To amend the Internal Revenue Code of 1986 to provide increased expensing for section 179 property in the Gulf Opportunity Zone.

SECTION 1. INCREASE IN EXPENSING UNDER SECTION 179 FOR GULF OPPORTUNITY 
              ZONE PROPERTY.

    (a) In General.--Section 179 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(e) Increase in Limitation for Gulf Opportunity Zone Property.--
            ``(1) In general.--For purposes of this section--
                    ``(A) the dollar amount in effect under subsection 
                (b)(1) for the taxable year shall be increased by the 
                lesser of--
                            ``(i) $100,000, or
                            ``(ii) the cost of qualified section 179 
                        Gulf Opportunity Zone property placed in 
                        service during the taxable year, and
                    ``(B) the the dollar amount in effect under 
                subsection (b)(2) for the taxable year shall be 
                increased by the lesser of--
                            ``(i) $600,000, or
                            ``(ii) the cost of qualified section 179 
                        Gulf Opportunity Zone property placed in 
                        service during the taxable year.
            ``(2) Qualified section 179 gulf opportunity zone 
        property.--For purposes of this subsection, the term `qualified 
        section 179 Gulf Opportunity Zone property' means section 179 
        property which is qualified Gulf Opportunity Zone property.
            ``(3) Qualified gulf opportunity zone property.-- For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified Gulf 
                Opportunity Zone property' means property--
                            ``(i) which is described in section 
                        168(k)(2)(A)(i),
                            ``(ii) substantially all of the use of 
                        which is in the Gulf Opportunity Zone and is in 
                        the active conduct of a trade or business by 
                        the taxpayer in such Zone,
                            ``(iii) the original use of which in the 
                        Gulf Opportunity Zone commences with the 
                        taxpayer on or after August 28, 2005,
                            ``(iv) which is acquired by the taxpayer by 
                        purchase (as defined in subsection (d)) on or 
                        after August 28, 2005, but only if no written 
                        binding contract for the acquisition was in 
                        effect before August 28, 2005, and
                            ``(v) which is placed in service by the 
                        taxpayer on or before December 31, 2007.
                    ``(B) Exceptions.--
                            ``(i) Alternative depreciation property.--
                        Such term shall not include any property 
                        described in section 168(k)(2)(D)(i).
                            ``(ii) Tax-exempt bond-financed property.--
                        Such term shall not include any property any 
                        portion of which is financed with the proceeds 
                        of any obligation the interest on which is 
                        exempt from tax under section 103.
                            ``(iii) Election out.--If a taxpayer makes 
                        an election under this clause with respect to 
                        any class of property for any taxable year, 
                        this subsection shall not apply to all property 
                        in such class placed in service during such 
                        taxable year.
            ``(4) Gulf opportunity zone; hurricane katrina disaster 
        area.--For purposes of this subsection--
                    ``(A) Gulf opportunity zone.--The term `Gulf 
                Opportunity Zone' means that portion of the Hurricane 
                Katrina disaster area determined by the President to 
                warrant individual or individual and public assistance 
                from the Federal Government under the Robert T. 
                Stafford Disaster Relief and Emergency Assistance Act 
                by reason of Hurricane Katrina.
                    ``(B) Hurricane katrina disaster area.--The term 
                `Hurricane Katrina disaster area' means an area with 
                respect to which a major disaster has been declared by 
                the President before September 14, 2005, under section 
                401 of such Act by reason of Hurricane Katrina.
            ``(5) Coordination with empowerment zones and renewal 
        communities.--For purposes of sections 1397A and 1400J, 
        qualified section 179 Gulf Opportunity Zone property shall not 
        be treated as qualified zone property or qualified renewal 
        property, unless the taxpayer elects not to take such qualified 
        section 179 Gulf Opportunity Zone property into account for 
        purposes of this subsection.
            ``(6) Recapture.--For purposes of this subsection, rules 
        similar to the rules under subsection (d)(10) shall apply with 
        respect to any qualified section 179 Gulf Opportunity Zone 
        property which ceases to be qualified section 179 Gulf 
        Opportunity Zone property.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to property placed in service after August 28, 2005.

Summary: Amends the Internal Revenue to increase the expensing allowance (i.e., a tax deduction in the current taxable year) for the cost of Gulf Opportunity Zone property placed in service in the Hurricane Katrina disaster area.