1.This Act may be cited as the
Tax Depreciation, Modernization, and
Simplification Act of 2005
.
2.Authority to modify
class lives
(a)Paragraph (1) of
section 168(i) of the Internal Revenue Code of 1986 is amended to read as
follows:
(1)
(A)Except as provided in this section, the term class
life means the class life (if any) which would be applicable with
respect to any property as of January 1, 1986, under subsection (m) of section
167, as in effect on the day before the date of the enactment of the Revenue
Reconciliation Act of 1990 (determined without regard to paragraph (4) thereof
and as if the taxpayer had made an election under such subsection).
(B)
(i)Except as provided in clause (ii), the Secretary, after
consultation with Congress, may prescribe by regulation—
(I)a new class life
for any property, or
(II)a class life for
any property which does not have a class life within the meaning of
subparagraph (A).
(ii)Clause
(i) shall not apply to—
(I)residential
rental property or nonresidential real property, or
(II)property for
which a class life, classification, or recovery period is assigned under
subsection (e)(3) (other than subparagraph (C)(v) thereof) or subparagraph (B),
(C), or (D) of subsection (g)(3).
(iii)Any
class life prescribed or modified under clause (i) shall reasonably reflect the
anticipated useful life and the anticipated decline in value over time of the
property to the industry or other group, and shall take into account when the
property is technologically or functionally obsolete for the original purpose
under which it was acquired.
(iv)Not
later than 60 days before the date on which the Secretary publishes any
proposed regulation under clause (i), the Secretary shall submit to Congress
the proposed regulation together with a report containing the information
considered by the Secretary in modifying or prescribing any class life under
the regulation.
(v)The
Secretary, through an office established in the Treasury, shall monitor and
analyze actual experience with respect to depreciable assets to which this
subparagraph applies.
(C)Any class life with respect to any property
prescribed or modified under subparagraph (B) shall be used in classifying such
property under subsection (e) and in applying subsection
(g).
.
(b)Application of
Congressional Review ActFor purposes of applying chapter 8 of
title 5, United States Code, to any regulation prescribed under section
168(i)(1)(B) of the Internal Revenue Code of 1986, each class life prescribed
under such section shall be considered to be a separate rule.
(c)The amendment made by this section shall take effect on the
date of the enactment of this Act.
3.Elimination of
mid-quarter convention
(a)Subsection (d) of section 168 of the Internal Revenue
Code of 1986 is amended—
(1)by striking
paragraph (3) and redesignating paragraph (4) as paragraph (3), and
(2)in paragraph (3),
as redesignated by paragraph (1), by striking subparagraph (C).
(b)The amendments made by this section shall apply to property
placed in service after the date of the enactment of this Act.
4.
(a)Section 168 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subsection:
(l)
(1)
(A)In lieu of the deduction otherwise allowed under this
section with respect to an item of qualified property, the taxpayer may elect
to add the adjusted basis of such property to the mass asset account of the
taxpayer to which such qualified property is assigned and to determine the
deduction under this section using the applicable depreciation method with
respect to such mass asset account.
(B)Election to
apply to all assets of the taxpayer with same recovery periodAn
election made under subparagraph (A) shall be made in such manner as the
Secretary may by regulations prescribe and shall apply to all qualified
property of the taxpayer which has the same applicable recovery period for such
taxable year and all subsequent taxable years.
(C)Any election made under this paragraph shall be
irrevocable except with the consent of the Secretary. The Secretary shall
prescribe rules for the proper accounting of assets in a mass asset account in
the case of any such revocation.
(2)
(A)Modification of
depreciation methodIn applying the applicable depreciation
method to any mass asset account, subsection (b) shall be applied without
regard to paragraph (1)(B) thereof.
(B)Adjustment to
reflect half-year conventionIn applying the deduction allowable
under subsection (a) to any mass asset account, the amount of the deduction
under subsection (a) shall be—
(i)100 percent of
the deduction otherwise allowed under this section in the case of qualified
property placed in service before the beginning of the taxable year, and
(ii)50 percent of
the deduction otherwise allowed under this section with respect to qualified
property placed in service during the taxable year.
(C)Sale of
qualified property
(i)In the case of the sale of any property the adjusted
basis of which has been added to a mass asset account, the balance of the mass
asset account to which such property was assigned shall be reduced (but not
below zero) by the amount of the proceeds from such sale.
(ii)If the proceeds from the sale of any property the adjusted
basis of which has been added to a mass asset account exceed the balance of
such mass asset account, then the excess shall be treated as ordinary
income.
(3)
(A)For purposes of this subsection, the term qualified
property means any tangible property—
(i)to which an
applicable depreciation method under paragraph (1) or (2) of subsection (b)
applies, and
(ii)the cost of
which is not more than $10,000.
(B)
(i)In the case of any taxable year beginning after 2006, the
$10,000 amount under subparagraph (A)(ii) shall be increased by an amount equal
to—
(I)such dollar
amount, multiplied by
(II)the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined by substituting
calendar year 2005
for calendar year 1992
in
subparagraph (B) thereof.
(ii)If
any amount as adjusted under the clause (i) is not a multiple of $1,000, such
amount shall be rounded to the next lowest multiple of $1,000.
(4)The term mass asset account means an account
of the taxpayer which reflects the adjusted basis of all qualified property to
which the same applicable depreciation method and applicable recovery period
applies.
.
(b)The amendments made by this section shall apply to property
placed in service after the date of the enactment of this Act.
5.Permanent
extension of expensing for small businesses
(a)Paragraph (1) of section 179(b) of the Internal
Revenue Code of 1986 is amended by striking $25,000 ($100,000 in the
case of taxable years beginning after 2002 and before 2008)
and
inserting $100,000
.
(b)Paragraph (2) of section 179(b) of such Code is
amended by striking $200,000 ($400,000 in the case of taxable years
beginning after 2002 and before 2008)
and inserting
$400,000
.
(c)Subparagraph (A) of section 179(b)(5) of such Code is
amended by striking and before 2008
.
(d)Paragraph
(2) of section 179(c) of such Code is amended by striking and before
2008
.
(e)Clause (ii) of section 179(d)(1)(A) is amended by
striking and before 2008
.