAR CARRYBACK OF NET OPERATING LOSSES FROM 2005 HURRICANE-
              DAMAGED OIL AND GAS FACILITIES.

    (a) In General.--Paragraph (1) of section 172(b) of the Internal 
Revenue Code of 1986 (relating to net operating loss deduction) is 
amended by adding at the end the following new subparagraph:
                    ``(J) 2005 losses from hurricane-damaged oil and 
                gas facilities.--In the case of a taxpayer which has a 
                2005 hurricane-damaged oil and gas facility loss (as 
                defined in subsection (j)) for a taxable year, such 
                loss shall be a net operating loss carryback to each of 
                the 10 taxable years preceding the taxable year of such 
                loss.''.
    (b) 2005 Hurricane-Damaged Oil and Gas Facility Loss.--Section 172 
of such Code is amended by redesignating subsections (j) and (k) as 
subsections (k) and (l), respectively, and by inserting after 
subsection (i) the following new subsection:
    ``(j) 2005 Hurricane-Damaged Oil and Gas Facility Loss.--For 
purposes of this section--
            ``(1) In general.--The term `2005 hurricane-damaged oil and 
        gas facility loss' means the lesser of--
                    ``(A) the amount of the net operating loss for such 
                taxable year, or
                    ``(B) the sum of--
                            ``(i) the amount of the loss allowed by 
                        section 165 for the taxable year for any loss 
                        sustained by reason of hurricane-related 
                        damage--
                                    ``(I) arising from any 
                                Presidentially declared disaster (as 
                                defined in section 1033(h)(3)(A)) 
                                during 2005, and
                                    ``(II) to any property of the 
                                taxpayer which is described in section 
                                179E(b)(1)(B), and
                            ``(ii) the deduction allowed by section 
                        179E(a)(2) for the taxable year.
            ``(2) Coordination with subsection (b)(2).--For purposes of 
        applying subsection (b)(2), a 2005 hurricane-damaged oil and 
        gas facility loss for any taxable year shall be treated in a 
        manner similar to the manner in which a specified liability 
        loss is treated.
            ``(3) Election.--Any taxpayer entitled to a 10-year 
        carryback under subsection (b)(1)(J) from any loss year may 
        elect to have the carryback period with respect to such loss 
        year determined without regard to subsection (b)(1)(J). Such 
        election shall be made in such manner as may be prescribed by 
        the Secretary and shall be made by the due date (including 
        extensions of time) for filing the taxpayer's return for the 
        taxable year of the net operating loss. Such election, once 
        made for any taxable year, shall be irrevocable for such 
        taxable year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to net operating losses for taxable years ending after the date 
of the enactment of this Act.

Summary: Winter Readiness Act of 2005 - Amends the Internal Revenue Code to allow a taxpayer election to expense (i.e., deduct in the current taxable year) all costs for qualified oil and gas production property placed in service before January 1, 2009, and for repairs to such property for hurricane-related damage. Defines "qualified oil and gas production property" to include assets used in offshore drilling for oil and gas, and for exploration and production of petroleum and natural gas deposits.

Allows a 10-year carryback of net operating losses incurred in 2005 for hurricane-damaged oil and gas facilities.