Expensing of property eligible for bonus depreciation

(a)

In general

So much of subsection (k) of section 168 of the Internal Revenue Code of 1986 (relating to special allowance for certain property acquired after September 10, 2001, and before January 1, 2005) as precedes paragraph (2)(D) thereof is amended to read as follows:

(k)

Expensing of certain property acquired after may 12, 2005

(1)

In general

In the case of any qualified property— (A)the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 100 percent of the adjusted basis of the qualified property, and (B)the adjusted basis of the qualified property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year. (2)

Qualified property

For purposes of this subsection— (A)

In general

The term qualified property means property— (i)(I)to which this section applies which has a recovery period of 20 years or less, (II) which is computer software (as defined in section 167(f)(1)(B)) for which a deduction is allowable under section 167(a) without regard to this subsection, (III) which is water utility property, or (IV) which is qualified leasehold improvement property, (ii) the original use of which commences with the taxpayer after May 12, 2005, (iii)which is acquired by the taxpayer after such date, but only if no written binding contract for the acquisition was in effect on or before such date. (B)

Certain aircraft

The term qualified property includes property— (i)which meets the requirements of clauses (ii) and (iii) of subparagraph (A), (ii)which is an aircraft which is not used in the trade or business of transporting persons or property other than for agricultural or firefighting purposes, (iii)which is purchased and on which such purchaser, at the time of the contract for purchase, has made a nonrefundable deposit of the lesser of— (I)10 percent of the cost, or (II)$100,000, and (iv)which has— (I)an estimated production period exceeding 4 months, and (II)a cost exceeding $200,000.

(b)

Technical amendments

(1)Paragraph (2) of section 168(k) of such Code is amended by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs (C), (D), (E), and (F), respectively. (2)Subparagraph (C) of section 168(k)(2) of such Code, as redesignated by paragraph (1), is amended by striking the last sentence of clause (iii), by striking clause (ii), and by redesignating clause (iii) as clause (ii). (3)Clause (i) of section 168(k)(2)(D) of such Code, as so redesignated, is amended by striking and before January 1, 2005. (4)Subparagraph (D) of section 168(k)(2) of such Code, as so redesignated, is amended by striking September 10, 2001 each place it appears and inserting. (5)Clause (i) of section 168(k)(2)(E) of such Code, as so redesignated, is amended by striking $4,600 and inserting $14,540. (6)Section 168(k) of such Code is amended by striking paragraph (4). (c)

Effective date

The amendments made by this section shall apply to property placed in service after May 12, 2005.

Long-term contract accounting

(a)

In general

Section 168(k)(2) of the Internal Revenue Code of 1986 is amended by adding after subparagraph (F), as redesignated by section 1, the following new subparagraph:

(F)

Long-term contract accounting

The percentage of completion method under section 460 shall be applied as if this subsection had not been enacted.

Election to increase minimum tax credit limitation in lieu of bonus depreciation

(a)

In general

Section 53 of the Internal Revenue Code of 1986 (relating to credit for prior year minimum tax liability) is amended by adding at the end of the following new subsection:

(e)

Additional credit in lieu of bonus depreciation

(1)

In general

In the case of a corporation making an election under this subsection for a taxable year, the limitation under subsection (c) shall be increased by an amount equal to the bonus depreciation amount. (2)

Bonus depreciation amount

For purposes of paragraph (1), the bonus depreciation amount for any taxable year is an amount equal to the product of— (A)35 percent, and (B)the excess (if any) of— (i)the aggregate amount of depreciation which would be determined under section 167 for property placed in service during such taxable year if no election under this subsection were made, over (ii)the aggregate allowance for depreciation allowable with respect to such property placed in service for such taxable year. (3)

Election

Section 168(k) (other than paragraph (2)(E) thereof) shall not apply to any property placed in service during a taxable year by a corporation making an election under this subsection for such taxable year. An election under this subsection may only be revoked with the consent of the Secretary. (4)

Credit refundable

The aggregate increase in the credit allowed by this section for any taxable year by reason of this subsection shall for purposes of this title (other than subsection (b)(2) of this section) be treated as a credit allowed to the taxpayer under subpart C.

(b)

Conforming amendments

Subsection (k) of section 168 of such Code is amended by adding at the end the following new paragraph:

(4)

Cross reference

For an election to claim certain minimum tax credits in lieu of the allowance determined under this subsection, see section 53(e).

Effective date

The amendments made by this Act shall apply to taxable years ending after May 12, 2005.