Home > 106th Congressional Bills > H.R. 107 (ih) To amend the Internal Revenue Code of 1986 to repeal the 1993 increase in income tax on Social Security benefits, to repeal the earnings limitation on Social Security recipients, and to repeal the estate and gift taxes. [Introduced in House]...H.R. 107 (ih) To amend the Internal Revenue Code of 1986 to repeal the 1993 increase in income tax on Social Security benefits, to repeal the earnings limitation on Social Security recipients, and to repeal the estate and gift taxes. [Introduced in House]...
108th CONGRESS
1st Session
H. R. 1079
To amend the Internal Revenue Code of 1986 to increase expensing for
small business and to allow small business to elect to determine the
deduction for depreciation on a neutral cost recovery basis for
property otherwise eligible to be expensed.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 5, 2003
Mr. Smith of Michigan (for himself, Mr. Hoekstra, Mr. Ehlers, and Mr.
Camp) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to increase expensing for
small business and to allow small business to elect to determine the
deduction for depreciation on a neutral cost recovery basis for
property otherwise eligible to be expensed.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Neutral Cost Recovery Act for Small
Business''.
SEC. 2. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) In General.--Paragraph (1) of section 179(b) of the Internal
Revenue Code of 1986 (relating to dollar limitation) is amended to read
as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $75,000. The dollar amount otherwise
applicable under the preceding sentence for any taxable year
shall be reduced by the basis of property which is placed in
service during such year and which is taken into account under
section 168(k).''.
(b) Increase in Phaseout Threshold.--Paragraph (2) of section
179(b) of such Code (relating to reduction in limitation) is amended by
striking ``$200,000'' and inserting ``$325,000''.
(c) Certain Computer Software.--Paragraph (1) of section 179(d) of
such Code (defining section 179 property) is amended to read as
follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property (to which section
168 applies), or
``(ii) computer software (as defined in
section 197(e)(3)(B)) which is described in
section 197(e)(3)(A)(i) and to which section
167 applies,
``(B) which is section 1245 property (as defined in
section 1245(a)(3)), and
``(C) which is acquired by purchase for use in the
active conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating
units.''.
(d) Inflation Adjustment of Dollar Limitation and Phaseout
Threshold.--Subsection (b) of section 179 of such Code is amended by
adding at the end the following new paragraph:
``(5) Inflation adjustments.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2003, the dollar
amounts in paragraphs (1) and (2) shall each be
increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B)
thereof.
``(B) Rounding.--
``(i) Dollar limitation.--If the amount in
paragraph (1) as increased under subparagraph
(A) is not a multiple of $1,000, such amount
shall be rounded to the nearest multiple of
$1,000.
``(ii) Phaseout amount.--If the amount in
paragraph (2) as increased under subparagraph
(A) is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.''.
(e) Revocation of Election.--Paragraph (2) of section 179(c) of
such Code (relating to election irrevocable) is amended to read as
follows:
``(2) Revocation of election.--The taxpayer may revoke an
election under paragraph (1), and any specification contained
in any such election, with respect to any property. Such
revocation, once made, shall be irrevocable.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
SEC. 3. NEUTRAL COST RECOVERY DEPRECIATION ADJUSTMENT FOR CERTAIN
PROPERTY PLACED IN SERVICE AFTER DECEMBER 31, 2003.
(a) In General.--Section 168 of the Internal Revenue Code of 1986
(relating to accelerated cost recovery system) is amended by adding at
the end thereof the following new subsection:
``(k) Deduction Adjustment To Allow Equivalent of Expensing for
Certain Property Placed in Service After December 31, 2003.--
``(1) In general.--In the case of property placed in
service after December 31, 2003, that the taxpayer would (but
for the second sentence of section 179(b)(1)) be eligible to
fully expense under section 179, the deduction under this
section with respect to such property--
``(A) shall be determined by substituting `150
percent' for `200 percent' in subsection (b)(1) in the
case of property to which the 200 percent declining
balance method would otherwise apply, and
``(B) for any taxable year after the taxable year
during which the property is placed in service shall
be--
``(i) the amount determined under this
section for such taxable year without regard to
this subparagraph, multiplied by
``(ii) the applicable neutral cost recovery
ratio for such taxable year.
``(2) Applicable neutral cost recovery ratio.--For purposes
of paragraph (1)--
``(A) In general.--The applicable neutral cost
recovery ratio for the property for any taxable year is
the number determined by--
``(i) dividing--
``(I) the gross domestic 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 domestic product
deflator for the calendar quarter
during which the property was placed in
service by the taxpayer, and
``(ii) then multiplying the number
determined under clause (i) 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
beginning of the corresponding calendar quarter
ending during such taxable year.
The applicable neutral cost recovery ratio shall never
be less than 1. The applicable neutral cost recovery
ratio shall be rounded to the nearest \1/1000\.
``(B) Special rule for certain property.--In the
case of property described in paragraph (2) or (3) of
subsection (b) or in subsection (g), the applicable
neutral cost recovery ratio shall be determined without
regard to subparagraph (A)(ii).
``(3) Gross domestic product deflator.--For purposes of
paragraph (2), the gross domestic product deflator for any
calendar quarter is the implicit price deflator for the gross
domestic 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 subsection apply to such property. Such
an election, once made, shall be irrevocable.
``(5) Churning transactions.--This subsection shall not
apply to any property if this section would not apply to such
property were subsection (f)(5)(A)(ii) applied by substituting
`2004' for `1981' and `2003' for `1980'.
``(6) Additional deduction not to affect basis or
recapture.--
``(A) In general.--The additional amount determined
under this section by reason of this subsection shall
not be taken into account in determining the adjusted
basis of any property or of any interest in a pass-thru
entity which holds such property and shall not be
treated as a deduction for depreciation for purposes of
sections 1245 and 1250.
``(B) Pass-thru entity defined.--For purposes of
subparagraph (A), the term `pass-thru entity' means--
``(i) a regulated investment company,
``(ii) a real estate investment trust,
``(iii) an S corporation,
``(iv) a partnership,
``(v) an estate or trust, and
``(vi) a common trust fund.''
(b) Minimum Tax Treatment.--
(1) 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 property to which section 168(k) applies and
which is placed in service after December 31, 2003, the
deduction allowable under this paragraph with respect
to such property for any taxable year (after the
taxable year during which the property is placed in
service) shall be--
``(i) the amount so allowable for such
taxable year without regard to this
subparagraph, multiplied by
``(ii) the applicable neutral cost recovery
ratio for such taxable year (as determined
under section 168(k)).
This subparagraph shall not apply to any property with
respect to which there is an election in effect not to
have section 168(k)) apply.''
(2) Subparagraph (C) of section 56(g)(4) of such Code is
amended by adding at the end the following new clause:
``(v) Neutral cost recovery deduction.--
Clause (i) shall not apply to the additional
deduction allowable by reason of section
168(k).''
(c) Coordination With Depreciation Limitation on Certain
Automobiles.--Clause (i) of section 280F(a)(1)(B) of such Code is
amended by adding at the end the following new sentence: ``For purposes
of this clause, the unrecovered basis of any passenger automobile shall
be treated as including the additional amount determined under section
168 by reason of subsection (k) thereof to the extent not allowed as a
deduction by reason of this paragraph for any taxable year in the
recovery period.''
(d) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2003.
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