RECOMMENDED CHANGES TO SECTION 101 OF H.R. 3090

SEC. 101. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE SEPTEMBER 11, 2004.
(a) IN GENERAL- Section 168 (relating to accelerated cost recovery system) is amended by adding at the end the following new subsection:
`(k) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE SEPTEMBER 11, 2004- 
`(1) ADDITIONAL ALLOWANCE- In the case of any qualified property--
`(A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 30 percent of the adjusted basis of the qualified property, and
`(B) the adjusted basis of the qualified property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.
`(2) QUALIFIED PROPERTY- For purposes of this subsection--
`(A) IN GENERAL- The term `qualified property' means property--
`(i)(I) to which this section applies which has a recovery period of 20 years or less or which is water utility property, or
`(II) which is computer software (as defined in section 167(f)(1)(B)) for which a deduction is allowable under section 167(a) without regard to this subsection,
`(ii) the original use of which commences with the taxpayer after September 10, 2001,
`(iii) which is--
`(I) acquired by the taxpayer after September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or 
`(II) acquired by the taxpayer pursuant to a written binding contract which was entered into after September 10, 2001, and before September 11, 2004, and
`(iv) which 
‘(I) except with regard to property described in subclause (II), is placed in service by the taxpayer before January 1, 2005 and
‘(II) in the case of property described in section 263A(f)(1)(B), has commenced construction before January 1, 2005 and is placed in service by the taxpayer before January 1, [2007].
`(B) EXCEPTIONS- 
`(i) ALTERNATIVE DEPRECIATION PROPERTY- The term `qualified property' shall not include any property to which the alternative depreciation system under subsection (g) applies, determined--
`(I) without regard to paragraph (7) of subsection (g) (relating to election to have system apply), and
`(II) after application of section 280F(b) (relating to listed property with limited business use).
`(ii) 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.
`(iii) CERTAIN REPAIRED OR RECONSTRUCTED PROPERTY- Except as otherwise provided in regulations, the term `qualified property' shall not include any repaired or reconstructed repair or reconstruction of property acquired after September 10, 2001, that is not qualified property.
`(iv) QUALIFIED LEASEHOLD IMPROVEMENT PROPERTY- The term `qualified property' shall not include any qualified leasehold improvement property (as defined in section 168(e)(6)).
`(C) SPECIAL RULES RELATING TO ORIGINAL USE- 
`(i) SELF-CONSTRUCTED PROPERTY- In the case of a taxpayer manufacturing, constructing, or producing property for the taxpayer's own use, the requirements of clause (iii) of subparagraph (A) shall be treated as met if the taxpayer begins manufacturing, constructing, or producing the property after September 10, 2001, and before September 11, 2004.
`(ii) SALE-LEASEBACKS- For purposes of subparagraph (A)(ii), if property--
`(I) is originally placed in service after September 10, 2001, by a person, and
`(II) 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 subclause (II).
`(D) COORDINATION WITH SECTION 280F- For purposes of section 280F--
`(i) AUTOMOBILES- In the case of a passenger automobile (as defined in section 280F(d)(5)) which is qualified property, the Secretary shall increase the limitation under section 280F(a)(1)(A)(i) by $4,600.
`(ii) LISTED PROPERTY- The deduction allowable under paragraph (1) shall be taken into account in computing any recapture amount under section 280F(b)(2).'
(b) ALLOWANCE AGAINST ALTERNATIVE MINIMUM TAX- 
(1) IN GENERAL- Section 56(a)(1)(A) (relating to depreciation adjustment for alternative minimum tax) is amended by adding at the end the following new clause:
`(iii) ADDITIONAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE SEPTEMBER 11, 2004- The deduction under section 168(k) shall be allowed.'
(2) CONFORMING AMENDMENT- Clause (i) of section 56(a)(1)(A) is amended by striking `clause (ii)' both places it appears and inserting `clauses (ii) and (iii)'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after September 10, 2001, in taxable years ending after such date.