[Congressional Record Volume 147, Number 139 (Tuesday, October 16, 2001)]
[Senate]
[Pages S10770-S10772]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 1553. A bill to amend the Internal Revenue Code of 1986 to allow a 
bonus deduction for depreciable business assets; to the Committee on 
Finance.
  Mr. HATCH. Mr. President, I rise today to introduce legislation 
designed to help stimulate the economy by creating a strong incentive 
for businesses to invest immediately in new productive assets.
  Unfortunately, the evil acts of terrorists on September 11 did more 
than shatter lives, hopes and dreams and destroy or damage great 
buildings in New York and Washington. They also caused serious harm to 
our national, and even the world's economies.
  While we do not yet know the full extent of the havoc brought to the 
U.S. economy by the calamities of September 11, practically all the 
experts agree that the damage will be significant. Few of them doubt 
that we are now in a recession. Moreover, many of the Nation's leading 
economists agree that the Congress and the President should move 
quickly to enact a package of tax cuts and other measures to stimulate 
the economy and try to prevent the downturn from becoming a long and 
deep one.
  For this reason, the bipartisan leadership of Congress in both 
houses, along with the White House, have been meeting for weeks in an 
attempt to develop a consensus on what such an economic stimulus 
package should include. Last Friday, the Committee on Ways and Means of 
the House of Representatives approved an initial stimulus bill.
  While it appears evident to me that it will be difficult for everyone 
in both parties and in both houses to agree on the proper content of 
the economic stimulus package, there are some guiding principles for 
the package on which most seem to agree. First, and almost by 
definition, the stimulus package should provide a strong incentive for 
players in the economy to take action they would not ordinarily take. 
Second, such an incentive should cause the desired action to occur 
quickly, when it will be of the most good to the economy. Finally, the 
stimulus should be temporary, and not cause a large long-term effect on 
the Federal budget, which could lead to an increase in interest rates.
  It may be that there are many specific tax law changes that meet 
these guiding principles. Some have suggested another round of tax 
rebate checks, but designated only for those who were not able to 
participate in the advance tax cut Congress passed in May of this year. 
Others are proposing the acceleration of the income tax rate cuts that 
were included in that same tax bill that are presently scheduled to 
take effect in future years. Still others insist that the stimulus 
package include new spending on our infrastructure or relief to ailing 
industries and to displaced employees.
  In the end, the economic stimulus package signed into law will 
probably contain a combination of several of these ideas. Our political 
process will

[[Page S10771]]

require us to reach some kind of consensus, which means some of this 
idea and some of that idea will have to be included.
  Knowing that the stimulus package will be a collage of ideas, I 
believe it is important that it include a core provision that almost 
everyone seems to agree meets the criteria of true economic stimulus, a 
strong inducement for businesses to invest in productive assets. The 
purpose of the bill I introduce today is to put before the Senate a 
bold plan that I believe would accomplish this goal.
  The Economic Stimulus Through Bonus Depreciation Act of 2001 would 
provide businesses throughout America a very strong, but short-term, 
incentive to purchase business assets and put them to work over the 
next few months. A strong and concentrated surge in capital spending by 
U.S. businesses would provide a tremendous shot in the arm to our 
economy, as present inventories become depleted and manufacturers 
scramble to keep up with the new demand.
  Specifically, my bill would provide a 50-percent bonus depreciation 
deduction for business assets purchased after September 10, 2001, and 
before July 1, 2002, and placed in service before January 1, 2003. This 
means that businesses that want to take advantage of this strong 
incentive, which generally provides more than twice the first year 
deduction than is allowed under current law, would have to act quickly 
and order the new business assets by next June 30, and take delivery by 
next December 31.
  For example, suppose a business needed a new delivery truck that cost 
$50,000. Under current law, most trucks are considered 5-year property, 
and are generally depreciated over a 5-year period. If the business 
purchased the truck in 2002, the current-law depreciation deduction for 
the first year would be $10,000. In other words, the business would be 
able to write off one-fifth of the cost of the truck in the year of 
purchase.
  Under my bill, that same business would be allowed a 50-percent 
first-year depreciation deduction, rather than the 20 percent. So, 
instead of a deduction of $10,000 in 2002, the business would be 
allowed to deduct $25,000 of the cost of the truck in the first year. 
This is a significant difference, and it should be enough of a 
difference to change behavior when coupled with a short window of 
opportunity.
  The short time frame is a key to the success of a stimulus promotion 
bill like this one. My bill would require that a business make a 
decision and enter into a contract to purchase a new asset by next June 
30, and then take delivery on the property by December 31, 2002.
  I will note that the economic stimulus bill approved by the House 
Ways and Means Committee last week includes a somewhat similar 
provision, one that provides for 30 percent extra depreciation for 
certain business assets. However, that bill allows the purchaser to 
take almost 3 years to decide to buy a new asset, then allows another 
several months to place the property into service. With all respect to 
my colleagues on the Ways and Means Committee, I believe the window of 
opportunity for the enhanced deduction created by that bill is too 
long. It does not instill the sense of urgency that I believe is needed 
to truly create a significant stimulus.

  It is important to note that my bill also applies to more types of 
business property than does the Ways and Means bill. The bill passed by 
the Ways and Means Committee would generally provide for an enhanced 
depreciation deduction for depreciable property with a recovery period 
of 20 years or less, except for leasehold improvements. The bill I am 
introducing today would apply to all types of depreciable property, 
including leasehold improvements and depreciable real estate.
  As a practical matter, I realize that many real estate projects, as 
well as many larger build-to-order equipment projects, take longer than 
a year to build and place in service. However, it is also true that 
many larger and costly projects can be built within the time 
constraints of this bill, especially if there is a concerted attempt to 
do so. I believe that the short time frame of my bill would induce many 
companies to act much more quickly than they otherwise would, in order 
to get business assets ordered and built in time to qualify for the 
bonus depreciation. This is where the economic stimulus power of this 
bill comes into play. The more effort that is made to get real estate 
projects finished, or to get equipment ordered, delivered, and placed 
in service in time to meet the deadlines of this bill, the more 
economic stimulus is created.
  Moreover, I believe this bill meets the three guiding principles I 
mentioned earlier. First, it provides a strong incentive for businesses 
to take stimulative action they would not otherwise take, in this case 
to purchase assets by June 30, 2002, in order to reap a significant tax 
savings. Second, because of the short deadline, this action will take 
place right away, when economic stimulus is really needed. Finally, the 
bill raises few risks of raising interest rates. Depreciation is a form 
of cost recovery over a period of time. Because our tax code allows the 
cost of assets to be recovered over time, a speed-up of the time of 
recovery has few long-term costs to the Federal budget. So, allowing 
businesses to write off a larger portion of the cost of assets for a 
short time period has a negative effect on the Treasury in the first 
two or three years, but begins to reverse itself afterward. Thus, much 
of the early year costs of my bill will be fully reversed within the 
10-year budget window.
  President Bush has indicated his support for the inclusion in the 
economic stimulus package of an enhanced depreciation provision. A 
number of Democrats and Republicans have also spoken out in support of 
this idea. And, as I mentioned, the Ways and Means Committee included a 
version of bonus depreciation in the bill it passed last week. Bonus 
depreciation is a solid economic stimulus idea. In crafting a consensus 
package, I urge my colleagues to include a depreciation provision that 
packs a punch by offering the promise of a large deduction for actions 
taken in a relatively short time frame. I believe the legislation I 
introduce today fits the bill nicely, and I urge its consideration.
  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. 1553

       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 ``Economic Stimulus Through 
     Bonus Depreciation Act of 2001''.

     SEC. 2. BONUS DEPRECIATION ALLOWANCE FOR CERTAIN BUSINESS 
                   ASSETS.

       (a) In General.--Section 168 of the Internal Revenue Code 
     of 1986 (relating to accelerated cost recovery system) is 
     amended by adding at the end the following:
       ``(k) Bonus Allowance for Certain Business Assets.--
       ``(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 be an amount equal to 50 percent of the 
     adjusted basis of the qualified property, and
       ``(B) subject to paragraph (2), the amount otherwise 
     allowable as a depreciation deduction under this chapter for 
     any subsequent taxable year shall be computed in the same 
     manner as if this subsection had not been enacted.
       ``(2) Adjusted basis.--The aggregate deduction allowed 
     under this section for taxable years described in paragraph 
     (1)(B) with respect to any qualified property shall not 
     exceed the adjusted basis of such property reduced by the 
     amount of the deduction allowed under paragraph (1)(A).
       ``(3) Qualified property.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified property' means 
     property--
       ``(i)(I) to which this section applies, or
       ``(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,
       ``(ii) the original use of which commences with the 
     taxpayer on or after September 11, 2001,
       ``(iii) which is--

       ``(I) acquired by the taxpayer on or after September 11, 
     2001, and before July 1, 2002, but only if no written binding 
     contract for the acquisition was in effect before September 
     11, 2001, or
       ``(II) acquired by the taxpayer pursuant to a written 
     binding contract which was entered into on or after September 
     11, 2001, and before July 1, 2002, and

       ``(iv) which is placed in service by the taxpayer before 
     January 1, 2003.
       ``(B) Exceptions.--

[[Page S10772]]

       ``(i) Alternative depreciation property.--The term 
     `qualified property' shall not include any property to which 
     the alternative depreciation system under subsection (g) 
     applies, determined--

       ``(I) without regard to paragraph (7) of subsection (g) 
     (relating to election to have system apply), and
       ``(II) after application of section 280F(b) (relating to 
     listed property with limited business use).

       ``(ii) Election out.--If a taxpayer makes an election under 
     this clause with respect to any class of property for any 
     taxable year, this subsection shall not apply to all property 
     in such class placed in service during such taxable year.
       ``(iii) Repaired or reconstructed property.--Except as 
     otherwise provided in regulations, the term `qualified 
     property' shall not include any repaired or reconstructed 
     property.
       ``(C) Special rules relating to original use.--
       ``(i) Self-constructed property.--In the case of a taxpayer 
     manufacturing, constructing, or producing property for the 
     taxpayer's own use, the requirements of clause (ii) of 
     subparagraph (A) shall be treated as met if the taxpayer 
     begins manufacturing, constructing, or producing the property 
     on or after September 11, 2001, and before January 1, 2003.
       ``(ii) Sale-leasebacks.--For purposes of subparagraph 
     (A)(i), if property--

       ``(I) is originally placed in service on or after September 
     11, 2001, by a person, and
       ``(II) is 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 subclause (II).
       ``(D) Coordination with section 280F.--For purposes of 
     section 280F--
       ``(i) Automobiles.--In the case of a passenger automobile 
     (as defined in section 280F(d)(5)) which is qualified 
     equipment, the Secretary shall increase the limitation under 
     section 280F(a)(1)(A)(i), and decrease each other limitation 
     under subparagraphs (A) and (B) of section 280F(a)(1), to 
     appropriately reflect the amount of the deduction allowable 
     under paragraph (1).
       ``(ii) Listed property.--The deduction allowable under 
     paragraph (1) shall be taken into account in computing any 
     recapture amount under section 280F(b)(2).
       ``(4) Applicable convention.--Subsection (d)(3) shall not 
     apply in determining the applicable convention with respect 
     to qualified property.''.
       (b) Allowance Against Alternative Minimum Tax.--
       (1) In general.--Section 56(a)(1)(A) of the Internal 
     Revenue Code of 1986 (relating to depreciation adjustment for 
     alternative minimum tax) is amended by adding at the end the 
     following:
       ``(iii) Additional allowance for certain business assets.--
     The deduction under section 168(k) shall be allowed.''.
       (2) Conforming amendment.--Clause (i) of section 
     56(a)(1)(A) of such Code is amended by inserting ``or (iii)'' 
     after ``(ii)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service on or after 
     September 11, 2001, in taxable years ending on or after such 
     date.
                                 ______