[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1042 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1042

 To amend the Internal Revenue Code of 1986 to encourage domestic oil 
              and gas production, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 13, 1999

 Mrs. Hutchison (for herself, Mr. Breaux, Mr. Domenici, Mr. Bingaman, 
Mr. Lott, Ms. Landrieu, Mr. Cochran, Mr. Thomas, Mr. Brownback, and Mr. 
Gramm) introduced the following bill; which was read twice and referred 
                      to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to encourage domestic oil 
              and gas production, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Domestic Energy 
Production Security and Stabilization Act.''
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Tax credit for marginal domestic oil and natural gas well 
                            production.
Sec. 3. Phase-out of certain minimum tax preferences relating to energy 
                            production.
Sec. 4. Depreciation adjustment not to apply to oil and gas assets.
Sec. 5. Repeal certain adjustments based on adjusted current earnings 
                            relating to oil and gas assets.
Sec. 6. Enhanced oil recovery credit and credit for producing fuel from 
                            a nonconventional source allowed against 
                            minimum tax.
Sec. 7. 10-year carryback for percentage depletion for oil and gas 
                            property.
Sec. 8. Net income limitation on percentage depletion repealed for oil 
                            and gas properties.
Sec. 9. Election to expense geological and geophysical expenditures and 
                            delay rental payments.
Sec. 10. Waiver of limitations.

SEC. 2. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL 
              PRODUCTION.

    (a) Purpose.--The purpose of this section is to prevent the 
abandonment of marginal oil and gas wells responsible for half of the 
domestic production of oil and gas in the United States.
    (b) Credit for Producing Oil and Gas From Marginal Wells.--Subpart 
D of part IV of subchapter A of chapter 1 (relating to business 
credits) is amended by adding at the end the following new section:

``SEC. 45D. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.

    ``(a) General Rule.--For purposes of section 38, the marginal well 
production credit for any taxable year is an amount equal to the 
product of--
            ``(1) the credit amount, and
            ``(2) the qualified crude oil production and the qualified 
        natural gas production which is attributable to the taxpayer.
    ``(b) Credit Amount.--For purposes of this section--
            ``(1) In general.--The credit amount is--
                    ``(A) $3 per barrel of qualified crude oil 
                production, and
                    ``(B) 50 cents per 1,000 cubic feet of qualified 
                natural gas production.
            ``(2) Reduction as oil and gas prices increase.--
                    ``(A) In general.--The $3 and 50 cents amounts 
                under paragraph (1) shall each be reduced (but not 
                below zero) by an amount which bears the same ratio to 
                such amount (determined without regard to this 
                paragraph) as--
                            ``(i) the excess (if any) of the applicable 
                        reference price over $14 ($1.56 for qualified 
                        natural gas production), bears to
                            ``(ii) $3 ($0.33 for qualified natural gas 
                        production).
                The applicable reference price for a taxable year is 
                the reference price for the calendar year preceding the 
                calendar year in which the taxable year begins.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2000, 
                each of the dollar amounts contained in subparagraph 
                (A) shall be increased to an amount equal to such 
                dollar amount multiplied by the inflation adjustment 
                factor for such calendar year (determined under section 
                43(b)(3)(B) by substituting `1999' for `1990').
                    ``(C) Reference price.--For purposes of this 
                paragraph, the term `reference price' means, with 
                respect to any calendar year--
                            ``(i) in the case of qualified crude oil 
                        production, the reference price determined 
                        under section 29(d)(2)(C), and
                            ``(ii) in the case of qualified natural gas 
                        production, the Secretary's estimate of the 
                        annual average wellhead price per 1,000 cubic 
                        feet for all domestic natural gas.
    ``(c) Qualified Crude Oil and Natural Gas Production.--For purposes 
of this section--
            ``(1) In general.--The terms `qualified crude oil 
        production' and `qualified natural gas production' mean 
        domestic crude oil or natural gas which is produced from a 
        marginal well.
            ``(2) Limitation on amount of production which may 
        qualify.--
                    ``(A) In general.--Crude oil or natural gas 
                produced during any taxable year from any well shall 
                not be treated as qualified crude oil production or 
                qualified natural gas production to the extent 
                production from the well during the taxable year 
                exceeds 1,095 barrels or barrel equivalents.
                    ``(B) Proportionate reductions.--
                            ``(i) Short taxable years.--In the case of 
                        a short taxable year, the limitations under 
                        this paragraph shall be proportionately reduced 
                        to reflect the ratio which the number of days 
                        in such taxable year bears to 365.
                            ``(ii) Wells not in production entire 
                        year.--In the case of a well which is not 
                        capable of production during each day of a 
                        taxable year, the limitations under this 
                        paragraph applicable to the well shall be 
                        proportionately reduced to reflect the ratio 
                        which the number of days of production bears to 
                        the total number of days in the taxable year.
            ``(3) Definitions.--
                    ``(A) Marginal well.--The term `marginal well' 
                means a domestic well--
                            ``(i) the production from which during the 
                        taxable year is treated as marginal production 
                        under section 613A(c)(6), or
                            ``(ii) which, during the taxable year--
                                    ``(I) has average daily production 
                                of not more than 25 barrel equivalents, 
                                and
                                    ``(II) produces water at a rate not 
                                less than 95 percent of total well 
                                effluent.
                    ``(B) Crude oil, etc.--The terms `crude oil', 
                `natural gas', `domestic', and `barrel' have the 
                meanings given such terms by section 613A(e).
                    ``(C) Barrel equivalent.--The term `barrel 
                equivalent' means, with respect to natural gas, a 
                conversion ratio of 6,000 cubic feet of natural gas to 
                1 barrel of crude oil.
    ``(d) Other Rules.--
            ``(1) Production attributable to the taxpayer.--In the case 
        of a marginal well in which there is more than one owner of 
        operating interests in the well and the crude oil or natural 
        gas production exceeds the limitation under subsection (c)(2), 
        qualifying crude oil production or qualifying natural gas 
        production attributable to the taxpayer shall be determined on 
        the basis of the ratio which taxpayer's revenue interest in the 
        production bears to the aggregate of the revenue interests of 
        all operating interest owners in the production.
            ``(2) Operating interest required.--Any credit under this 
        section may be claimed only on production which is attributable 
        to the holder of an operating interest.
            ``(3) Production from nonconventional sources excluded.--In 
        the case of production from a marginal well which is eligible 
        for the credit allowed under section 29 for the taxable year, 
        no credit shall be allowable under this section unless the 
        taxpayer elects not to claim the credit under section 29 with 
        respect to the well.''
    ``(c) Credit Treated as Business Credit.--Section 38(b) is amended 
by striking ``plus'' at the end of paragraph (11), by striking the 
period at the end of paragraph (12) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(13) the marginal oil and gas well production credit 
        determined under section 45D(a).''
    (d) Credit Allowed Against Regular and Minimum Tax.--
            (1) In general.--Subsection (c) of section 38 (relating to 
        limitation based on amount of tax) is amended by redesignating 
        paragraph (3) as paragraph (4) and by inserting after paragraph 
        (2) the following new paragraph:
            ``(3) Special rules for marginal oil and gas well 
        production credit.--
                    ``(A) In general.--In the case of the marginal oil 
                and gas well production credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the marginal 
                                oil and gas well production credit).
                    ``(B) Marginal oil and gas well production 
                credit.--For purposes of this subsection, the term 
                `marginal oil and gas well production credit' means the 
                credit allowable under subsection (a) by reason of 
                section 45D(a).''
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) is amended by inserting ``or the marginal oil 
        and gas well production credit'' after ``employment credit''.
    (e) Carryback.--Subsection (a) of section 39 (relating to carryback 
and carryforward of unused credits generally) is amended by adding at 
the end the following new paragraph:
            ``(3) 10-year carryback for marginal oil and gas well 
        production credit.--In the case of the marginal oil and gas 
        well production credit--
                    ``(A) this section shall be applied separately from 
                the business credit (other than the marginal oil and 
                gas well production credit),
                    ``(B) paragraph (1) shall be applied by 
                substituting `10 taxable years' for `1 taxable years' 
                in subparagraph (A) thereof, and
                    ``(C) paragraph (2) shall be applied--
                            ``(i) by substituting `31 taxable years' 
                        for `21 taxable years' in subparagraph (A) 
                        thereof, and
                            ``(ii) by substituting `30 taxable years' 
                        for `20 taxable years' in subparagraph (B) 
                        thereof.''
    (f) Coordination With Section 29.--Section 29(a) is amended by 
striking ``There'' and inserting ``At the election of the taxpayer, 
there''.
    (g) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following item:

                              ``Sec. 45D. Credit for producing oil and 
                                        gas from marginal wells.''
    (h) Effective Date.--The amendments made by this section shall 
apply to production in taxable years beginning after December 31, 1998.

SEC. 3. PHASE-OUT OF CERTAIN MINIMUM TAX PREFERENCES RELATING TO ENERGY 
              PRODUCTION.

    (a) Energy Preferences for Integrated Oil Companies.--Section 56 
(relating to alternative minimum taxable income) is amended by adding 
at the end the following new subsection:
    ``(h) Adjustment Based on Energy Preference.--
            ``(1) In general.--In computing the alternative minimum 
        taxable income of any taxpayer for any taxable year beginning 
        after 1998, there shall be allowed as a deduction an amount 
        equal to the alternative tax energy preference deduction.
            ``(2) Phase-out of deduction as oil prices increases.--The 
        amount of the deduction under paragraph (1) (determined without 
        regard to this paragraph) shall be reduced (but not below zero) 
        by the amount which bears the same ratio to such amount as--
                    ``(A) the amount by which the reference price for 
                the calendar year preceding the calendar year in which 
                the taxable year begins exceeds $14, bears to
                    ``(B) $3.
        For purposes of this paragraph, the reference price for any 
        calendar year shall be determined under section 29(d)(2)(C), 
        and, in the case of any taxable year beginning in a calendar 
        year after 2000, the $14 amount under subparagraph (A) shall be 
        adjusted at the same time and in the same manner as under 
        section 43(b)(3) by substituting `1999' for `1990'.
            ``(3) Alternative tax energy preference deduction.--For 
        purposes of paragraph (1), the term `alternative tax energy 
        preference deduction' means an amount equal to the sum of--
                    ``(A) the intangible drilling cost preference, and
                    ``(B) the depletion preference.
            ``(4) Intangible drilling cost preference.--For purposes of 
        this subsection, the term `intangible drilling cost preference' 
        means the amount by which alternative minimum taxable income 
        would be reduced if it were computed without regard to section 
        57(a)(2).
            ``(5) Depletion preference.--For purposes of this 
        subsection, the term `depletion preference' means the amount by 
        which alternative minimum taxable income would be reduced if it 
        were computed without regard to section 57(a)(1).
            ``(6) Alternative minimum taxable income.--For purposes of 
        paragraphs (1), (4), and (5), alternative minimum taxable 
        income shall be determined without regard to the deduction 
        allowable under this subsection and the alternative tax net 
        operating loss deduction under subsection (a)(4).
            ``(7) Regulations.--The Secretary may by regulation provide 
        for appropriate adjustments in computing alternative minimum 
        taxable income or adjusted current earnings for any taxable 
        year following a taxable year for which a deduction was allowed 
        under this subsection to ensure that no double benefit is 
        allowed by reason of such deduction.''
    (b) Repeal of Limit on Reduction for Independent Producers.--
Subparagraphs (E) of section 57(a)(2) (relating to exception for 
independent producers) is amended to read as follows:
                    ``(E) Exception for independent producers.--In the 
                case of any oil or gas well, this paragraph shall not 
                apply to any taxpayer which is not an integrated oil 
                company (as defined in section 291(b)(4)).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 4. DEPRECIATION ADJUSTMENT NOT TO APPLY TO OIL AND GAS ASSETS.

    (a) In General.--Subparagraph (B) of section 56(a)(1) (relating to 
depreciation adjustments) is amended to read as follows:
                    ``(B) Exceptions.--This paragraph shall not apply 
                to--
                            ``(i) property described in paragraph (1), 
                        (2), (3), or (4) of section 168(f), or
                            ``(ii) property used in the active conduct 
                        of the trade or business of exploring for, 
                        extracting, developing, or gathering crude oil 
                        or natural gas.''
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service in taxable years beginning after December 
31, 1998.

SEC. 5. REPEAL CERTAIN ADJUSTMENTS BASED ON ADJUSTED CURRENT EARNINGS 
              RELATING TO OIL AND GAS ASSETS.

    (a) Intangible Drilling Costs.--Clause (i) of section 56(g)(4)(D) 
is amended by striking the second sentence and inserting ``In the case 
of any oil or gas well, this clause shall not apply in the case of 
amounts paid or incurred in taxable years beginning after December 31, 
1998.''
    (b) Depletion.--Clause (ii) of section 56(g)(4)(F) is amended to 
read as follows:
                            ``(ii) Exception for oil and gas wells.--In 
                        the case of any taxable year beginning after 
                        December 31, 1998, clause (i) (and subparagraph 
                        (C)(i)) shall not apply to any deduction for 
                        depletion computed in accordance with section 
                        613A.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 6. ENHANCED OIL RECOVERY CREDIT AND CREDIT FOR PRODUCING FUEL FROM 
              A NONCONVENTIONAL SOURCE ALLOWED AGAINST MINIMUM TAX.

    (a) Enhanced Oil Recovery Credit Allowed Against Regular and 
Minimum Tax.--
            (1) Allowing credit against minimum tax.--Subsection (c) of 
        section 38 (relating to limitation based on amount of tax), as 
        amended by section 2(d), is amended by redesignating 
paragraph (4) as paragraph (5) and by inserting after paragraph (3) the 
following new paragraph:
            ``(4) Special rules for enhanced oil recovery credit.--
                    ``(A) In general.--In the case of the enhanced oil 
                recovery credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the enhanced 
                                oil recovery credit).
                    ``(B) Enhanced oil recovery credit.--For purposes 
                of this subsection, the term `enhanced oil recovery 
                credit' means the credit allowable under subsection (a) 
                by reason of section 43(a).''
            (2) Conforming amendments.--
                    (A) Subclause (II) of section 38(c)(2)(A)(ii), as 
                amended by section 2(d), is amended by striking ``or 
                the marginal oil and gas well production credit'' and 
                inserting ``, the marginal oil and gas well production 
                credit, or the enhanced oil recovery credit''.
                    (B) Subclause (II) of section 38(c)(3)(A)(ii), as 
                added by section 2(d), is amended by inserting ``or the 
                enhanced oil recovery credit'' after ``recovery 
                credit''.
    (b) Credit for Producing Fuel From a Non-conventional Source.--
            (1) Allowing credit against minimum tax.--Section 29(b)(6) 
        is amended to read as follows:
                    ``(6) Application with other credits.--The credit 
                allowed by subsection (a) for any taxable year shall 
                not exceed--
                            ``(A) the regular tax for the taxable year 
                        and the tax imposed by section 55, reduced by
                            ``(B) the sum of the credits allowable 
                        under subpart A and section 27.''
            (2) Conforming amendments.--
                    (A) Section 53(d)(1)(B)(iii) is amended by 
                inserting ``as in effect on the date of the enactment 
                of the Domestic Energy Production Security and 
                Stabilization Act,'' after ``29(b)(6)(B),''.
                    (B) Section 55(c)(2) is amended by striking 
                ``29(b)(6),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 7. 10-YEAR CARRYBACK FOR PERCENTAGE DEPLETION FOR OIL AND GAS 
              PROPERTY.

    (a) In General.--Subsection (d)(1) of section 613A (relating to 
limitations on percentage depletion in case of oil and gas wells) is 
amended to read as follows:
            ``(1) Limitation based on taxable income.--
                    ``(A) In general.--The deduction for the taxable 
                year attributable to the application of subsection (c) 
                shall not exceed so much of the taxpayer's taxable 
                income for the year as the taxpayer elects computed 
                without regard to--
                            ``(i) any depletion on production from an 
                        oil or gas property which is subject to the 
                        provisions of subsection (c),
                            ``(ii) any net operating loss carryback to 
                        the taxable year under section 172,
                            ``(iii) any capital loss carryback to the 
                        taxable year under section 1212, and
                            ``(iv) in the case of a trust, any 
                        distributions to its beneficiary, except in the 
                        case of any trust where any beneficiary of such 
                        trust is a member of the family (as defined in 
                        section 267(c)(4)) of a settlor who created 
                        inter vivos and testamentary trusts for members 
                        of the family and such settlor died within the 
                        last six days of the fifth month in 1970, and 
                        the law in the jurisdiction in which such trust 
                        was created requires all or a portion of the 
                        gross or net proceeds of any royalty or other 
                        interest in oil, gas, or other mineral 
                        representing any percentage depletion allowance 
                        to be allocated to the principal of the trust.
                    ``(B) Carrybacks and carryforwards.--
                            ``(i) In general.--If an amount is 
                        disallowed as a deduction for the taxable year 
                        (in this subparagraph referred to as the 
                        `unused depletion year') by reason of 
                        application of subparagraph (A), the disallowed 
                        amount shall be treated as an amount allowable 
                        as a deduction under subsection (c) for--
                                    ``(I) any of the 10 taxable years 
                                preceding the unused depletion year, 
                                and
                                    ``(II) the taxable year following 
                                the unused depletion year,
                        subject to the application of subparagraph (A) 
                        to such taxable year.
                            ``(ii) Election to waive carryback.--Any 
                        taxpayer entitled to a carryback period under 
                        this subparagraph may elect to relinquish such 
                        carryback for any of the taxable years to which 
                        it would apply. Such election made in any 
                        taxable year may be revised in the succeeding 
                        taxable year in such manner as the Secretary 
                        may prescribe.
                    ``(C) Allocation of disallowed amounts.--For 
                purposes of basis adjustments and determining whether 
                cost depletion exceeds percentage depletion with 
                respect to the production from a property, any amount 
                disallowed as a deduction on the application of this 
paragraph shall be allocated to the respective properties from which 
the oil or gas was produced in proportion to the percentage depletion 
otherwise allowable to such properties under subsection (c).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1998, and to any taxable 
year beginning on or before such date to the extent necessary to apply 
section 613A(d)(1) of the Internal Revenue Code of 1986 (as added by 
subsection (a)).

SEC. 8. NET INCOME LIMITATION ON PERCENTAGE DEPLETION REPEALED FOR OIL 
              AND GAS PROPERTIES.

    (a) In General.--Section 613(a) (relating to percentage depletion) 
is amended by striking the second sentence and inserting: ``Except in 
the case of oil and gas properties, such allowance shall not exceed 50 
percent of the taxpayer's taxable income from the property (computed 
without allowances for depletion).''
    (b) Conforming Amendments.--
            (1) Section 613A(c)(7) (relating to special rules) is 
        amended by striking subparagraph (C) and redesignating 
        subparagraph (D) as subparagraph (C).
            (2) Section 613A(c)(6) (relating to oil and natural gas 
        produced from marginal properties) is amended by striking 
        subparagraph (H).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 9. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES AND 
              DELAY RENTAL PAYMENTS.

    (a) Purpose.--The purpose of this section is to recognize that 
geological and geophysical expenditures and delay rentals are ordinary 
and necessary business expenses that should be deducted in the year the 
expense is incurred.
    (b) Election To Expense Geological and Geophysical Expenditures.--
            (1) In general.--Section 263 (relating to capital 
        expenditures) is amended by adding at the end the following new 
        subsection:
    ``(j) Geological and Geophysical Expenditures for Oil and Gas 
Wells.--Notwithstanding subsection (a), a taxpayer may elect to treat 
geological and geophysical expenses incurred in connection with the 
exploration for, or development of, oil or gas as expenses which are 
not chargeable to capital account. Any expenses so treated shall be 
allowed as a deduction in the taxable year in which paid or incurred.''
            (2) Conforming amendment.--Section 263A(c)(3) is amended by 
        inserting ``263(j),'' after ``263(i),''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to expenses paid or incurred 
                after the date of the enactment of this Act.
                    (B) Transition rule.--In the case of any expenses 
                described in section 263(j) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                paid or incurred on or before the date of the enactment 
                of this Act, the taxpayer may elect, at such time and 
                in such manner as the Secretary of the Treasury may 
                prescribe, to amortize the suspended portion of such 
                expenses over the 36-month period beginning with the 
                month in which the date of the enactment of this Act 
                occurs. For purposes of this subparagraph, the 
                suspended portion of any expense is that portion of 
                such expense which, as of the first day of the 36-month 
                period, has not been included in the cost of a property 
                or otherwise deducted.
    (c) Election To Expense Delay Rental Payments.--
            (1) In general.--Section 263 (relating to capital 
        expenditures), as amended by subsection (b)(1), is amended by 
        adding at the end the following new subsection:
    ``(k) Delay Rental Payments for Domestic Oil and Gas Wells.--
            ``(1) In general.--Notwithstanding subsection (a), a 
        taxpayer may elect to treat delay rental payments incurred in 
        connection with the development of oil or gas within the United 
        States (as defined in section 638) as payments which are not 
        chargeable to capital account. Any payments so treated shall be 
        allowed as a deduction in the taxable year in which paid or 
        incurred.
            ``(2) Delay rental payments.--For purposes of paragraph 
        (1), the term `delay rental payment' means an amount paid for 
        the privilege of deferring the drilling of an oil or gas well 
        under an oil or gas lease.''
            (2) Conforming amendment.--Section 263A(c)(3), as amended 
        by subsection (b)(2), is amended by inserting ``263(k),'' after 
        ``263(j),''.
                    (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to payments made or incurred 
                after the date of the enactment of this Act.
                    (B) Transition rule.--In the case of any payments 
                described in section 263(k) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                made or incurred on or before the date of the enactment 
                of this Act, the taxpayer may elect, at such time and 
                in such manner as the Secretary of the Treasury may 
                prescribe, to amortize the suspended portion of such 
                payments over the 36-month period beginning with the 
                month in which the date of the enactment of this Act 
                occurs. For purposes of this subparagraph, the 
                suspended portion of any payment is that portion of 
                such payment which, as of the first day of the 36-month 
                period, has not been included in the cost of a property 
                or otherwise deducted.

SEC. 10. WAIVER OF LIMITATIONS.

    If refund or credit of any overpayment of tax resulting from the 
application of the amendments made by this Act is prevented at any time 
before the close of the 1-year period beginning on the date of the 
enactment of this Act by the operation of any law or rule of law 
(including res judicata), such refund or credit may nevertheless be 
made or allowed if claim therefor is filed before the close of such 
period.
                                 <all>