[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2485 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2485

 To amend the Internal Revenue Code of 1986 to allow advanced applied 
  technology equipment to be expensed and to reduce the depreciation 
              recovery periods for certain other property.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 12, 2001

 Mr. English (for himself, Mr. Neal of Massachusetts, Mrs. Johnson of 
Connecticut, Mr. Tanner, and Mr. Foley) 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 allow advanced applied 
  technology equipment to be expensed and to reduce the depreciation 
              recovery periods for certain other property.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``High Productivity 
Investment Act of 2001''.
    (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) Secretary.--References in this Act to the ``Secretary'' are to 
the Secretary of the Treasury or his delegate.

SEC. 2. FINDINGS; NEW COST RECOVERY SYSTEM DESIGNED TO INCREASE 
              PRODUCTIVITY AND WAGES.

    (a) Findings.--The Congress finds that--
            (1) capital spending on applied technology is enabling 
        Americans to be more productive thereby raising their wages and 
        causing the economy to grow;
            (2) economic growth has eliminated the deficit and provided 
        for long-term tax cuts, increases in spending and debt 
        reduction;
            (3) continuing high levels of investment in the most modern 
        and efficient capital equipment will preserve and magnify these 
        gains; and
            (4) the result of sustained productivity growth will be a 
        permanently higher standard of living for Americans.
    (b) Reducing the Cost of Capital.--The Act reduces the after-tax 
cost of productive capital equipment by--
            (1) allowing the full cost of the most advanced applied 
        technology to be deducted in the year the property is placed in 
        service; and
            (2) allowing the full cost of other associated machinery 
        and equipment to be recovered by deductions spread over 3, 5, 
        7, 10, or 15 years.
    (c) Guiding Principles.--The goal is to put the best tools in the 
hands of Americans, thereby--
            (1) raising their wages by helping them to produce more 
        goods and services faster, better and cheaper; and
            (2) bringing about a long-term structural improvement in 
        the United States economy built around a permanently higher 
        level of productivity and income.

SEC. 3. ADOPTION OF THE HIGH PRODUCTIVITY INVESTMENT DEDUCTION AND 
              RAPID COST RECOVERY SYSTEM.

    (a) In General.--Part VI of subchapter B of chapter 1 (relating to 
itemized deductions for individuals and corporations) is amended by 
inserting after section 168 the following new sections:

``SEC. 168A. RAPID COST RECOVERY SYSTEM.

    ``(a) General Rule.--Except as otherwise provided in this section, 
the depreciation deduction provided by section 167(a) for any tangible 
property placed in service on or after January 1, 2002, shall be 
determined by using--
            ``(1) the applicable recovery method,
            ``(2) the applicable recovery period, and
            ``(3) the applicable convention.
    ``(b) Applicable Recovery Method.--
            ``(1) General rule for plant and equipment.--Except as 
        provided in paragraphs (2) and (3), the applicable recovery 
        method is--
                    ``(A) the 200 percent declining balance method,
                    ``(B) switching to the straight line method for the 
                1st taxable year for which using the straight line 
                method with respect to the adjusted basis as of the 
                beginning of such year will yield a larger allowance.
            ``(2) Special rule for long-lifed personal property.--
        Paragraph (1) shall be applied by substituting `150 percent' 
        for `200 percent' in the case of--
                    ``(A) any 10-year property or 15-year property, or
                    ``(B) any property with respect to which the 
                taxpayer is eligible to elect and elects under 
                paragraph (5) to have the provisions of this paragraph 
                apply.
            ``(3) Property to which the straight-line method applies.--
        The applicable depreciation method is the straight-line method 
        in the case of the following property:
                    ``(A) Nonresidential real property.
                    ``(B) Residential rental property.
                    ``(C) Any railroad grading or tunnel bore.
                    ``(D) Property with respect to which the taxpayer 
                elects under paragraph (5) to have the provisions of 
                this paragraph apply.
            ``(4) Salvage value.--Salvage value shall be treated as 
        zero for purposes of determining allowances under this section.
            ``(5) Elections.--
                    ``(A) Straight-line method.--A taxpayer may elect 
                to use the straight-line method in lieu of the method 
                otherwise required under this subsection for 1 or more 
                classes of property for any taxable year.
                    ``(B) 150 Percent declining balance method.--A 
                taxpayer may elect to use the method described in 
                paragraph (2) for any taxable year for 1 or more 
                classes of property for which the method described in 
                paragraph (1) otherwise would apply.
                    ``(C) Application of election.--Any election made 
                under this paragraph shall apply to all property in the 
                class for which the election is made and, once made, 
                shall be irrevocable.
    ``(c) Applicable Recovery Period.--The applicable recovery period 
shall be determined in accordance with the following table:

  
                                                The applicable recovery
``In the case of:
                                                       period is:      
    High productivity property.............................     1 year 
    3-year property........................................    3 years 
    5-year property........................................    5 years 
    Electric generating assets.............................    7 years 
    10-year property.......................................   10 years 
    15-year property.......................................   10 years 
    Residential rental property............................ 27.5 years 
    Nonresidential real property...........................   39 years 
    Any railroad grading or tunnel bore....................   50 years.
    ``(d) Applicable Convention.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the applicable convention is the half-year 
        convention.
            ``(2) Real property.--The applicable convention is the mid-
        month convention in the case of--
                    ``(A) residential rental property,
                    ``(B) nonresidential real property, and
                    ``(C) any railroad grading or tunnel bore.
            ``(3) Special rule where substantial property placed in 
        service during last 3 months of taxable year.--Except as 
        provided in regulations, if during any taxable year--
                    ``(A) the aggregate bases of property to which 
                paragraph (1) applies (as determined without 
                application of this subparagraph) placed in service 
                during the last 3 months of the taxable year, exceed
                    ``(B) 40 percent of the aggregate bases of property 
                to which paragraph (1) applies (as determined without 
                application of this subparagraph) placed in service 
                during such taxable year, the applicable convention for 
                all property to which paragraph (1) would apply (as 
                determined without application of this subparagraph) 
                placed in service during such taxable year shall be the 
                mid-quarter convention.
            ``(4) Definitions.--
                    ``(A) Half-year convention.--The half-year 
                convention is a convention which treats all property 
                placed in service during any taxable year (or disposed 
                of during any taxable year) as placed in service (or 
                disposed of) on the mid-point of such taxable year.
                    ``(B) Mid-month convention.--The mid-month 
                convention is a convention which treats all property 
                placed in service during any month (or disposed of 
                during any month) as placed in service (or disposed of) 
                on the mid-point of such month.
                    ``(C) Mid-quarter convention.--The mid-quarter 
                convention is a convention which treats all property 
                placed in service during any quarter of a taxable year 
                (or disposed of during any quarter of a taxable year) 
                as placed in service (or disposed of) on the mid-point 
                of such quarter.
    ``(e) Classification of Property.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, property that is not high productivity property, 
electric generating assets, a railroad grading or tunnel bore, 
residential rental property, or nonresidential real property shall be 
classified under the following table:

                Property shall be
                                        If such property has a modified
                  treated as:
                                          class life (in years) of:    
                    3-year property........................      3     
                    5-year property........................      5     
                    10-year property.......................     10     
                    15-year property.......................     15.    
            ``(2) High productivity property.--
                    ``(A) Classification of property.--For purposes of 
                applying this section to high productivity property for 
                which an election is not made under section 168B(a) and 
                for purposes of other provisions of this title that 
                require classification of property--
                            ``(i) high productivity property which has 
                        a modified class life of 3 years shall be 
                        treated as 3-year property, and
                            ``(ii) all other high productivity property 
                        shall be treated as 5-year property.
                    ``(B) Definition.--The term `high productivity 
                property' has the same meaning as the term `high 
                productivity property' under section 168B.
            ``(3) Real property.--For purposes of this section--
                    ``(A) Residential rental property.--
                            ``(i) In general.--The term `residential 
                        rental property' means any building or 
                        structure if 80 percent or more of the gross 
                        rental income from such building or structure 
                        for the taxable year is rental income from 
                        dwelling units.
                            ``(ii) Definitions.--For purposes of clause 
                        (i)--
                                    ``(I) the term `dwelling unit' 
                                means a house or apartment used to 
                                provide living accommodations in a 
                                building or structure, but does not 
                                include a unit in a hotel, motel, or 
                                other establishment more than one-half 
                                of the units in which are used on a 
                                transient basis, and
                                    ``(II) if any portion of the 
                                building or structure is occupied by 
                                the taxpayer, the gross rental income 
                                from such building or structure shall 
                                include the rental value of the portion 
                                so occupied.
                    ``(B) Nonresidential real property.--The term 
                `nonresidential real property' means section 1250 
                property which is not--
                            ``(i) residential rental property, or
                            ``(ii) property with a modified class life.
            ``(4) Railroad grading or tunnel bore.--The term `railroad 
        grading or tunnel bore' means all improvements resulting from 
        excavations (including tunneling), construction of embankments, 
        clearings, diversions of roads and streams, sodding of slopes, 
        and from similar work necessary to provide, construct, 
        reconstruct, alter, protect, improve, replace or restore a 
        roadbed or right-of-way for railroad track.
            ``(5) Electric generating assets.--The term `electric 
        generating assets' means property used in--
                    ``(A) nuclear power production,
                    ``(B) hydraulic power production,
                    ``(C) steam power production, or
                    ``(D) custom turbine production of electricity for 
                sale to the public, other than assets with a modified 
                class of less than 7 years.
    ``(f) Excluded Property.--This section shall not apply to--
            ``(1) Certain methods of depreciation.--Any property if--
                    ``(A) the taxpayer elects to exclude such property 
                from the application of this section, and
                    ``(B) for the 1st taxable year for which a 
                depreciation deduction would be allowable with respect 
                to such property in the hands of the taxpayer, the 
                property is properly depreciated under the unit-of-
                production method or any method of depreciation not 
                expressed in a term of years (other than the 
                retirement-replacement-betterment method or similar 
                method).
            ``(2) Certain public utility property.--Any public utility 
        property (within the meaning of section 168(i)(10)) if the 
        taxpayer does not use a normalization method of accounting (as 
        determined under section 168(i)(9)).
            ``(3) Films and video tape.--Any motion picture film or 
        video tape.
            ``(4) Sound recordings.--Any works which result from the 
        fixation of a series of musical, spoken, or other sounds, 
        regardless of the nature of the material (such as discs, tapes, 
        or other phonorecordings) in which such sounds are embodied.
            ``(5) Certain property placed in service in churning 
        transactions.--
                    ``(A) In general.--This section shall not apply to 
                any churning property acquired by the taxpayer after 
                December 31, 2001, if--
                            ``(i) the property was owned or used at any 
                        time during 2001 by the taxpayer or a related 
                        person,
                            ``(ii) the property was owned or used at 
                        any time during 2001, and, as part of the 
                        transaction, the user of the property does not 
                        change,
                            ``(iii) the taxpayer leases such property 
                        to a person (or a person related to such 
                        person) who owned or used such property at any 
                        time during 2001, or
                            ``(iv) the property is acquired in a 
                        transaction as part of which the user of such 
                        property does not change and the property was 
                        acquired from a person to which clause (ii) or 
                        clause (iii) applies.
                    ``(B) Churning property.--For purposes of this 
                paragraph, the term `churning property' means any 
                property that was first placed in service before 
                January 1, 2002, if the recovery life of such property 
                in the hands of the transferor (determined as of the 
                time the property was placed in service) is greater 
                than the recovery life of such property in the hands of 
                the transferee (determined as if this paragraph did not 
                apply).
                    ``(C) Applicable cost recovery rules.--Section 168 
                shall apply to any property to which this section does 
                not apply by reason of this paragraph.
                    ``(D) Special rules.--For purposes of this 
                paragraph--
                            ``(i) property shall not be treated as 
                        owned before it is placed in service, and
                            ``(ii) whether the user of a property 
                        changes will be determined in accordance with 
                        regulations prescribed by the Secretary.
            ``(6) Expensed property.--Property the expenses of which 
        are not chargeable to capital account under another provision 
        of this chapter, except to the extent provided in the 
        applicable provision.
    ``(g) Alternative Depreciation System.--
            ``(1) In general.--In the case of--
                    ``(A) any tangible property which during the 
                taxable year is used predominantly outside the United 
                States,
                    ``(B) any tax-exempt use property (as defined in 
                section 168(h) and modified by paragraph (3)),
                    ``(C) any tax-exempt bond financed property (as 
                defined in section 168(g)(5)),
                    ``(D) any imported property covered by an Executive 
                order under section 168(g)(6), and
                    ``(E) any property to which the taxpayer makes an 
                election to have this subsection apply in accordance 
                with procedures described in section 168(g)(7),
        which is placed in service after December 31, 2001, the 
        depreciation deduction provided by section 167(a) shall be 
        determined under the alternative depreciation system of section 
        168(g) as modified by paragraph (2).
            ``(2) Modifications to alternative depreciation system.--
        For purposes of applying the alternative depreciation system of 
        section 168(g) to property described in paragraph (1)--
                    ``(A) Recovery period for high productivity 
                property.--Subparagraph (C) of section 168(g)(3) shall 
                apply by substituting `high productivity property (as 
                defined in section 168B(b))' for `qualified 
                technological equipment'.
                    ``(B) Lease of high productivity property.--For 
                purposes of applying the definition of `tax-exempt use 
                property' in section 168(h), the phrase `high 
                productivity property (as defined in section 168B(b))' 
                shall be substituted for `qualified technological 
                equipment' in paragraph (3) of section 168(h).
                    ``(C) Electric generating assets.--In the case of 
                electric generating assets the recovery period used for 
                purposes of paragraph (2) of section 168(g) shall be 10 
                years.
    ``(h) Definitions.--
            ``(1) Modified class life.--
                    ``(A) In general.--The term `modified class life' 
                means the modified class life of an item of property as 
                set forth in a table prepared by the Secretary in 
                accordance with section 7 of the High Productivity 
                Investment Act of 2001.
                    ``(B) Before preparation of table.--In the case of 
                a taxpayer which is required to file a return before 
                the table described in subclause (A) is published, the 
                taxpayer shall determine the modified class life of 
                property in accordance with the principles of section 7 
                of the High Productivity Investment Act of 2001.
            ``(2) Section 1245 and 1250 property.--The terms `section 
        1245 property' and `section 1250 property' have the meanings 
        given such terms by sections 1245(a)(3) and 1250(c), 
        respectively.
    ``(i) Special Rules.--
            ``(1) General asset accounts.--Under regulations, a 
        taxpayer may maintain 1 or more general asset accounts for any 
        property to which this section applies. Except as provided in 
        regulations, all proceeds realized on any disposition of 
        property in a general asset account shall be included in income 
        as ordinary income.
            ``(2) Changes in use.--The Secretary shall, by regulations, 
        provide for the method of determining the deduction allowable 
        under section 167(a) with respect to any tangible property for 
        any taxable year (and the succeeding taxable years) during 
        which such property changes status under this section but 
        continues to be held by the same person.
            ``(3) Treatments of additions or improvements to 
        property.--In the case of any addition to (or improvement of) 
        any property--
                    ``(A) any deduction under subsection (a) for such 
                addition or improvement shall be computed in the same 
                manner as the deduction for such property would be 
                computed if such property had been placed in service at 
                the same time as such addition or improvement, and
                    ``(B) the applicable recovery period for such 
                addition or improvement shall begin on the later of--
                            ``(i) the date on which such addition (or 
                        improvement) is placed in service, or
                            ``(ii) the date on which the property with 
                        respect to which such addition (or improvement) 
                        was made is placed in service.
            ``(4) Treatment of certain transferees.--
                    ``(A) In general.--In the case of any property 
                transferred in a transaction described in subparagraph 
                (B), the transferee shall be treated as the transferor 
for purposes of computing the depreciation deduction determined under 
this section or section 168, as the case may be, with respect to so 
much of the basis in the hands of the transferee as does not exceed the 
adjusted basis in the hands of the transferor. In any case where this 
section 168 as in effect before the amendments made by section 201 of 
the Tax Reform Act of 1986 applied to the property in the hands of the 
transferor, the reference in the preceding sentence to section 168 
shall be treated as a reference to such section as so in effect.
                    ``(B) Transactions covered.--The transactions 
                described in this subparagraph are--
                            ``(i) any transaction described in section 
                        332, 351, 361, 721, or 731, and
                            ``(ii) any transaction between members of 
                        the same affiliated group during any taxable 
                        year for which a consolidated return is made by 
                        such group.
                Subparagraph (A) shall not apply in the case of a 
                termination of a partnership under section 
                708(b)(1)(B).
                    ``(C) Property reacquired by the taxpayer.--Under 
                regulations, property which is disposed of and then 
                reacquired by the taxpayer shall be treated for 
                purposes of computing the deduction allowable under 
                subsection (a) as if such property had not been 
                disposed of.
            ``(5) Treatment of leasehold improvements.--
                    ``(A) In general.--In the case of any building 
                erected (or improvements made) on leased property, if 
                such building or improvement is property to which this 
                section applies, the depreciation deduction shall be 
                determined under the provisions of this section.
                    ``(B) Treatment of lessor improvements which are 
                abandoned at termination of lease.--An improvement--
                            ``(i) which is made by the lessor of leased 
                        property for the lessee of such property, and
                            ``(ii) which is irrevocably disposed of or 
                        abandoned by the lessor at the termination of 
                        the lease by such lessee, shall be treated for 
                        purposes of determining gain or loss under this 
                        title as disposed of by the lessor when so 
                        disposed of or abandoned.
                    ``(C) Cross reference.--

                                ``For treatment of qualified long-term 
real property constructed or improved in connection with cash or rent 
reduction from lessor to lessee, see section 110(b).
            ``(6) Public utility property which does not meet 
        normalization rules.--In the case of any public utility 
        property to which this section does not apply by reason of 
        subsection (f)(2), the allowance for depreciation under section 
        167(a) shall be an amount computed using the method and period 
        referred to in section 168(i)(9)(A)(i).
    ``(j) Property on Indian Reservations.--
            ``(1) In general.--A taxpayer may elect to apply the cost 
        recovery rules of section 168 (including subsection (j) 
        thereof), in lieu of the rules of this section, to property to 
        which the rules of section 168(j) would apply but for this 
        section and section 168(k).
            ``(2) Election.--Any election pursuant to paragraph (1) 
        shall apply to all `qualified Indian reservation property' (as 
        defined in section 168(j)) placed in service by the taxpayer in 
        the taxable year to which the election relates.

``SEC. 168B. HIGH PRODUCTIVITY INVESTMENT DEDUCTION.

    ``(a) Treatment as Expenses.--A taxpayer may elect to treat the 
cost of any high productivity property as an expense not chargeable to 
capital account. Any cost so treated shall be allowed as a deduction in 
the taxable year in which the high productivity property is placed in 
service.
    ``(b) Definition of High Productivity Property.--
            ``(1) In general.--Except as provided in paragraph (3), the 
        term `high productivity property' means any--
                    ``(A) computer,
                    ``(B) computer related peripheral equipment,
                    ``(C) computer based machinery,
                    ``(D) electronic diagnostic equipment,
                    ``(E) electronic control equipment,
                    ``(F) other electronic, electromechanical, laser or 
                computer based equipment,
                    ``(G) computer software,
                    ``(H) equipment used in the manufacture of 
                semiconductors,
                    ``(I) high technology medical equipment,
                    ``(J) advanced technology communications equipment,
                    ``(K) optical fiber and photonics equipment,
                    ``(L) advanced environmental products,
                    ``(M) advanced life science products, or
                    ``(N) new high productivity assets.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) Computer.--The term `computer' means a 
                programmable electronically activated device which--
                            ``(i) is capable of accepting information, 
                        applying prescribed processes to the 
                        information, and supplying the results of those 
                        processes, and
                            ``(ii) consists of a central processing 
                        unit containing extensive storage, logic, 
                        arithmetic and control capabilities.
                    ``(B) Computer related peripheral equipment.--The 
                term `computer related peripheral equipment' means any 
                auxiliary machine or other equipment (whether on-line 
                or off-line) which is designed to be placed under the 
                control of the central processing unit of a computer 
                (as determined without regard to whether such machine 
                or equipment is an integral part of other property 
                which is not a computer).
                    ``(C) Computer based machinery.--The term `computer 
                based machinery' means any machine which--
                            ``(i) cuts, forms, shapes, drills, bores, 
                        mixes, paints, seals, welds, or otherwise 
                        transforms material, or
                            ``(ii) handles, conveys, assembles, or 
                        packages materials or products,
                by responding to electronically stored information and 
                programmed commands.
                    ``(D) Electronic diagnostic equipment.--The term 
                `electronic diagnostic equipment' means equipment that 
                uses electronic components to sense or monitor 
                location, size, volume, surface characteristics, 
                pressure, temperature, speed, chemical composition, or 
                other similar characteristics.
                    ``(E) Electronic control equipment.--The term 
                `electronic control equipment' means equipment that 
                electronically controls pressure, temperature, size, 
                volume, composition purity or other similar 
                characteristics.
                    ``(F) High technology medical equipment.--The term 
                `high technology medical equipment' means any 
                electronic, electromechanical, or computer-based high 
                technology equipment used in the screening, monitoring, 
                observation, diagnosis, or treatment of patients in a 
                laboratory, medical, or hospital environment.
                    ``(G) Advanced technology communications 
                equipment.--The term `advanced technology 
                communications equipment' means equipment used in the 
                transmission or reception of voice, data, video, 
                paging, messaging, or other communications services 
                that are delivered using packet technology. A packet is 
                a unit of data, or sequence of binary digits, that is 
                routed between an origin and a destination on a packet-
                switched network.
                    ``(H) Optical fiber and photonics equipment.--The 
                term `optical fiber and photonics equipment' means 
                optical fiber and the equipment and materials used to 
                generate, manipulate and direct light particles over 
                such fiber.
                    ``(I) Advanced environmental products.--The term 
                `advanced environmental product' means any high cell 
                density ceramic or other device used for the control of 
                nitrogen oxide and particulate emissions.
                    ``(J) Advanced life sciences products.--The term 
                `advanced life sciences product' means any polymer, 
                ceramic or high-purity glass product used in biological 
                research.
                    ``(K) New high productivity assets.--
                            ``(i) In general.--The term `new high 
                        productivity assets' means any asset utilizing 
                        1 or more technological or scientific processes 
                        which were not in common commercial use before 
                        January 1, 2001.
                            ``(ii) Determinations.--The Secretary shall 
                        establish procedures pursuant to which 
                        taxpayers can seek a public ruling that a 
                        particular class of assets qualifies as new 
                        high productivity assets. The procedures shall 
                        require the Secretary to provide a 
                        determination within 90 days of receipt of a 
                        properly completed request for a public ruling.
            ``(3) Excluded property.--The term `high productivity 
        property' shall not include--
                    ``(A) an entire car, locomotive, aircraft, ship or 
                other vehicle solely because the vehicle is controlled 
                in whole or part by a computer or other electronic 
                equipment,
                    ``(B) any equipment of a kind used primarily for 
                entertainment or amusement of the user, and
                    ``(C) typewriters, calculators, copiers, 
                duplication equipment, and other similar equipment.
    ``(c) Election.-- An election under this section for any taxable 
year shall--
            ``(1) be made on an asset by asset basis, and
            ``(2) be made on the taxpayer's return of the tax imposed 
        by this chapter for the taxable year.
    ``(d) Special Rules.--
            ``(1) Cost.--For purposes of this section, the cost of 
        property does not include so much of the basis of such property 
        as is determined by reference to the basis of other property 
        held at any time by the person acquiring such property.
            ``(2) Antichurning rules.--
                    ``(A) In general.--The antichurning rules of 
                section 168A(f)(5) shall apply to this section.
                    ``(B) Special rule.--For purposes of apply the 
                antichurning rules of section 168A(f)(5) to this 
                section, assets to which this section may apply but for 
                such rule shall be treated as having a recovery period 
                for of 1 year.
            ``(3) Recapture in certain cases.--The Secretary shall, by 
        regulations, provide for the recapturing the benefit under any 
        deduction allowable under subsection (a) with respect to any 
        property which is not used predominantly in a trade or business 
        at any time.
            ``(4) Alternative depreciation system applies.--The 
        election under subsection (a) may not be made with respect to 
        property which at any time during the taxable year in which 
        such property is placed in service is--
                    ``(A) described in paragraph (1) of section 168A(g) 
                or
                    ``(B) `listed property' `not predominantly used in 
                a qualified business use' as such terms apply for 
                purposes of paragraph (1) of 280F(b).''.
    (b) Conforming Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by adding after section 168 the 
following new items:

                              ``Sec. 168A. Rapid cost recovery system.
                              ``Sec. 168B. High productivity investment 
                                        deduction.''

SEC. 4. REPEAL OF MACRS.

    (a) In General.--Section 168 is amended by inserting at the end 
thereof the following new subsection:
    ``(k) Repeal of MACRS.--This section shall apply to property placed 
in service after December 31, 2001, only to the extent provided in 
section 168A.''

SEC. 5. MODIFICATIONS TO ALTERNATIVE MINIMUM TAX.

    (a) Repeal of Depreciation Preference.--Subparagraph (A) of section 
56(a)(1) is amended to read as follows:
                    ``(A) Pre-2002 property.--
                            ``(i) Certain property placed in service 
                        before 1999.--Except as provided in clause 
                        (iv), the depreciation deduction allowable 
                        under section 167 with respect to any tangible 
                        property placed in service after December 31, 
                        1986, and before January 1, 1999, shall be 
                        determined under the alternative system of 
                        section 168(g) but using the method of 
                        depreciation described in clause (iii).
                            ``(ii) Certain property placed in service 
                        before 2002.--Except as provided in clause 
                        (iv), the method of depreciation described in 
                        clause (iii) shall be used to determine the 
                        depreciation deduction allowable under section 
                        167 with respect to--
                                    ``(I) any tangible property placed 
                                in service after December 31, 1998, and 
                                before January 1, 2002, and
                                    ``(II) any property to which 
                                section 168A(f)(5) applies.
                            ``(iii) 150-percent declining balance 
                        method for certain property.--Except as 
                        provided in clause (iv), the method of 
                        depreciation used to determine depreciation 
                        deductions under clauses (i) and (ii) shall 
                        be--
                                    ``(I) the 150 percent declining 
                                balance method,
                                    ``(II) switching to the straight 
                                line method for the 1st taxable year 
                                for which using the straight line 
                                method with respect to the adjusted 
                                basis as of the beginning of the year 
                                will yield a higher allowance.
                            ``(iv) Property depreciated on the straight 
                        line basis.--The method of depreciation used to 
                        determine the depreciation deductions under 
                        clauses (i) and (ii) shall be the straight line 
                        method in the case of--
                                    ``(I) section 1250 property (as 
                                defined in section 1250(c)), and
                                    ``(II) other property if the 
                                depreciation deduction determined under 
                                section 168 with respect to such other 
                                property for purposes of the regular 
                                tax is determined using the straight 
                                line method.''
    (b) Repeal of Depreciation Deduction for Adjusted Current 
Earnings.--Clause (i) of section 56(g)(4)(A) (relating to the 
depreciation deduction for purposes of computing adjusted current 
earnings) is amended to read as follows:
                            ``(i) Property placed in service after 
                        1989.--
                                    ``(I) Property placed in service 
                                before 1994.--The depreciation 
                                deduction with respect to any property 
                                placed in service before January 1, 
                                1994, in a taxable year beginning after 
                                1989 shall be determined under the 
                                alternative system of section 168(g).
                                    ``(II) Property placed in service 
                                before 2002.--The depreciation 
                                deduction with respect to any property 
                                placed in service after December 31, 
                                1993, and before January 1, 2002 shall 
                                be determined under the rules of 
                                subparagraph (A) of subsection (a)(1).
                                    ``(III) Property placed in service 
                                after 2001.--The depreciation deduction 
                                with respect to any property placed in 
                                service after December 31, 2001, shall 
                                be the depreciation deduction 
                                determined with respect to such 
                                property for purposes of the regular 
                                tax.
                                    ``(IV) Antichurning rule.--For 
                                purposes of this clause, property which 
                                section 168A(f)(5) applies shall be 
                                treated as described in subclause 
                                (III).''
    (c) Technical Amendments.--Section 56(a)(5) (relating to minimum 
tax depreciation for pollution control equipment) is amended by 
striking ``section 168 using the straight line method.'' and inserting 
``section 168A(a).''.

SEC. 6. CONFORMING AMENDMENTS.

    (a) References to Depreciation Allowable Under Section 168.--The 
Code is amended by striking ``168'' and inserting ``168 or 168A'' in 
the following places:
            (1) Section 47(c)(2)(A)(i).
            (2) Section 280F(a)(1)(B)(iv).
            (3) Section 280F(a)(2)(B).
            (4) Section 280F(d)(1).
            (5) Section 312(k)(3)(A).
            (6) Section 381(c)(6).
            (7) Section 936(i)(4)(B).
            (8) Section 1250(b)(5)(A).
            (9) Section 1250(b)(5)(B).
            (10) Section 1397C(a)(1).
    (b) Amendments to Reflect Expensing.--
            (1) The Code is amended by striking ``179'' and inserting 
        ``168B or 179'' in the following places:
                    (A) Section 179A(e)(5).
                    (B) Section 280F(d)(1), including the title of such 
                paragraph.
                    (C) Section 1397C(a)(1).
            (2) Paragraph (1) of section 263 is amended by striking ``; 
        or'' at the end of subparagraph (G) and inserting a comma, by 
        striking the period at the end of subparagraph (H) and 
        inserting ``, or'', and by inserting at the end of the 
        paragraph the following new subparagraph:
                    ``(I) expenditures for which a deduction is allowed 
                under section 168B.''
            (3) Section 312(k) is amended by striking ``179 or 179A'' 
        each place that it appears (including the subsection title) and 
        inserting ``168B, 179 or 179A''.
            (4) Section 1245(a)(2)(C) is amended by striking ``179'' 
        and inserting ``168B, 179''.
    (c) Changes to Other References to Section 168.--
            (1) Section 47(c)(2)(B)(i) (relating to the use of the 
        straight line method for rehabilitation property) is amended by 
        inserting ``or section 168A(b)(5)(A)'' after ``168'' and before 
        the period.
            (2) Section 47(c)(2)(B)(vi) (relating to exclusions from 
        qualified rehabilitation property) is amended by striking 
        ``168(c)'' and inserting in lieu thereof ``168A(c)''.
            (3) Section 142(i)(2)(A) (relating to tax-exempt bond 
        financing of high speed intercity rail facilities) is amended 
        by striking ``167 or 168,'' and inserting in lieu thereof 
        ``167, 168, 168A or 168B,''.
            (4) Section 167(b) (relating to cross references for 
        depreciation provisions) is amended by inserting at the end 
        thereof: ``For determination of depreciation deduction in case 
        of property to which section 168A applies, see section 168A.''.
            (5) Section 179(d)(1) (relating to property eligible for 
        expensing) is amended by striking ``168'' and inserting in lieu 
        thereof ``168A''.
            (6) Section 280F(b)(1) (relating to the use of the 
        alternate depreciation system for personal use property not 
        predominantly used in a qualified business use) is amended by 
        striking ``168'' and inserting in lieu thereof ``168A''.
            (7) Section 291(c)(1) (relating to the corporate preference 
        item for pollution control facilities) is amended by striking 
``168'' and inserting in lieu thereof ``168A''.
            (8) Clauses (i), (ii), (iii) and (iv) of section 
        936(i)(4)(B) (relating to the possessions tax credit) are 
        amended by striking ``168'' each place that it appears and 
        inserting in lieu thereof ``168A''.
            (9) Section 467(e)(3)(B) is amended to read as follows:
                    ``(B) Special rule for property not depreciable 
                under section 168 or 168a.--In the case of property to 
                which section 168 or 168A does not apply, subparagraph 
                (A) shall be applied as if section 168A applies to such 
                property.''
    (d) Other Conforming Amendments.--
            (1) Section 936(i)(4)(B)(i) is amended by inserting ``high 
        productivity property,'' before ``3-year property''.
            (2) Section 936(i)(4)(B) is amended by striking out clause 
        (v) thereof.

SEC. 7. MODIFIED CLASS LIFE.

    (a) Table of Modified Class Lives.--
            (1) In general.--The Secretary shall prescribe a table 
        showing classes of property and the modified class life of each 
        class of property. The initial table prescribed by such 
        Secretary shall be based on the schedule in subsection (b) with 
        such changes in the description of classes of property as the 
        Secretary deems appropriate, including the consolidation of 
        similar classes with identical modified class lives.
            (2) New types of property.--If the Secretary identifies 
        classes of property that are not described in the schedule in 
        subsection (b), the Secretary shall modify the schedule 
        described in paragraph (1) by adding a new modified asset class 
        for such classes of property. If the Secretary determines that 
        any existing class of property includes assets with distinctly 
        different characteristics, the Secretary may divide such class 
        into 2 or more modified asset classes. The modified class life 
        for any class established pursuant to this paragraph shall be 
        the same as the modified class life for other classes which 
        include assets with characteristics similar to those of the 
        assets in the new class.
            (3) Changes in lives of property.--
                    (A) Decrease in modified class life.--Upon petition 
                from persons who place in service assets in a 
                particular modified asset class, the Secretary shall 
                examine whether the modified class life for such class 
                is too long (as determined by comparing the modified 
                class life with the modified class life for modified 
                asset classes for assets which have characteristics 
                similar to those of the assets in the class being 
                examined). If the Secretary finds that the modified 
                class life for the examined class is too long, he shall 
                promptly prescribe a new modified class life for the 
                class.
                    (B) Increase in modified class life.--If the 
                Secretary determines that potentially abusive 
                transactions are occurring because the modified class 
                life of an asset class is shorter than it should be (as 
                measured by the standards set in subparagraph (A)), the 
                Secretary may prescribe a new modified class life for 
                such class after a period of notice and comment. In no 
                other case shall the Secretary increase the modified 
                class life of a class.
    (b) Tentative Schedule.--
            (1) In general.--This subsection includes a schedule of 
        classes of assets and the modified class life of each class of 
        assets. The schedule shall form the basis for the table to be 
        prescribed by the Secretary pursuant to subsection (a).
            (2) Description of assets classes.--For purposes of 
        applying the schedule under this subsection--
                    (A) MACRS class.--If an asset class is described in 
                this subsection by reference to a MACRS asset class, 
                such asset class is the asset class described in 
                Internal Revenue Service Revenue Procedure 87-56, as 
                modified or supplemented through the date of the 
                enactment of this Act.
                    (B) Asset described in two classes.--If an asset is 
                described in two classes and one of the classes is 
                under the heading ``Assets Used in All Business 
                Activities,'' the asset shall be classified in the 
                asset class under such heading. If an asset class is 
                described in two asset classes and one class has a 
                specific description and the other class has a 
                reference to a MACRS asset class, the asset shall be 
                classified in the asset class with the specific 
                description.
            (3) Modified class life schedule.--The modified class life 
        schedule is as follows:

                Assets class and description of 
                    assets included           Modified class life (yrs)
Assets Used in All Business Activities:
        1.11  Office furniture, fixtures and equipment                5
            (MACRS class 00.11).
        1.12  Information systems (MACRS class 00.12)......           3
        1.13  Data handling equipment, except computers               5
            (MACRS class 00.13).
        1.21  Noncommercial airplanes (MACRS class 00.21)..           5
        1.22  Automobiles, Taxis (MACRS class 00.22).......           3
        1.23  Buses (MACRS class 00.23)....................           5
        1.24  Light general purpose trucks (MACRS class               5
            00.241).
        1.25  Heavy general purpose trucks (MACRS class               5
            00.242).
        1.26  Railroad cars and locomotives (MACRS class              5
            00.25).
        1.27  Tractor units for over-the-road use (MACRS              3
            class 00.26).
        1.28  Trailers and trailer mounted containers                 5
            (MACRS class 00.27).
        1.29  Vessels, barges, etc. (MACRS class 00.28)....          10
        1.31  Land improvements (MACRS class 00.3).........          15
        1.41  Industrial steam and electric generation and/          15
            or distribution systems (MACRS class 00.4).
Assets Used in the Following Activity Categories:
        2  Agriculture:
                2.1  Agriculture general (MACRS class 01.1)           5
                2.2  Cotton ginning assets (MACRS class               5
                    01.11).
                2.3  Cattle breeding or dairy (MACRS class            3
                    01.21).
                2.4  Young breeding work horse (MACRS class           5
                    01.221).
                2.5  Old breeding work horse (MACRS class             5
                    01.222).
                2.6  Young race horse (MACRS class 01.223).           3
                2.7  Old race horse (MACRS class 01.224)...           3
                2.8  Other race horse (MACRS class 01.225).           5
                2.9  Hogs, breeding (MACRS class 01.23)....           3
                2.10  Sheep & goats, breeding (MACRS class            3
                    01.24).
                2.11  Farm buildings except structures               15
                    (MACRS class 01.3).
                2.12  Single purpose agricultural and                10
                    horticultural structures (MACRS class 
                    01.4).
                2.13  Tree or vine bearing fruit or nuts              5
                    (any tree or vine bearing fruits or 
                    nuts).
        3  Mining (MACRS class 10.0).......................           5
        4  Oil and Gas:
                4.1  Offshore drilling (MACRS class 13.0)..           3
                4.2  Drilling of oil and gas wells (MACRS             3
                    class 13.1).
                4.3  Exploration for and production of                5
                    petroleum and natural gas deposits 
                    (MACRS class 13.2).
                4.4  Petroleum refining (MACRS class 13.3).           3
        5  Construction (MACRS class 15.0).................           3
        6  Manufacture of Food Products:
                6.1  Manufacture of grain and grain mill              5
                    products (MACRS class 20.1).
                6.2  Manufacture of sugar and sugar                   5
                    products (MACRS class 20.2).
                6.3  Manufacture of vegetable oil and                 5
                    vegetable oil products (MACRS class 
                    20.3).
                6.4  Manufacture of food and other kindred            5
                    products (MACRS class 20.4).
                6.5  Manufacture of food and beverages--              3
                    special handling devices (MACRS class 
                    20.5).
        7  Manufacture of tobacco and tobacco products                5
            (MACRS class 21.0).
        8  Manufacture of yarn, fabrics, carpets, and 
            apparel:
                8.1  Manufacture of knitted goods (MACRS              3
                    class 22.1).
                8.2  Manufacture of yarn, thread, and woven           5
                    fabric (MACRS class 22.2).
                8.3  Manufacture of carpets and dyeing,               3
                    finishing and packaging of textile 
                    products (MACRS class 22.3, other than 
                    assets used in the production of 
                    medical and dental supplies).
                8.4  Manufacture of textured yarns (MACRS             3
                    class 22.4).
                8.5  Manufacture of nonwoven fabrics (MACRS           5
                    class 22.5).
                8.6  Manufacture of apparel (MACRS class              3
                    23.0).
        9  Manufacture of drugs, medical and dental 
            supplies:
                9.1  Manufacture of drugs..................           3
                9.2  Manufacture of medical and dental                3
                    supplies (assets used in the production 
                    of medical and dental supplies other 
                    than drugs and medicines [part of MACRS 
                    class 22.3]).
        10  Timber and manufacture of wood products:
                10.1  Cutting of timber (MACRS class 24.1).           3
                10.2  Sawing of dimensional stock from                5
                    logs--permanent (MACRS class 24.2).
                10.3  Sawing of dimensional stock from                3
                    logs--temporary (MACRS class 24.3).
                10.4  Manufacture of wood products and                5
                    furniture (MACRS class 24.4).
                10.5  Manufacture of pulp and paper (MACRS            5
                    class 26.1).
                10.6  Manufacture of converted paper,                 5
                    paperboard, and pulp products.
        11  Printing, publishing and allied industries                5
            (MACRS class 27.0).
        12  Manufacture of chemicals, rubber products and 
            plastics:
                12.1  Manufacture of chemicals and allied             3
                    products (MACRS class 28.0).
                12.2  Manufacture of rubber products (MACRS           5
                    class 30.1).
                12.3  Manufacture of rubber products--                3
                    special tools and devices (MACRS class 
                    30.11).
                12.4  Manufacture of finished plastic                 5
                    products (MACRS class 30.2).
                12.5  Manufacture of finished plastic                 3
                    products--special tools (MACRS class 
                    30.21).
        13  Manufacture of leather and leather products               5
            (MACRS class 31.0).
        14  Manufacture of products from sand and stone:
                14.1  Manufacture of glass products (MACRS            5
                    class 32.1).
                14.2  Manufacture of glass products--                 3
                    special tools (MACRS class 32.11).
                14.3  Manufacture of cement (MACRS class             10
                    32.2).
                14.4  Manufacture of other stone and clay             5
                    products (MACRS class 32.3).
        15  Manufacture of metals and metal products:
                15.1  Manufacture of primary nonferrous               5
                    metals (MACRS class 33.2).
                15.2  Manufacture of primary nonferrous               3
                    metals--special tools (MACRS class 
                    33.21).
                15.3  Manufacture of foundry products                 5
                    (MACRS class 33.3).
                15.4  Manufacture of primary steel mill               5
                    products (MACRS class 33.4).
                15.5  Manufacture of fabricated metal                 5
                    products (MACRS class 34.0).
                15.6  Manufacture of fabricated metal                 3
                    products--special tools (MACRS class 
                    34.01).
        16  Manufacture of electrical and nonelectrical               5
            machinery and other mechanical products (MACRS 
            class 35.0).
        17  Manufacture of electronic components and 
            engines:
                17.1  Manufacture of electronic components,           3
                    products and systems (MACRS class 
                    36.0).
                17.2  Manufacture of semiconductors (MACRS            3
                    class 36.1).
                17.3  Manufacture of electronic internal              3
                    combustion and turbine engines 
                    (includes all manufacturing and 
                    assembly assets used in the manufacture 
                    and assembly of electronic internal 
                    combustion and turbine engines greater 
                    than 50 horsepower and replacement 
                    parts. Excludes buildings and 
                    structural components).
        18  Manufacture of transportation products:
                18.1  Manufacture of motor vehicles (MACRS            5
                    class 37.11).
                18.2  Manufacture of motor vehicles--                 3
                    special tools (MACRS class 37.12).
                18.3  Manufacture of aerospace products               5
                    (MACRS class 37.2).
                18.4  Ship and boat building machinery and            5
                    equipment (MACRS class 37.31).
                18.5  Ship and boat building dry docks and           10
                    land improvements (MACRS class 37.32).
                18.6  Ship and boat building--special tools           5
                    (MACRS class 37.33).
                18.7  Manufacture of locomotives (MACRS               5
                    class 37.41).
                18.8  Manufacture of railroad cars (MACRS             5
                    class 37.42).
        19  Manufacture of personal and recreational                  5
            products (MACRS class 39.0).
        20  Railroad operations:
                20.1  Railroad machinery and equipment                5
                    (MACRS class 40.1).
                20.2  Railroad structures and similar                15
                    improvements (MACRS class 40.2).
                20.3  Railroad wharves and docks (MACRS              15
                    class 40.3).
                20.4  Railroad track (MACRS class 40.4)....           5
                20.5  Railroad hydraulic electric                    15
                    generating equipment (MACRS class 
                    40.51).
                20.6  Railroad nuclear generating equipment          15
                    (MACRS class 40.52).
                20.7  Railroad steam electric generating             15
                    equipment (MACRS class 40.53).
                20.8  Railroad steam, compressed air and             15
                    other plant equipment (MACRS class 
                    40.54).
        21  Motor transport:
                21.1  Motor transport-passengers (MACRS               5
                    class 41.0).
                21.2  Motor transport-freight (MACRS class            5
                    42.0).
        22  Water transportation (MACRS class 44.0)........          15
        23  Air transport:
                23.1  Air transport-general (MACRS class              5
                    45.0).
                23.2  Air transport (restricted) (MACRS               5
                    class 45.1).
        24  Pipeline transportation (MACRS class 46.0).....          15
        25  Telephone communications:
                25.1  Telephone central office buildings             10
                    (MACRS class 48.11).
                25.2  Telephone central office equipment              5
                    (MACRS class 48.12).
                25.3  Computer-based telephone central                3
                    office switching equipment (MACRS class 
                    48.121).
                25.4  Telephone station equipment (MACRS              5
                    class 48.13).
                25.5  Telephone distribution plant (MACRS             5
                    class 48.14).
                25.6  Advanced technology communications              3
                    equipment (section 168B(b)(2)(G)).
        26  Radio and television broadcasting (MACRS class            3
            48.2).
        27  Telegraph, ocean cable and satellite 
            communications:
                27.1  Electric power generating and                  10
                    distribution systems (MACRS class 
                    48.31).
                27.2  High frequency radio and microwave              5
                    systems (MACRS class 48.32).
                27.3  Cable and long-line systems (MACRS             10
                    class 48.33).
                27.4  Central office control equipment                5
                    (MACRS class 48.34).
                27.5  Computerized switching, channeling              5
                    and associated control equipment (MACRS 
                    class 48.35).
                27.6  Satellite ground segment property               5
                    (MACRS class 48.36).
                27.7  Satellite space segment property                3
                    (MACRS class 48.37).
                27.8  Equipment installed on customer's               5
                    premises (MACRS class 48.38).
                27.9  Support and service equipment (MACRS            5
                    class 48.39).
        28  Cable television:
                28.1  Headend (48.41)......................           5
                28.2  Subscriber connection and                       5
                    distribution systems (MACRS class 
                    48.42).
                28.3  Program origination (MACRS class                3
                    48.43).
                28.4  Service and test (MACRS class 48.44).           3
                28.5  Microwave system (MACRS class 48.45).           3
        29  Electric services:
                29.1  Electric utility hydraulic production           7
                    plant (MACRS class 49.11).
                29.2  Electric utility nuclear production             7
                    plant (MACRS class 49.12).
                29.3  Electric utility fuel assemblies                3
                    (MACRS class 49.121).
                29.4  Electric utility steam production               7
                    plant (MACRS class 49.13).
                29.5  Electric utility transmission and              10
                    distribution plant (MACRS class 49.14).
                29.6  Electric utility combustion turbine             7
                    production plant (MACRS class 49.15).
        30  Gas distribution:
                30.1  Gas utility distribution facilities            15
                    (MACRS class 49.21).
                30.2  Gas utility manufactured gas                   15
                    production plants (MACRS class 49.221).
                30.3  Gas utility substitute natural gas              5
                    production plant (MACRS class 49.222).
                30.4  Substitute natural gas-coal                     5
                    gasification (MACRS class 49.223).
                30.5  Natural gas production plant (MACRS             5
                    class 49.23).
                30.6  Gas utility truck pipelines and                15
                    related storage facilities (MACRS class 
                    49.24).
                30.7  Liquefied natural gas plant (MACRS             15
                    class 49.25).
        31  Water and steam distribution:
                31.1  Water utilities (MACRS class 49.3)...          15
                31.2  Central steam utility production and           15
                    distribution (MACRS class 49.4).
        32  Waste and sewage facilities:
                32.1  Waste reduction and resource recovery           5
                    plants (MACRS class 49.5).
                32.2  Municipal wastewater treatment plant           15
                    (MACRS class 50).
                32.3  Municipal sewer (MACRS class 51).....          15
        33  Wholesale and retail trade:
                33.1  Distributive trades and services                3
                    (MACRS class 57.0).
                33.2  Distributive trade and services--              15
                    section 1250 assets (MACRS class 57.1; 
                    includes retail motor fuel outlets 
                    (whether or not food or other 
                    convenience items are sold at the 
                    outlet).
                33.3  Rent to own property (qualified rent            3
                    to own property as defined in section 
                    168(i)(13)).
        34  Recreation:
                34.1  Recreation (MACRS class 79.0)........           5
                34.2  Themes and amusement parks (MACRS               5
                    class 80.0).
Special Assets (even if listed above):
        35  Alternate energy assets:
                35.1  Property described in section                   3
                    48(a)(3)(A) (or would be so described 
                    if `solar and wind' were substituted 
                    for `solar' in clause (i) thereof) 
                    determined without regard to whether 
                    the property is public utility 
                    property.
                35.2  Biomass property (biomass property              3
                    described in section 48(l)(15) (as in 
                    effect on the day before the date of 
                    enactment of the Revenue Reconciliation 
                    Act of 1990) that is a qualifying small 
                    production facility with the meaning of 
                    section 3(17)(c) of the Federal Power 
                    Act (16 U.S.C. 796(17)(C)) as in effect 
                    on September 1, 1986.
                35.3  Assets described in section                     3
                    48(l)(3)(A)(ix) (as in effect on the 
                    day before the enactment of the Revenue 
                    Reconciliation Act of 1990).
        36  Research and experimentation assets:
                36.1  Property used in connection with                3
                    research and experimentation referred 
                    to in section 168(e)(3)(B) (as 
                    determined without regard to section 
                    168(k)).
Section 1245 assets not described above....................           5

 SEC. 8. TRANSITION RULES AND EFFECTIVE DATE.

    (a) Effective Date.--The amendments made by this Act shall be 
effective for property placed in service on or after January 1, 2002, 
with respect to taxable years beginning on or after or including such 
date.
    (b) Survival of Transition Rules.--The rephrasing or relabeling of 
any provision of the Internal Revenue Code of 1986 that occurs by 
reason of this Act shall not operate to abrogate or limit any 
transitional rule or exception applicable to the provision that was 
rephrased.
                                 <all>