II 109th CONGRESS 1st Session S. 1852 IN THE SENATE OF THE UNITED STATES October 6, 2005 Mr. Salazar 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 reduce the incentive to purchase larger and luxury motor vehicles.

1.

Short title

This Act may be cited as the Reducing the Incentives to Guzzle Gas Act.

2.

Inclusion of heavy vehicles in limitation on depreciation of certain luxury automobiles

(a)

In general

Section 280F(d)(5)(A) of the Internal Revenue Code of 1986 (defining passenger automobile) is amended— (1)by striking clause (ii) and inserting the following new clause: (ii)(I)which is rated at 6,000 pounds unloaded gross vehicle weight or less, or (II)which is rated at more than 6,000 pounds but not more than 14,000 pounds gross vehicle weight. , (2)by striking clause (ii) in the second sentence and inserting clause (ii)(I). (b)

Exception for vehicles used in farming business

Section 280F(d)(5)(B) of such Code (relating to exception for certain vehicles) is amended by striking and at the end of clause (ii), by redesignating clause (iii) as clause (iv), and by inserting after clause (ii) the following new clause: (iii)any vehicle used in a farming business (as defined in section 263A(e)(4), and . (c)

Effective date

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

3.

Updated depreciation deduction limits

(a)

In general

Subparagraph (A) of section 280F(a)(1) of the Internal Revenue Code of 1986 (relating to limitation on amount of depreciation for luxury automobiles) is amended to read as follows: (A)

Limitation

The amount of the depreciation deduction for any taxable year shall not exceed for any passenger automobile— (i)for the 1st taxable year in the recovery period— (I)described in subsection (d)(5)(A)(ii)(I), $4,000, (II)described in the second sentence of subsection (d)(5)(A), $5,000, and (III)described in subsection (d)(5)(A)(ii)(II), $6,000, (ii)for the 2nd taxable year in the recovery period— (I)described in subsection (d)(5)(A)(ii)(I), $6,400, (II)described in the second sentence of subsection (d)(5)(A), $8,000, and (III)described in subsection (d)(5)(A)(ii)(II), $9,600, (iii)for the 3rd taxable year in the recovery period— (I)described in subsection (d)(5)(A)(ii)(I), $3,850, (II)described in the second sentence of subsection (d)(5)(A), $4,800, and (III)described in subsection (d)(5)(A)(ii)(II), $5,775, and (iv)for each succeeding taxable year in the recovery period— (I)described in subsection (d)(5)(A)(ii)(I), $2,325, (II)described in the second sentence of subsection (d)(5)(A), $2,900, and (III)described in subsection (d)(5)(A)(ii)(II), $3,475. . (b)

Years after recovery period

Section 280F(a)(1)(B)(ii) of such Code is amended to read as follows: (ii)

Limitation

The amount treated as an expense under clause (i) for any taxable year shall not exceed for any passenger automobile— (I)described in subsection (d)(5)(A)(ii)(I), $2,325, (II)described in the second sentence of subsection (d)(5)(A), $2,900, and (III)described in subsection (d)(5)(A)(ii)(II), $3,475. . (c)

Inflation adjustment

Section 280F(d)(7) of such Code (relating to automobile price inflation adjustment) is amended— (1)by striking after 1988 in subparagraph (A) and inserting after 2006, and (2)by striking subparagraph (B) and inserting the following new subparagraph: (B)

Automobile price inflation adjustment

For purposes of this paragraph— (i)

In general

The automobile price inflation adjustment for any calendar year is the percentage (if any) by which— (I)the average wage index for the preceding calendar year, exceeds (II)the average wage index for 2005. (ii)

Average wage index

The term average wage index means the average wage index published by the Social Security Administration. . (d)

Effective date

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

4.

Expensing limitation for farm vehicles

(a)

In general

Paragraph (6) of section 179(b) of the Internal Revenue Code of 1986 (relating to limitations) is amended to read as follows: (6)

Limitation on cost taken into account for farm vehicles

The cost of any vehicle described in section 280F(d)(5)(B)(iii) for any taxable year which may be taken into account under this section shall not exceed $30,000. . (b)

Effective date

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