[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Pages S4798-S4799]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEAHY (for himself and Mr. Dodd):
  S. 962. A bill to allow a deduction from gross income for year 2000 
computer conversion costs of small businesses; to the Committee on 
Finance.


             THE SMALL BUSINESS Y2K COMPLIANCE ACT OF 1999

  Mr. LEAHY. Mr. President, I rise today to introduce the Small 
Business Y2K Compliance Act of 1999. I am pleased to be joined by 
Senator Dodd, the ranking member of the Senate Special Committee on the 
Year 2000 Technology Problem, as an original cosponsor of this measure.
  Our legislation would offer small businesses a tax deduction of up to 
$40,000 towards the expenses of purchasing and installing Year 2000 
compliant computer hardware and software in 1999. In addition, our bill 
would reward those small businesses that have acted responsibly by 
allowing an accelerated depreciation of up to $40,000 for the purchase 
and installation of Year 2000 compliant computer hardware and software 
made in 1997 and 1998. These tax incentives have been endorsed by 
thousands of small business owners at last year's White House 
Conference on Small Business, the American Small Business Alliance and 
the Small Business Administration.
  Unfortunately, not all small businesses are doing enough to address 
the year 2000 issue because of a lack of resources in many cases. They 
face Y2K problems both directly and indirectly through their suppliers, 
customers and financial institutions. As recently as last October a 
representative of the National Federation of Independent Businesses 
testified: ``A fifth of them do not understand that there is a Y2K 
problem. . . . They are not aware of it. A fifth of them are currently 
taking action. A fifth have not taken action but plan to take action, 
and two-fifths are aware of the problem but do not plan to take any 
action prior to the year 2000.''
  Indeed, the Small Business Administration recently warned that 
330,000 small businesses are at risk of closing down as a result of Y2K 
problems, and another 370,000 could be temporarily or permanently 
hobbled.
  Federal and State government agencies have entire departments working

[[Page S4799]]

on this problem. Utilities, financial institutions, telecommunications 
companies, and other large companies have information technology 
divisions working to make corrections to keep their systems running. 
They have armies of workers--but small businesses do not.
  Small businesses are the backbone of our economy, from the city 
corner market to the family farm to the small-town doctor. In my home 
State of Vermont, 98 percent of the businesses are small businesses 
with limited resources. That is why it is so important to provide small 
businesses with the resources to correct their Y2K problems now.
  A few months ago, I hosted a Y2K conference in Vermont to help small 
businesses prepare for 2000. Hundreds of small business owners from 
across Vermont attended the conference to learn how to minimize or 
eliminate their Y2K computer problems. Vermonters are working hard to 
identify their Y2K vulnerabilities and prepare action plans to resolve 
them. They should be encouraged and assisted in these important 
efforts.
  This is the right approach. We have to fix as many of these problems 
ahead of time as we can. Ultimately, the best business policy and the 
best defense against any Y2K-based lawsuits is to be Y2K compliant.
  That is why it is so important to provide small businesses with the 
resources to correct their Y2K problems now. Our legislation would 
provide targeted tax incentives to encourage small businesses round the 
country in their Y2K remediation efforts. Our bill encourages Y2K 
compliance now to avoid computer problems next year.
  Moreover, the tax incentives in our legislation would have a 
negligible revenue cost. Indeed, the Joint Committee on Taxation has 
estimated that companion legislation introduced in the House of 
Representatives by Representative Karen Thurman, H.R. 179, would reduce 
revenue by $171 million from 1990-2003, but would increase revenues by 
the same $171 million from 2004-2008. Thus, this bill is fiscally 
prudent as well.
  I urge my colleagues to cosponsor and support the ``Small Business 
Y2K Compliance Act of 1999.''
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 962

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Y2K 
     Compliance Act of 1999''.

     SEC. 2. DEDUCTION FOR COSTS OF MAKING COMPUTERS AND COMPUTER 
                   SOFTWARE YEAR 2000 COMPLIANT.

       (a) In General.--
       (1) Property placed in service in 1999.--A taxpayer may 
     elect to treat the cost of a business Y2K asset placed in 
     service during the taxpayer's first taxable year beginning in 
     1999 as an expense which is not chargeable to capital 
     account. The cost so treated shall be allowed as a deduction 
     from gross income for purposes of the Internal Revenue Code 
     of 1986.
       (2) Property placed in service in 1997 or 1998.--A taxpayer 
     may elect to deduct from gross income an amount equal to the 
     unrecovered basis of a business Y2K asset placed in service 
     during the 2 taxable years preceding the first taxable year 
     beginning in 1999 and which is otherwise subject to 
     depreciation under such Code.
       (b) Limitations.--
       (1) In general.--The aggregate amount allowed as a 
     deduction under subsection (a) shall not exceed $40,000.
       (2) Application of business limitations of section 179.--
     Rules similar to the rules of paragraphs (2), (3), and (4) of 
     section 179(b) of such Code shall apply for purposes of this 
     section. For purposes of the preceding sentence, the cost of 
     property to which the limitation in paragraph (2) of such 
     section 179(b) applies shall be the sum of--
       (A) the amounts elected under subsection (a)(1) with 
     respect to property placed in service during the taxpayer's 
     first taxable year beginning in 1999, and
       (B) the amounts elected under subsection (a)(2) with 
     respect to the unrecovered basis of business Y2K assets 
     placed in service during the 2 taxable years preceding the 
     first taxable year beginning in 1999.
       (c) Definitions.--For purposes of this section--
       (1) Business y2k asset.--The term ``business Y2K asset'' 
     means an asset acquired by purchase for use in the active 
     conduct of a trade or business which is--
       (A) any computer acquired to replace a computer where such 
     replacement is necessary because of the year 2000 computer 
     conversion problem, and
       (B) any of the following items which are of a character 
     subject to the allowance for depreciation under such Code:
       (i) the modification of computer software to address the 
     year 2000 computer conversion problem, and
       (ii) computer software which is year 2000 compliant 
     acquired to replace computer software which is not so 
     compliant.
       (2) Computer.--The term ``computer'' means a computer or 
     peripheral equipment (as defined by section 168(i)(2)(B)) of 
     such Code.
       (3) Computer software.--The term ``computer software'' has 
     the meaning given to such term by section 167(f) of such 
     Code.
       (4) Unrecovered basis.--The term ``unrecovered basis'' 
     means the adjusted basis of the business Y2K asset determined 
     as of the close of the last taxable year beginning before 
     January 1, 1999.
       (d) Special Rules.--
       (1) In general.--Rules similar to the rules of subsections 
     (c) and (d) (other than paragraph (1) thereof) of section 179 
     of such Code shall apply for purposes of this section.
       (2) Treatment as deduction under section 179.--For purposes 
     of the Internal Revenue Code of 1986, the deduction allowed 
     under this section shall be treated in the same manner as a 
     deduction allowed under section 179 of such Code.
       (3) Ordering rule.--For purposes of section 179 of such 
     Code, subsection (b)(3)(C) of such section shall be applied 
     without regard to the deduction allowed under this section.
                                 ______