Temporary expensing for equipment used in refining of liquid fuels

(a)

In general

Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 179D the following new section:

179E.

Election to expense certain refineries

(a)

Treatment as expenses

A taxpayer may elect to treat the cost of any qualified refinery property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the qualified refinery is placed in service. (b)

Election

(1)

In general

An election under this section for any taxable year shall be made on the taxpayer’s return of the tax imposed by this chapter for the taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe. (2)

Election irrevocable

Any election made under this section may not be revoked except with the consent of the Secretary. (c)

Qualified refinery property

(1)

In general

The term qualified refinery property means any refinery or portion of a refinery— (A)the original use of which commences with the taxpayer, (B)the construction of which— (i)except as provided in clause (ii), is subject to a binding construction contract entered into after June 14, 2005, and before January 1, 2010, but only if there was no written binding construction contract entered into on or before June 14, 2005, or (ii)in the case of self-constructed property, began after June 14, 2005, (C)which is placed in service by the taxpayer after the date of the enactment of this section and before January 1, 2014, (D)in the case of any portion of a refinery, which meets the requirements of subsection (d), and (E)which meets all applicable environmental laws in effect on the date such refinery or portion thereof was placed in service. (2)

Special rule for sale-leasebacks

For purposes of paragraph (1)(A), if property is— (A)originally placed in service after the date of the enactment of this section by a person, and (B)sold and leased back by such person within 3 months after the date such property was originally placed in service,

such property shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback referred to in subparagraph (B).

(3)

Effect of waiver under Clean Air Act

A waiver under the Clean Air Act shall not be taken into account in determining whether the requirements of paragraph (1)(E) are met. (d)

Production capacity

The requirements of this subsection are met if the portion of the refinery— (1)increases the rated capacity of the existing refinery by 5 percent or more over the capacity of such refinery as reported by the Energy Information Agency on January 1, 2005, (2)enables the existing refinery to process qualified fuels (as defined in section 29(c)) at a rate which is equal to or greater than 25 percent of the total throughput of such refinery on an average daily basis, or (3)replaces any portion of a refinery damaged or destroyed by Hurricane Katrina. (e)

Election to allocate deduction to cooperative owner

If— (1)a taxpayer to which subsection (a) applies is an organization to which part I of subchapter T applies, and (2)one or more persons directly holding an ownership interest in the taxpayer are organizations to which part I of subchapter T apply,

the taxpayer may elect to allocate all or a portion of the deduction allowable under subsection (a) to such persons. Such allocation shall be equal to the person’s ratable share of the total amount allocated, determined on the basis of the person’s ownership interest in the taxpayer. The taxable income of the taxpayer shall not be reduced under section 1382 by reason of any amount to which the preceding sentence applies.

(f)

Ineligible refineries

No deduction shall be allowed under subsection (a) for any qualified refinery property— (1)the primary purpose of which is for use as a topping plant, asphalt plant, lube oil facility, crude or product terminal, or blending facility, or (2)which is built solely to comply with consent decrees or projects mandated by Federal, State, or local governments. (g)

Reporting

No deduction shall be allowed under subsection (a) to any taxpayer for any taxable year unless such taxpayer files with the Secretary a report containing such information with respect to the operation of the refineries of the taxpayer as the Secretary shall require.

(b)

Conforming amendments

(1)Section 1245(a) of the Internal Revenue Code of 1986 is amended by inserting 179E, after 179D, both places it appears in paragraphs (2)(C) and (3)(C). (2)Section 263(a)(1) of such Code is amended by striking or at the end of subparagraph (J), by striking the period at the end of subparagraph (K) and inserting , or, and by inserting after subparagraph (K) the following new subparagraph:

(L)expenditures for which a deduction is allowed under section 179E.

(3)Section 312(k)(3)(B) of such Code is amended by striking or 179D each place it appears in the heading and text and inserting 179D, or 179E. (4)The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 179D the following new item:

Sec. 179E. Election to expense certain refineries.

(c)

Effective date

The amendments made by this section shall apply to properties placed in service after the date of the enactment of this Act.