[Congressional Record Volume 149, Number 59 (Friday, April 11, 2003)]
[Senate]
[Pages S5353-S5354]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. NICKLES (for himself and Mrs. Lincoln):
  S. 895. A bill to amend the Internal Revenue Code of 1986 to include 
wireless telecommunications equipment in the definition of qualified 
technological equipment for purposes of determining the depreciation 
treatment of such equipment; to the Committee on Finance.
  Mr. NICKLES. Mr. President, I rise today to introduce legislation to 
clarify the tax rules governing the depreciation of wireless 
telecommunications equipment. I am joined by my distinguished colleague 
from Arkansas, Mrs. Lincoln.
  Our current depreciation system, the Modified Accelerated Cost 
Recovery System, MACRS, was last reformed in 1986. At that time, the 
wireless telecommunications industry was in its infancy. Therefore, 
wireless telecommunications equipment, which is primarily computer-
based technology, was not assigned to a specific asset class.
  The IRS has provided only limited guidance with respect to the 
depreciation of wireless telecommunications equipment. In 1998, the IRS 
issued Technical Advice Memorandum, TAM, 98-25-03, which asserted that 
the classes of assets used to provide wireless telecommunications 
services are comparable to wireline telecommunications assets and, 
thus, should be assigned to wireline asset classes. The TAM concluded 
that mobile switching centers should be classified in the same asset 
class with computer-based telephone central office switching equipment, 
5-year property. However, the TAM failed to take a clear position with 
regard to the classification of cell site equipment, so there is no 
practical guidance for IRS revenue agents or taxpayers to follow.
  Over the past decade, the IRS and wireless telecommunications 
companies have expended significant resources in audits and settlement 
disputes involving the depreciation of wireless telecommunications 
equipment. This has resulted in ad hoc, inconsistent, and costly case-
by-case determinations of the appropriate class

[[Page S5354]]

life for this equipment. It has created the current situation in which 
similarly situated companies are being treated differently, with some 
being required to depreciate their wireless telecommunications 
equipment over 5 years, and others over 10 years or longer.
  I believe Congress should act to clarify the depreciation rules for 
wireless telecommunications equipment to provide certainty to the IRS 
and the taxpayer, thereby putting an end to the costly dispute 
settlement process; to ensure a level playing field for taxpayers; and 
to provide fair tax-treatment of wireless telecommunications equipment. 
Given the nature of this equipment and the rapid technological advances 
in the wireless industry, I believe the most appropriate classification 
for wireless telecommunications equipment is as ``qualified 
technological equipment'' with a 5-year depreciable life.
  The bill I am introducing with my colleague from Arkansas would make 
this important clarification to the tax laws. I look forward to working 
with my colleagues to enact my legislation that will provide more 
rational tax-treatment of wireless telecommunications equipment. By so 
doing, we will take an incremental step toward modernizing the Tax 
Code's outdated depreciation rules.
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