26 U.S.C. § 168 : US Code - Section 168: Accelerated cost recovery system

Search 26 U.S.C. § 168 : US Code - Section 168: Accelerated cost recovery system

    (a) General rule
      Except as otherwise provided in this section, the depreciation
    deduction provided by section 167(a) for any tangible property
    shall be determined by using - 
        (1) the applicable depreciation method,
        (2) the applicable recovery period, and
        (3) the applicable convention.
    (b) Applicable depreciation method
      For purposes of this section - 
      (1) In general
        Except as provided in paragraphs (2) and (3), the applicable
      depreciation method is - 
          (A) the 200 percent declining balance method,
          (B) switching to the straight line method for the 1st taxable
        year for which using the straight line method with respect to
        the adjusted basis as of the beginning of such year will yield
        a larger allowance.
      (2) 150 percent declining balance method in certain cases
        Paragraph (1) shall be applied by substituting "150 percent"
      for "200 percent" in the case of - 
          (A) any 15-year or 20-year property not referred to in
        paragraph (3),
          (B) any property used in a farming business (within the
        meaning of section 263A(e)(4)),
          (C) any property (other than property described in paragraph
        (3)) which is a qualified smart electric meter or qualified
        smart electric grid system, or
          (D) any property (other than property described in paragraph
        (3)) with respect to which the taxpayer elects under paragraph
        (5) to have the provisions of this paragraph apply.
      (3) Property to which straight line method applies
        The applicable depreciation method shall be the straight line
      method in the case of the following property:
          (A) Nonresidential real property.
          (B) Residential rental property.
          (C) Any railroad grading or tunnel bore.
          (D) Property with respect to which the taxpayer elects under
        paragraph (5) to have the provisions of this paragraph apply.
          (E) Property described in subsection (e)(3)(D)(ii).
          (F) Water utility property described in subsection (e)(5).
          (G) Qualified leasehold improvement property described in
        subsection (e)(6).
          (H) Qualified restaurant property described in subsection
        (e)(7).
          (I) Qualified retail improvement property described in
        subsection (e)(8).
      (4) Salvage value treated as zero
        Salvage value shall be treated as zero.
      (5) Election
        An election under paragraph (2)(C) or (3)(D) may be made with
      respect to 1 or more classes of property for any taxable year and
      once made with respect to any class shall apply to all property
      in such class placed in service during such taxable year. Such an
      election, once made, shall be irrevocable.
    (c) Applicable recovery period
      For purposes of this section, the applicable recovery period
    shall be determined in accordance with the following table:


                   In the case of:                     2The applicable  
                                                       recovery period  
                                                             is:        
    --------------------------------------------------------------------
      3-year property                                            3 years
      5-year property                                            5 years
      7-year property                                            7 years
      10-year property                                          10 years
      15-year property                                          15 years
      20-year property                                          20 years
      Water utility property                                    25 years
      Residential rental property                             27.5 years
      Nonresidential real property                             39 years.
      Any railroad grading or tunnel bore                      50 years.
    --------------------------------------------------------------------

    (d) Applicable convention
      For purposes of this section - 
      (1) In general
        Except as otherwise provided in this subsection, the applicable
      convention is the half-year convention.
      (2) Real property
        In the case of - 
          (A) nonresidential real property,
          (B) residential rental property, and
          (C) any railroad grading or tunnel bore,

      the applicable convention is the mid-month convention.
      (3) Special rule where substantial property placed in service
        during last 3 months of taxable year
        (A) In general
          Except as provided in regulations, if during any taxable year
        - 
            (i) the aggregate bases of property to which this section
          applies placed in service during the last 3 months of the
          taxable year, exceed
            (ii) 40 percent of the aggregate bases of property to which
          this section applies placed in service during such taxable
          year,

      the applicable convention for all property to which this section
      applies placed in service during such taxable year shall be the
      mid-quarter convention.
        (B) Certain property not taken into account
          For purposes of subparagraph (A), there shall not be taken
        into account - 
            (i) any nonresidential real property (!1) residential
          rental property, and railroad grading or tunnel bore, and

            (ii) any other property placed in service and disposed of
          during the same taxable year.
      (4) Definitions
        (A) Half-year convention
          The half-year convention is a convention which treats all
        property placed in service during any taxable year (or disposed
        of during any taxable year) as placed in service (or disposed
        of) on the mid-point of such taxable year.
        (B) Mid-month convention
          The mid-month convention is a convention which treats all
        property placed in service during any month (or disposed of
        during any month) as placed in service (or disposed of) on the
        mid-point of such month.
        (C) Mid-quarter convention
          The mid-quarter convention is a convention which treats all
        property placed in service during any quarter of a taxable year
        (or disposed of during any quarter of a taxable year) as placed
        in service (or disposed of) on the mid-point of such quarter.
    (e) Classification of property
      For purposes of this section - 
      (1) In general
        Except as otherwise provided in this subsection, property shall
      be classified under the following table:


       Property shall be treated          If such property has a class  
                  as:                         life (in years) of:       
    --------------------------------------------------------------------
      3-year property                  4 or less                        
      5-year property                  More than 4 but less than 10     
      7-year property                  10 or more but less than 16      
      10-year property                 16 or more but less than 20      
      15-year property                 20 or more but less than 25      
      20-year property                 25 or more.                      
    --------------------------------------------------------------------

      (2) Residential rental or nonresidential real property
        (A) Residential rental property
          (i) Residential rental property
            The term "residential rental property" means any building
          or structure if 80 percent or more of the gross rental income
          from such building or structure for the taxable year is
          rental income from dwelling units.
          (ii) Definitions
            For purposes of clause (i) - 
              (I) the term "dwelling unit" means a house or apartment
            used to provide living accommodations in a building or
            structure, but does not include a unit in a hotel, motel,
            or other establishment more than one-half of the units in
            which are used on a transient basis, and
              (II) if any portion of the building or structure is
            occupied by the taxpayer, the gross rental income from such
            building or structure shall include the rental value of the
            portion so occupied.
        (B) Nonresidential real property
          The term "nonresidential real property" means section 1250
        property which is not - 
            (i) residential rental property, or
            (ii) property with a class life of less than 27.5 years.
      (3) Classification of certain property
        (A) 3-year property
          The term "3-year property" includes - 
            (i) any race horse - 
              (I) which is placed in service before January 1, 2014,
            and
              (II) which is placed in service after December 31, 2013,
            and which is more than 2 years old at the time such horse
            is placed in service by such purchaser,

            (ii) any horse other than a race horse which is more than
          12 years old at the time it is placed in service, and
            (iii) any qualified rent-to-own property.
        (B) 5-year property
          The term "5-year property" includes - 
            (i) any automobile or light general purpose truck,
            (ii) any semi-conductor manufacturing equipment,
            (iii) any computer-based telephone central office switching
          equipment,
            (iv) any qualified technological equipment,
            (v) any section 1245 property used in connection with
          research and experimentation,
            (vi) any property which - 
              (I) is described in subparagraph (A) of section 48(a)(3)
            (or would be so described if "solar or wind energy" were
            substituted for "solar energy" in clause (i) thereof and
            the last sentence of such section did not apply to such
            subparagraph),
              (II) is described in paragraph (15) of section 48(l) (as
            in effect on the day before the date of the enactment of
            the Revenue Reconciliation Act of 1990) and is a qualifying
            small power production facility within the meaning of
            section 3(17)(C) of the Federal Power Act (16 U.S.C.
            796(17)(C)), as in effect on September 1, 1986, or
              (III) is described in section 48(l)(3)(A)(ix) (as in
            effect on the day before the date of the enactment of the
            Revenue Reconciliation Act of 1990), and

            (vii) any machinery or equipment (other than any grain bin,
          cotton ginning asset, fence, or other land improvement) which
          is used in a farming business (as defined in section
          263A(e)(4)), the original use of which commences with the
          taxpayer after December 31, 2008, and which is placed in
          service before January 1, 2010.

        Nothing in any provision of law shall be construed to treat
        property as not being described in clause (vi)(I) (or the
        corresponding provisions of prior law) by reason of being
        public utility property (within the meaning of section
        48(a)(3)).
        (C) 7-year property
          The term "7-year property" includes - 
            (i) any railroad track, and (!2)

            (ii) any motorsports entertainment complex,
            (iii) any Alaska natural gas pipeline,
            (iv) any natural gas gathering line the original use of
          which commences with the taxpayer after April 11, 2005, and
            (v) any property which - 
              (I) does not have a class life, and
              (II) is not otherwise classified under paragraph (2) or
            this paragraph.
        (D) 10-year property
          The term "10-year property" includes - 
            (i) any single purpose agricultural or horticultural
          structure (within the meaning of subsection (i)(13)),
            (ii) any tree or vine bearing fruit or nuts,
            (iii) any qualified smart electric meter, and
            (iv) any qualified smart electric grid system.
        (E) 15-year property
          The term "15-year property" includes - 
            (i) any municipal wastewater treatment plant,
            (ii) any telephone distribution plant and comparable
          equipment used for 2-way exchange of voice and data
          communications,
            (iii) any section 1250 property which is a retail motor
          fuels outlet (whether or not food or other convenience items
          are sold at the outlet),
            (iv) any qualified leasehold improvement property placed in
          service before January 1, 2012,
            (v) any qualified restaurant property placed in service
          before January 1, 2012,
            (vi) initial clearing and grading land improvements with
          respect to gas utility property,
            (vii) any section 1245 property (as defined in section
          1245(a)(3)) used in the transmission at 69 or more kilovolts
          of electricity for sale and the original use of which
          commences with the taxpayer after April 11, 2005,
            (viii) any natural gas distribution line the original use
          of which commences with the taxpayer after April 11, 2005,
          and which is placed in service before January 1, 2011, and
            (ix) any qualified retail improvement property placed in
          service after December 31, 2008, and before January 1, 2012.
        (F) 20-year property
          The term "20-year property" means initial clearing and
        grading land improvements with respect to any electric utility
        transmission and distribution plant.
      (4) Railroad grading or tunnel bore
        The term "railroad grading or tunnel bore" means all
      improvements resulting from excavations (including tunneling),
      construction of embankments, clearings, diversions of roads and
      streams, sodding of slopes, and from similar work necessary to
      provide, construct, reconstruct, alter, protect, improve,
      replace, or restore a roadbed or right-of-way for railroad track.
      (5) Water utility property
        The term "water utility property" means property - 
          (A) which is an integral part of the gathering, treatment, or
        commercial distribution of water, and which, without regard to
        this paragraph, would be 20-year property, and
          (B) any municipal sewer.
      (6) Qualified leasehold improvement property
        The term "qualified leasehold improvement property" has the
      meaning given such term in section 168(k)(3) except that the
      following special rules shall apply:
        (A) Improvements made by lessor
          In the case of an improvement made by the person who was the
        lessor of such improvement when such improvement was placed in
        service, such improvement shall be qualified leasehold
        improvement property (if at all) only so long as such
        improvement is held by such person.
        (B) Exception for changes in form of business
          Property shall not cease to be qualified leasehold
        improvement property under subparagraph (A) by reason of - 
            (i) death,
            (ii) a transaction to which section 381(a) applies,
            (iii) a mere change in the form of conducting the trade or
          business so long as the property is retained in such trade or
          business as qualified leasehold improvement property and the
          taxpayer retains a substantial interest in such trade or
          business,
            (iv) the acquisition of such property in an exchange
          described in section 1031, 1033, or 1038 to the extent that
          the basis of such property includes an amount representing
          the adjusted basis of other property owned by the taxpayer or
          a related person, or
            (v) the acquisition of such property by the taxpayer in a
          transaction described in section 332, 351, 361, 721, or 731
          (or the acquisition of such property by the taxpayer from the
          transferee or acquiring corporation in a transaction
          described in such section), to the extent that the basis of
          the property in the hands of the taxpayer is determined by
          reference to its basis in the hands of the transferor or
          distributor.
      (7) Qualified restaurant property
        (A) In general
          The term "qualified restaurant property" means any section
        1250 property which is - 
            (i) a building, or
            (ii) an improvement to a building,

        if more than 50 percent of the building's square footage is
        devoted to preparation of, and seating for on-premises
        consumption of, prepared meals.
        (B) Exclusion from bonus depreciation
          Property described in this paragraph shall not be considered
        qualified property for purposes of subsection (k).
      (8) Qualified retail improvement property
        (A) In general
          The term "qualified retail improvement property" means any
        improvement to an interior portion of a building which is
        nonresidential real property if - 
            (i) such portion is open to the general public and is used
          in the retail trade or business of selling tangible personal
          property to the general public, and
            (ii) such improvement is placed in service more than 3
          years after the date the building was first placed in
          service.
        (B) Improvements made by owner
          In the case of an improvement made by the owner of such
        improvement, such improvement shall be qualified retail
        improvement property (if at all) only so long as such
        improvement is held by such owner. Rules similar to the rules
        under paragraph (6)(B) shall apply for purposes of the
        preceding sentence.
        (C) Certain improvements not included
          Such term shall not include any improvement for which the
        expenditure is attributable to - 
            (i) the enlargement of the building,
            (ii) any elevator or escalator,
            (iii) any structural component benefitting a common area,
          or
            (iv) the internal structural framework of the building.
        (D) Exclusion from bonus depreciation
          Property described in this paragraph shall not be considered
        qualified property for purposes of subsection (k).
    (f) Property to which section does not apply
      This section shall not apply to - 
      (1) Certain methods of depreciation
        Any property if - 
          (A) the taxpayer elects to exclude such property from the
        application of this section, and
          (B) for the 1st taxable year for which a depreciation
        deduction would be allowable with respect to such property in
        the hands of the taxpayer, the property is properly depreciated
        under the unit-of-production method or any method of
        depreciation not expressed in a term of years (other than the
        retirement-replacement-betterment method or similar method).
      (2) Certain public utility property
        Any public utility property (within the meaning of subsection
      (i)(10)) if the taxpayer does not use a normalization method of
      accounting.
      (3) Films and video tape
        Any motion picture film or video tape.
      (4) Sound recordings
        Any works which result from the fixation of a series of
      musical, spoken, or other sounds, regardless of the nature of the
      material (such as discs, tapes, or other phonorecordings) in
      which such sounds are embodied.
      (5) Certain property placed in service in churning transactions
        (A) In general
          Property - 
            (i) described in paragraph (4) of section 168(e) (as in
          effect before the amendments made by the Tax Reform Act of
          1986), or
            (ii) which would be described in such paragraph if such
          paragraph were applied by substituting "1987" for "1981" and
          "1986" for "1980" each place such terms appear.
        (B) Subparagraph (A)(ii) not to apply
          Clause (ii) of subparagraph (A) shall not apply to - 
            (i) any residential rental property or nonresidential real
          property,
            (ii) any property if, for the 1st taxable year in which
          such property is placed in service - 
              (I) the amount allowable as a deduction under this
            section (as in effect before the date of the enactment of
            this paragraph) with respect to such property is greater
            than,
              (II) the amount allowable as a deduction under this
            section (as in effect on or after such date and using the
            half-year convention) for such taxable year, or

            (iii) any property to which this section (as amended by the
          Tax Reform Act of 1986) applied in the hands of the
          transferor.
        (C) Special rule
          In the case of any property to which this section would apply
        but for this paragraph, the depreciation deduction under
        section 167 shall be determined under the provisions of this
        section as in effect before the amendments made by section 201
        of the Tax Reform Act of 1986.
    (g) Alternative depreciation system for certain property
      (1) In general
        In the case of - 
          (A) any tangible property which during the taxable year is
        used predominantly outside the United States,
          (B) any tax-exempt use property,
          (C) any tax-exempt bond financed property,
          (D) any imported property covered by an Executive order under
        paragraph (6), and
          (E) any property to which an election under paragraph (7)
        applies,

      the depreciation deduction provided by section 167(a) shall be
      determined under the alternative depreciation system.
      (2) Alternative depreciation system
        For purposes of paragraph (1), the alternative depreciation
      system is depreciation determined by using - 
          (A) the straight line method (without regard to salvage
        value),
          (B) the applicable convention determined under subsection
        (d), and
          (C) a recovery period determined under the following table:


                       In the case of:                    2The recovery 
                                                             period     
                                                            shall be:   
    --------------------------------------------------------------------
          (i) Property not described in clause (ii)      The class life.
           or (iii)                                                     
          (ii) Personal property with no class life            12 years.
          (iii) Nonresidential real and residential            40 years.
           rental property                                              
          (iv) Any railroad grading or tunnel bore             50 years.
           or water utility property                                    
    --------------------------------------------------------------------

      (3) Special rules for determining class life
        (A) Tax-exempt use property subject to lease
          In the case of any tax-exempt use property subject to a
        lease, the recovery period used for purposes of paragraph (2)
        shall (notwithstanding any other subparagraph of this
        paragraph) in no event be less than 125 percent of the lease
        term.
        (B) Special rule for certain property assigned to classes
          For purposes of paragraph (2), in the case of property
        described in any of the following subparagraphs of subsection
        (e)(3), the class life shall be determined as follows:


                   If property is described                    2    The 
                       in subparagraph:                         class   
                                                               life is: 
    --------------------------------------------------------------------
            (A)(iii)                                                   4
            (B)(ii)                                                    5
            (B)(iii)                                                 9.5
            (B)(vii)                                                  10
            (C)(i)                                                    10
            (C)(iii)                                                  22
            (C)(iv)                                                   14
            (D)(i)                                                    15
            (D)(ii)                                                   20
            (E)(i)                                                    24
            (E)(ii)                                                   24
            (E)(iii)                                                  20
            (E)(iv)                                                   39
            (E)(v)                                                    39
            (E)(vi)                                                   20
            (E)(vii)                                                  30
            (E)(viii)                                                 35
            (E)(ix)                                                   39
            (F)                                                       25
    --------------------------------------------------------------------

        (C) Qualified technological equipment
          In the case of any qualified technological equipment, the
        recovery period used for purposes of paragraph (2) shall be 5
        years.
        (D) Automobiles, etc.
          In the case of any automobile or light general purpose truck,
        the recovery period used for purposes of paragraph (2) shall be
        5 years.
        (E) Certain real property
          In the case of any section 1245 property which is real
        property with no class life, the recovery period used for
        purposes of paragraph (2) shall be 40 years.
      (4) Exception for certain property used outside United States
        Subparagraph (A) of paragraph (1) shall not apply to - 
          (A) any aircraft which is registered by the Administrator of
        the Federal Aviation Agency and which is operated to and from
        the United States or is operated under contract with the United
        States;
          (B) rolling stock which is used within and without the United
        States and which is - 
            (i) of a rail carrier subject to part A of subtitle IV of
          title 49, or
            (ii) of a United States person (other than a corporation
          described in clause (i)) but only if the rolling stock is not
          leased to one or more foreign persons for periods aggregating
          more than 12 months in any 24-month period;

          (C) any vessel documented under the laws of the United States
        which is operated in the foreign or domestic commerce of the
        United States;
          (D) any motor vehicle of a United States person (as defined
        in section 7701(a)(30)) which is operated to and from the
        United States;
          (E) any container of a United States person which is used in
        the transportation of property to and from the United States;
          (F) any property (other than a vessel or an aircraft) of a
        United States person which is used for the purpose of exploring
        for, developing, removing, or transporting resources from the
        outer Continental Shelf (within the meaning of section 2 of the
        Outer Continental Shelf Lands Act, as amended and supplemented;
        (43 U.S.C. 1331));
          (G) any property which is owned by a domestic corporation
        (other than a corporation which has an election in effect under
        section 936) or by a United States citizen (other than a
        citizen entitled to the benefits of section 931 or 933) and
        which is used predominantly in a possession of the United
        States by such a corporation or such a citizen, or by a
        corporation created or organized in, or under the law of, a
        possession of the United States;
          (H) any communications satellite (as defined in section
        103(3) of the Communications Satellite Act of 1962, 47 U.S.C.
        702(3)), or any interest therein, of a United States person;
          (I) any cable, or any interest therein, of a domestic
        corporation engaged in furnishing telephone service to which
        section 168(i)(10)(C) applies (or of a wholly owned domestic
        subsidiary of such a corporation), if such cable is part of a
        submarine cable system which constitutes part of a
        communication link exclusively between the United States and
        one or more foreign countries;
          (J) any property (other than a vessel or an aircraft) of a
        United States person which is used in international or
        territorial waters within the northern portion of the Western
        Hemisphere for the purpose of exploring for, developing,
        removing, or transporting resources from ocean waters or
        deposits under such waters;
          (K) any property described in section 48(l)(3)(A)(ix) (as in
        effect on the day before the date of the enactment of the
        Revenue Reconciliation Act of 1990) which is owned by a United
        States person and which is used in international or territorial
        waters to generate energy for use in the United States; and
          (L) any satellite (not described in subparagraph (H)) or
        other spacecraft (or any interest therein) held by a United
        States person if such satellite or other spacecraft was
        launched from within the United States.

      For purposes of subparagraph (J), the term "northern portion of
      the Western Hemisphere" means the area lying west of the 30th
      meridian west of Greenwich, east of the international dateline,
      and north of the Equator, but not including any foreign country
      which is a country of South America.
      (5) Tax-exempt bond financed property
        For purposes of this subsection - 
        (A) In general
          Except as otherwise provided in this paragraph, the term "tax-
        exempt bond financed property" means any property to the
        extent such property is financed (directly or indirectly) by an
        obligation the interest on which is exempt from tax under
        section 103(a).
        (B) Allocation of bond proceeds
          For purposes of subparagraph (A), the proceeds of any
        obligation shall be treated as used to finance property
        acquired in connection with the issuance of such obligation in
        the order in which such property is placed in service.
        (C) Qualified residential rental projects
          The term "tax-exempt bond financed property" shall not
        include any qualified residential rental project (within the
        meaning of section 142(a)(7)).
      (6) Imported property
        (A) Countries maintaining trade restrictions or engaging in
          discriminatory acts
          If the President determines that a foreign country - 
            (i) maintains nontariff trade restrictions, including
          variable import fees, which substantially burden United
          States commerce in a manner inconsistent with provisions of
          trade agreements, or
            (ii) engages in discriminatory or other acts (including
          tolerance of international cartels) or policies unjustifiably
          restricting United States commerce,

        the President may by Executive order provide for the
        application of paragraph (1)(D) to any article or class of
        articles manufactured or produced in such foreign country for
        such period as may be provided by such Executive order. Any
        period specified in the preceding sentence shall not apply to
        any property ordered before (or the construction,
        reconstruction, or erection of which began before) the date of
        the Executive order unless the President determines an earlier
        date to be in the public interest and specifies such date in
        the Executive order.
        (B) Imported property
          For purposes of this subsection, the term "imported property"
        means any property if - 
            (i) such property was completed outside the United States,
          or
            (ii) less than 50 percent of the basis of such property is
          attributable to value added within the United States.

        For purposes of this subparagraph, the term "United States"
        includes the Commonwealth of Puerto Rico and the possessions of
        the United States.
      (7) Election to use alternative depreciation system
        (A) In general
          If the taxpayer makes an election under this paragraph with
        respect to any class of property for any taxable year, the
        alternative depreciation system under this subsection shall
        apply to all property in such class placed in service during
        such taxable year. Notwithstanding the preceding sentence, in
        the case of nonresidential real property or residential rental
        property, such election may be made separately with respect to
        each property.
        (B) Election irrevocable
          An election under subparagraph (A), once made, shall be
        irrevocable.
    (h) Tax-exempt use property
      (1) In general
        For purposes of this section - 
        (A) Property other than nonresidential real property
          Except as otherwise provided in this subsection, the term
        "tax-exempt use property" means that portion of any tangible
        property (other than nonresidential real property) leased to a
        tax-exempt entity.
        (B) Nonresidential real property
          (i) In general
            In the case of nonresidential real property, the term "tax-
          exempt use property" means that portion of the property
          leased to a tax-exempt entity in a disqualified lease.
          (ii) Disqualified lease
            For purposes of this subparagraph, the term "disqualified
          lease" means any lease of the property to a tax-exempt
          entity, but only if - 
              (I) part or all of the property was financed (directly or
            indirectly) by an obligation the interest on which is
            exempt from tax under section 103(a) and such entity (or a
            related entity) participated in such financing,
              (II) under such lease there is a fixed or determinable
            price purchase or sale option which involves such entity
            (or a related entity) or there is the equivalent of such an
            option,
              (III) such lease has a lease term in excess of 20 years,
            or
              (IV) such lease occurs after a sale (or other transfer)
            of the property by, or lease of the property from, such
            entity (or a related entity) and such property has been
            used by such entity (or a related entity) before such sale
            (or other transfer) or lease.
          (iii) 35-percent threshold test
            Clause (i) shall apply to any property only if the portion
          of such property leased to tax-exempt entities in
          disqualified leases is more than 35 percent of the property.
          (iv) Treatment of improvements
            For purposes of this subparagraph, improvements to a
          property (other than land) shall not be treated as a separate
          property.
          (v) Leasebacks during 1st 3 months of use not taken into
            account
            Subclause (IV) of clause (ii) shall not apply to any
          property which is leased within 3 months after the date such
          property is first used by the tax-exempt entity (or a related
          entity).
        (C) Exception for short-term leases
          (i) In general
            Property shall not be treated as tax-exempt use property
          merely by reason of a short-term lease.
          (ii) Short-term lease
            For purposes of clause (i), the term "short-term lease"
          means any lease the term of which is - 
              (I) less than 3 years, and
              (II) less than the greater of 1 year or 30 percent of the
            property's present class life.

          In the case of nonresidential real property and property with
          no present class life, subclause (II) shall not apply.
        (D) Exception where property used in unrelated trade or
          business
          The term "tax-exempt use property" shall not include any
        portion of a property if such portion is predominantly used by
        the tax-exempt entity (directly or through a partnership of
        which such entity is a partner) in an unrelated trade or
        business the income of which is subject to tax under section
        511. For purposes of subparagraph (B)(iii), any portion of a
        property so used shall not be treated as leased to a tax-exempt
        entity in a disqualified lease.
        (E) Nonresidential real property defined
          For purposes of this paragraph, the term "nonresidential real
        property" includes residential rental property.
      (2) Tax-exempt entity
        (A) In general
          For purposes of this subsection, the term "tax-exempt entity"
        means - 
            (i) the United States, any State or political subdivision
          thereof, any possession of the United States, or any agency
          or instrumentality of any of the foregoing,
            (ii) an organization (other than a cooperative described in
          section 521) which is exempt from tax imposed by this
          chapter,
            (iii) any foreign person or entity, and
            (iv) any Indian tribal government described in section
          7701(a)(40).

        For purposes of applying this subsection, any Indian tribal
        government referred to in clause (iv) shall be treated in the
        same manner as a State.
        (B) Exception for certain property subject to United States tax
          and used by foreign person or entity
          Clause (iii) of subparagraph (A) shall not apply with respect
        to any property if more than 50 percent of the gross income for
        the taxable year derived by the foreign person or entity from
        the use of such property is - 
            (i) subject to tax under this chapter, or
            (ii) included under section 951 in the gross income of a
          United States shareholder for the taxable year with or within
          which ends the taxable year of the controlled foreign
          corporation in which such income was derived.

        For purposes of the preceding sentence, any exclusion or
        exemption shall not apply for purposes of determining the
        amount of the gross income so derived, but shall apply for
        purposes of determining the portion of such gross income
        subject to tax under this chapter.
        (C) Foreign person or entity
          For purposes of this paragraph, the term "foreign person or
        entity" means - 
            (i) any foreign government, any international organization,
          or any agency or instrumentality of any of the foregoing, and
            (ii) any person who is not a United States person.

        Such term does not include any foreign partnership or other
        foreign pass-thru entity.
        (D) Treatment of certain taxable instrumentalities
          For purposes of this subsection, a corporation shall not be
        treated as an instrumentality of the United States or of any
        State or political subdivision thereof if - 
            (i) all of the activities of such corporation are subject
          to tax under this chapter, and
            (ii) a majority of the board of directors of such
          corporation is not selected by the United States or any State
          or political subdivision thereof.
        (E) Certain previously tax-exempt organizations
          (i) In general
            For purposes of this subsection, an organization shall be
          treated as an organization described in subparagraph (A)(ii)
          with respect to any property (other than property held by
          such organization) if such organization was an organization
          (other than a cooperative described in section 521) exempt
          from tax imposed by this chapter at any time during the 5-
          year period ending on the date such property was first used
          by such organization. The preceding sentence and subparagraph
          (D)(ii) shall not apply to the Federal Home Loan Mortgage
          Corporation.
          (ii) Election not to have clause (i) apply
            (I) In general
              In the case of an organization formerly exempt from tax
            under section 501(a) as an organization described in
            section 501(c)(12), clause (i) shall not apply to such
            organization with respect to any property if such
            organization elects not to be exempt from tax under section
            501(a) during the tax-exempt use period with respect to
            such property.
            (II) Tax-exempt use period
              For purposes of subclause (I), the term "tax-exempt use
            period" means the period beginning with the taxable year in
            which the property described in subclause (I) is first used
            by the organization and ending with the close of the 15th
            taxable year following the last taxable year of the
            applicable recovery period of such property.
            (III) Election
              Any election under subclause (I), once made, shall be
            irrevocable.
          (iii) Treatment of successor organizations
            Any organization which is engaged in activities
          substantially similar to those engaged in by a predecessor
          organization shall succeed to the treatment under this
          subparagraph of such predecessor organization.
          (iv) First used
            For purposes of this subparagraph, property shall be
          treated as first used by the organization - 
              (I) when the property is first placed in service under a
            lease to such organization, or
              (II) in the case of property leased to (or held by) a
            partnership (or other pass-thru entity) in which the
            organization is a member, the later of when such property
            is first used by such partnership or pass-thru entity or
            when such organization is first a member of such
            partnership or pass-thru entity.
      (3) Special rules for certain high technology equipment
        (A) Exemption where lease term is 5 years or less
          For purposes of this section, the term "tax-exempt use
        property" shall not include any qualified technological
        equipment if the lease to the tax-exempt entity has a lease
        term of 5 years or less. Notwithstanding subsection
        (i)(3)(A)(i), in determining a lease term for purposes of the
        preceding sentence, there shall not be taken into account any
        option of the lessee to renew at the fair market value rent
        determined at the time of renewal; except that the aggregate
        period not taken into account by reason of this sentence shall
        not exceed 24 months.
        (B) Exception for certain property
          (i) In general
            For purposes of subparagraph (A), the term "qualified
          technological equipment" shall not include any property
          leased to a tax-exempt entity if - 
              (I) part or all of the property was financed (directly or
            indirectly) by an obligation the interest on which is
            exempt from tax under section 103(a),
              (II) such lease occurs after a sale (or other transfer)
            of the property by, or lease of such property from, such
            entity (or related entity) and such property has been used
            by such entity (or a related entity) before such sale (or
            other transfer) or lease, or
              (III) such tax-exempt entity is the United States or any
            agency or instrumentality of the United States.
          (ii) Leasebacks during 1st 3 months of use not taken into
            account
            Subclause (II) of clause (i) shall not apply to any
          property which is leased within 3 months after the date such
          property is first used by the tax-exempt entity (or a related
          entity).
      (4) Related entities
        For purposes of this subsection - 
          (A)(i) Each governmental unit and each agency or
        instrumentality of a governmental unit is related to each other
        such unit, agency, or instrumentality which directly or
        indirectly derives its powers, rights, and duties in whole or
        in part from the same sovereign authority.
          (ii) For purposes of clause (i), the United States, each
        State, and each possession of the United States shall be
        treated as a separate sovereign authority.
          (B) Any entity not described in subparagraph (A)(i) is
        related to any other entity if the 2 entities have - 
            (i) significant common purposes and substantial common
          membership, or
            (ii) directly or indirectly substantial common direction or
          control.

          (C)(i) An entity is related to another entity if either
        entity owns (directly or through 1 or more entities) a 50
        percent or greater interest in the capital or profits of the
        other entity.
          (ii) For purposes of clause (i), entities treated as related
        under subparagraph (A) or (B) shall be treated as 1 entity.
          (D) An entity is related to another entity with respect to a
        transaction if such transaction is part of an attempt by such
        entities to avoid the application of this subsection.
      (5) Tax-exempt use of property leased to partnerships, etc.,
        determined at partner level
        For purposes of this subsection - 
        (A) In general
          In the case of any property which is leased to a partnership,
        the determination of whether any portion of such property is
        tax-exempt use property shall be made by treating each tax-
        exempt entity partner's proportionate share (determined under
        paragraph (6)(C)) of such property as being leased to such
        partner.
        (B) Other pass-thru entities; tiered entities
          Rules similar to the rules of subparagraph (A) shall also
        apply in the case of any pass-thru entity other than a
        partnership and in the case of tiered partnerships and other
        entities.
        (C) Presumption with respect to foreign entities
          Unless it is otherwise established to the satisfaction of the
        Secretary, it shall be presumed that the partners of a foreign
        partnership (and the beneficiaries of any other foreign pass-
        thru entity) are persons who are not United States persons.
      (6) Treatment of property owned by partnerships, etc.
        (A) In general
          For purposes of this subsection, if - 
            (i) any property which (but for this subparagraph) is not
          tax-exempt use property is owned by a partnership which has
          both a tax-exempt entity and a person who is not a tax-exempt
          entity as partners, and
            (ii) any allocation to the tax-exempt entity of partnership
          items is not a qualified allocation,

        an amount equal to such tax-exempt entity's proportionate share
        of such property shall (except as provided in paragraph (1)(D))
        be treated as tax-exempt use property.
        (B) Qualified allocation
          For purposes of subparagraph (A), the term "qualified
        allocation" means any allocation to a tax-exempt entity which -
        
            (i) is consistent with such entity's being allocated the
          same distributive share of each item of income, gain, loss,
          deduction, credit, and basis and such share remains the same
          during the entire period the entity is a partner in the
          partnership, and
            (ii) has substantial economic effect within the meaning of
          section 704(b)(2).

        For purposes of this subparagraph, items allocated under
        section 704(c) shall not be taken into account.
        (C) Determination of proportionate share
          (i) In general
            For purposes of subparagraph (A), a tax-exempt entity's
          proportionate share of any property owned by a partnership
          shall be determined on the basis of such entity's share of
          partnership items of income or gain (excluding gain allocated
          under section 704(c)), whichever results in the largest
          proportionate share.
          (ii) Determination where allocations vary
            For purposes of clause (i), if a tax-exempt entity's share
          of partnership items of income or gain (excluding gain
          allocated under section 704(c)) may vary during the period
          such entity is a partner in the partnership, such share shall
          be the highest share such entity may receive.
        (D) Determination of whether property used in unrelated trade
          or business
          For purposes of this subsection, in the case of any property
        which is owned by a partnership which has both a tax-exempt
        entity and a person who is not a tax-exempt entity as partners,
        the determination of whether such property is used in an
        unrelated trade or business of such an entity shall be made
        without regard to section 514.
        (E) Other pass-thru entities; tiered entities
          Rules similar to the rules of subparagraphs (A), (B), (C),
        and (D) shall also apply in the case of any pass-thru entity
        other than a partnership and in the case of tiered partnerships
        and other entities.
        (F) Treatment of certain taxable entities
          (i) In general
            For purposes of this paragraph and paragraph (5), except as
          otherwise provided in this subparagraph, any tax-exempt
          controlled entity shall be treated as a tax-exempt entity.
          (ii) Election
            If a tax-exempt controlled entity makes an election under
          this clause - 
              (I) such entity shall not be treated as a tax-exempt
            entity for purposes of this paragraph and paragraph (5),
            and
              (II) any gain recognized by a tax-exempt entity on any
            disposition of an interest in such entity (and any dividend
            or interest received or accrued by a tax-exempt entity from
            such tax-exempt controlled entity) shall be treated as
            unrelated business taxable income for purposes of section
            511.

          Any such election shall be irrevocable and shall bind all tax-
          exempt entities holding interests in such tax-exempt
          controlled entity. For purposes of subclause (II), there
          shall only be taken into account dividends which are properly
          allocable to income of the tax-exempt controlled entity which
          was not subject to tax under this chapter.
          (iii) Tax-exempt controlled entity
            (I) In general
              The term "tax-exempt controlled entity" means any
            corporation (which is not a tax-exempt entity determined
            without regard to this subparagraph and paragraph (2)(E))
            if 50 percent or more (in value) of the stock in such
            corporation is held by 1 or more tax-exempt entities (other
            than a foreign person or entity).
            (II) Only 5-percent shareholders taken into account in case
              of publicly traded stock
              For purposes of subclause (I), in the case of a
            corporation the stock of which is publicly traded on an
            established securities market, stock held by a tax-exempt
            entity shall not be taken into account unless such entity
            holds at least 5 percent (in value) of the stock in such
            corporation. For purposes of this subclause, related
            entities (within the meaning of paragraph (4)) shall be
            treated as 1 entity.
            (III) Section 318 to apply
              For purposes of this clause, a tax-exempt entity shall be
            treated as holding stock which it holds through application
            of section 318 (determined without regard to the 50-percent
            limitation contained in subsection (a)(2)(C) thereof).
        (G) Regulations
          For purposes of determining whether there is a qualified
        allocation under subparagraph (B), the regulations prescribed
        under paragraph (8) for purposes of this paragraph - 
            (i) shall set forth the proper treatment for partnership
          guaranteed payments, and
            (ii) may provide for the exclusion or segregation of items.
      (7) Lease
        For purposes of this subsection, the term "lease" includes any
      grant of a right to use property.
      (8) Regulations
        The Secretary shall prescribe such regulations as may be
      necessary or appropriate to carry out the purposes of this
      subsection.
    (i) Definitions and special rules
      For purposes of this section - 
      (1) Class life
        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 (determined without regard to paragraph (4) and as if
      the taxpayer had made an election under such subsection). The
      Secretary, through an office established in the Treasury, shall
      monitor and analyze actual experience with respect to all
      depreciable assets. The reference in this paragraph to subsection
      (m) of section 167 shall be treated as a reference to such
      subsection as in effect on the day before the date of the
      enactment of the Revenue Reconciliation Act of 1990.
      (2) Qualified technological equipment
        (A) In general
          The term "qualified technological equipment" means - 
            (i) any computer or peripheral equipment,
            (ii) any high technology telephone station equipment
          installed on the customer's premises, and
            (iii) any high technology medical equipment.
        (B) Computer or peripheral equipment defined
          For purposes of this paragraph - 
          (i) In general
            The term "computer or peripheral equipment" means - 
              (I) any computer, and
              (II) any related peripheral equipment.
          (ii) Computer
            The term "computer" means a programmable electronically
          activated device which - 
              (I) is capable of accepting information, applying
            prescribed processes to the information, and supplying the
            results of these processes with or without human
            intervention, and
              (II) consists of a central processing unit containing
            extensive storage, logic, arithmetic, and control
            capabilities.
          (iii) Related peripheral equipment
            The term "related peripheral equipment" means any auxiliary
          machine (whether on-line or off-line) which is designed to be
          placed under the control of the central processing unit of a
          computer.
          (iv) Exceptions
            The term "computer or peripheral equipment" shall not
          include - 
              (I) any equipment which is an integral part of other
            property which is not a computer,
              (II) typewriters, calculators, adding and accounting
            machines, copiers, duplicating equipment, and similar
            equipment, and
              (III) equipment of a kind used primarily for amusement or
            entertainment of the user.
        (C) High technology medical equipment
          For purposes of this paragraph, the term "high technology
        medical equipment" means any electronic, electromechanical, or
        computer-based high technology equipment used in the screening,
        monitoring, observation, diagnosis, or treatment of patients in
        a laboratory, medical, or hospital environment.
      (3) Lease term
        (A) In general
          In determining a lease term - 
            (i) there shall be taken into account options to renew,
            (ii) the term of a lease shall include the term of any
          service contract or similar arrangement (whether or not
          treated as a lease under section 7701(e)) - 
              (I) which is part of the same transaction (or series of
            related transactions) which includes the lease, and
              (II) which is with respect to the property subject to the
            lease or substantially similar property, and

            (iii) 2 or more successive leases which are part of the
          same transaction (or a series of related transactions) with
          respect to the same or substantially similar property shall
          be treated as 1 lease.
        (B) Special rule for fair rental options on nonresidential real
          property or residential rental property
          For purposes of clause (i) of subparagraph (A), in the case
        of nonresidential real property or residential rental property,
        there shall not be taken into account any option to renew at
        fair market value, determined at the time of renewal.
      (4) General asset accounts
        Under regulations, a taxpayer may maintain 1 or more general
      asset accounts for any property to which this section applies.
      Except as provided in regulations, all proceeds realized on any
      disposition of property in a general asset account shall be
      included in income as ordinary income.
      (5) Changes in use
        The Secretary shall, by regulations, provide for the method of
      determining the deduction allowable under section 167(a) with
      respect to any tangible property for any taxable year (and the
      succeeding taxable years) during which such property changes
      status under this section but continues to be held by the same
      person.
      (6) Treatments of additions or improvements to property
        In the case of any addition to (or improvement of) any property
      - 
          (A) any deduction under subsection (a) for such addition or
        improvement shall be computed in the same manner as the
        deduction for such property would be computed if such property
        had been placed in service at the same time as such addition or
        improvement, and
          (B) the applicable recovery period for such addition or
        improvement shall begin on the later of - 
            (i) the date on which such addition (or improvement) is
          placed in service, or
            (ii) the date on which the property with respect to which
          such addition (or improvement) was made is placed in service.
      (7) Treatment of certain transferees
        (A) In general
          In the case of any property transferred in a transaction
        described in subparagraph (B), the transferee shall be treated
        as the transferor for purposes of computing the depreciation
        deduction determined under this section with respect to so much
        of the basis in the hands of the transferee as does not exceed
        the adjusted basis in the hands of the transferor. In any case
        where this section as in effect before the amendments made by
        section 201 of the Tax Reform Act of 1986 applied to the
        property in the hands of the transferor, the reference in the
        preceding sentence to this section shall be treated as a
        reference to this section as so in effect.
        (B) Transactions covered
          The transactions described in this subparagraph are - 
            (i) any transaction described in section 332, 351, 361,
          721, or 731, and
            (ii) any transaction between members of the same affiliated
          group during any taxable year for which a consolidated return
          is made by such group.

        Subparagraph (A) shall not apply in the case of a termination
        of a partnership under section 708(b)(1)(B).
        (C) Property reacquired by the taxpayer
          Under regulations, property which is disposed of and then
        reacquired by the taxpayer shall be treated for purposes of
        computing the deduction allowable under subsection (a) as if
        such property had not been disposed of.
      (8) Treatment of leasehold improvements
        (A) In general
          In the case of any building erected (or improvements made) on
        leased property, if such building or improvement is property to
        which this section applies, the depreciation deduction shall be
        determined under the provisions of this section.
        (B) Treatment of lessor improvements which are abandoned at
          termination of lease
          An improvement - 
            (i) which is made by the lessor of leased property for the
          lessee of such property, and
            (ii) which is irrevocably disposed of or abandoned by the
          lessor at the termination of the lease by such lessee,

        shall be treated for purposes of determining gain or loss under
        this title as disposed of by the lessor when so disposed of or
        abandoned.
        (C) Cross reference
          For treatment of qualified long-term real property
        constructed or improved in connection with cash or rent
        reduction from lessor to lessee, see section 110(b).
      (9) Normalization rules
        (A) In general
          In order to use a normalization method of accounting with
        respect to any public utility property for purposes of
        subsection (f)(2) - 
            (i) the taxpayer must, in computing its tax expense for
          purposes of establishing its cost of service for ratemaking
          purposes and reflecting operating results in its regulated
          books of account, use a method of depreciation with respect
          to such property that is the same as, and a depreciation
          period for such property that is no shorter than, the method
          and period used to compute its depreciation expense for such
          purposes; and
            (ii) if the amount allowable as a deduction under this
          section with respect to such property differs from the amount
          that would be allowable as a deduction under section 167
          using the method (including the period, first and last year
          convention, and salvage value) used to compute regulated tax
          expense under clause (i), the taxpayer must make adjustments
          to a reserve to reflect the deferral of taxes resulting from
          such difference.
        (B) Use of inconsistent estimates and projections, etc.
          (i) In general
            One way in which the requirements of subparagraph (A) are
          not met is if the taxpayer, for ratemaking purposes, uses a
          procedure or adjustment which is inconsistent with the
          requirements of subparagraph (A).
          (ii) Use of inconsistent estimates and projections
            The procedures and adjustments which are to be treated as
          inconsistent for purposes of clause (i) shall include any
          procedure or adjustment for ratemaking purposes which uses an
          estimate or projection of the taxpayer's tax expense,
          depreciation expense, or reserve for deferred taxes under
          subparagraph (A)(ii) unless such estimate or projection is
          also used, for ratemaking purposes, with respect to the other
          2 such items and with respect to the rate base.
          (iii) Regulatory authority
            The Secretary may by regulations prescribe procedures and
          adjustments (in addition to those specified in clause (ii))
          which are to be treated as inconsistent for purposes of
          clause (i).
        (C) Public utility property which does not meet normalization
          rules
          In the case of any public utility property to which this
        section does not apply by reason of subsection (f)(2), the
        allowance for depreciation under section 167(a) shall be an
        amount computed using the method and period referred to in
        subparagraph (A)(i).
      (10) Public utility property
        The term "public utility property" means property used
      predominantly in the trade or business of the furnishing or sale
      of - 
          (A) electrical energy, water, or sewage disposal services,
          (B) gas or steam through a local distribution system,
          (C) telephone services, or other communication services if
        furnished or sold by the Communications Satellite Corporation
        for purposes authorized by the Communications Satellite Act of
        1962 (47 U.S.C. 701), or
          (D) transportation of gas or steam by pipeline,

      if the rates for such furnishing or sale, as the case may be,
      have been established or approved by a State or political
      subdivision thereof, by any agency or instrumentality of the
      United States, or by a public service or public utility
      commission or other similar body of any State or political
      subdivision thereof.
      (11) Research and experimentation
        The term "research and experimentation" has the same meaning as
      the term research and experimental has under section 174.
      (12) Section 1245 and 1250 property
        The terms "section 1245 property" and "section 1250 property"
      have the meanings given such terms by sections 1245(a)(3) and
      1250(c), respectively.
      (13) Single purpose agricultural or horticultural structure
        (A) In general
          The term "single purpose agricultural or horticultural
        structure" means - 
            (i) a single purpose livestock structure, and
            (ii) a single purpose horticultural structure.
        (B) Definitions
          For purposes of this paragraph - 
          (i) Single purpose livestock structure
            The term "single purpose livestock structure" means any
          enclosure or structure specifically designed, constructed,
          and used - 
              (I) for housing, raising, and feeding a particular type
            of livestock and their produce, and
              (II) for housing the equipment (including any
            replacements) necessary for the housing, raising, and
            feeding referred to in subclause (I).
          (ii) Single purpose horticultural structure
            The term "single purpose horticultural structure" means - 
              (I) a greenhouse specifically designed, constructed, and
            used for the commercial production of plants, and
              (II) a structure specifically designed, constructed, and
            used for the commercial production of mushrooms.
          (iii) Structures which include work space
            An enclosure or structure which provides work space shall
          be treated as a single purpose agricultural or horticultural
          structure only if such work space is solely for - 
              (I) the stocking, caring for, or collecting of livestock
            or plants (as the case may be) or their produce,
              (II) the maintenance of the enclosure or structure, and
              (III) the maintenance or replacement of the equipment or
            stock enclosed or housed therein.
          (iv) Livestock
            The term "livestock" includes poultry.
      (14) Qualified rent-to-own property
        (A) In general
          The term "qualified rent-to-own property" means property held
        by a rent-to-own dealer for purposes of being subject to a rent-
        to-own contract.
        (B) Rent-to-own dealer
          The term "rent-to-own dealer" means a person that, in the
        ordinary course of business, regularly enters into rent-to-own
        contracts with customers for the use of consumer property, if a
        substantial portion of those contracts terminate and the
        property is returned to such person before the receipt of all
        payments required to transfer ownership of the property from
        such person to the customer.
        (C) Consumer property
          The term "consumer property" means tangible personal property
        of a type generally used within the home for personal use.
        (D) Rent-to-own contract
          The term "rent-to-own contract" means any lease for the use
        of consumer property between a rent-to-own dealer and a
        customer who is an individual which - 
            (i) is titled "Rent-to-Own Agreement" or "Lease Agreement
          with Ownership Option," or uses other similar language,
            (ii) provides for level (or decreasing where no payment is
          less than 40 percent of the largest payment), regular
          periodic payments (for a payment period which is a week or
          month),
            (iii) provides that legal title to such property remains
          with the rent-to-own dealer until the customer makes all the
          payments described in clause (ii) or early purchase payments
          required under the contract to acquire legal title to the
          item of property,
            (iv) provides a beginning date and a maximum period of time
          for which the contract may be in effect that does not exceed
          156 weeks or 36 months from such beginning date (including
          renewals or options to extend),
            (v) provides for payments within the 156-week or 36-month
          period that, in the aggregate, generally exceed the normal
          retail price of the consumer property plus interest,
            (vi) provides for payments under the contract that, in the
          aggregate, do not exceed $10,000 per item of consumer
          property,
            (vii) provides that the customer does not have any legal
          obligation to make all the payments referred to in clause
          (ii) set forth under the contract, and that at the end of
          each payment period the customer may either continue to use
          the consumer property by making the payment for the next
          payment period or return such property to the rent-to-own
          dealer in good working order, in which case the customer does
          not incur any further obligations under the contract and is
          not entitled to a return of any payments previously made
          under the contract, and
            (viii) provides that the customer has no right to sell,
          sublease, mortgage, pawn, pledge, encumber, or otherwise
          dispose of the consumer property until all the payments
          stated in the contract have been made.
      (15) Motorsports entertainment complex
        (A) In general
          The term "motorsports entertainment complex" means a racing
        track facility which - 
            (i) is permanently situated on land, and
            (ii) during the 36-month period following the first day of
          the month in which the asset is placed in service, hosts 1 or
          more racing events for automobiles (of any type), trucks, or
          motorcycles which are open to the public for the price of
          admission.
        (B) Ancillary and support facilities
          Such term shall include, if owned by the taxpayer who owns
        the complex and provided for the benefit of patrons of the
        complex - 
            (i) ancillary facilities and land improvements in support
          of the complex's activities (including parking lots,
          sidewalks, waterways, bridges, fences, and landscaping),
            (ii) support facilities (including food and beverage
          retailing, souvenir vending, and other nonlodging
          accommodations), and
            (iii) appurtenances associated with such facilities and
          related attractions and amusements (including ticket booths,
          race track surfaces, suites and hospitality facilities,
          grandstands and viewing structures, props, walls, facilities
          that support the delivery of entertainment services, other
          special purpose structures, facades, shop interiors, and
          buildings).
        (C) Exception
          Such term shall not include any transportation equipment,
        administrative services assets, warehouses, administrative
        buildings, hotels, or motels.
        (D) Termination
          Such term shall not include any property placed in service
        after December 31, 2011.
      (16) Alaska natural gas pipeline
        The term "Alaska natural gas pipeline" means the natural gas
      pipeline system located in the State of Alaska which - 
          (A) has a capacity of more than 500,000,000,000 Btu of
        natural gas per day, and
          (B) is - 
            (i) placed in service after December 31, 2013, or
            (ii) treated as placed in service on January 1, 2014, if
          the taxpayer who places such system in service before January
          1, 2014, elects such treatment.

      Such term includes the pipe, trunk lines, related equipment, and
      appurtenances used to carry natural gas, but does not include any
      gas processing plant.
      (17) Natural gas gathering line
        The term "natural gas gathering line" means - 
          (A) the pipe, equipment, and appurtenances determined to be a
        gathering line by the Federal Energy Regulatory Commission, and
          (B) the pipe, equipment, and appurtenances used to deliver
        natural gas from the wellhead or a commonpoint to the point at
        which such gas first reaches - 
            (i) a gas processing plant,
            (ii) an interconnection with a transmission pipeline for
          which a certificate as an interstate transmission pipeline
          has been issued by the Federal Energy Regulatory Commission,
            (iii) an interconnection with an intrastate transmission
          pipeline, or
            (iv) a direct interconnection with a local distribution
          company, a gas storage facility, or an industrial consumer.
      (18) Qualified smart electric meters
        (A) In general
          The term "qualified smart electric meter" means any smart
        electric meter which - 
            (i) is placed in service by a taxpayer who is a supplier of
          electric energy or a provider of electric energy services,
          and
            (ii) does not have a class life (determined without regard
          to subsection (e)) of less than 10 years.
        (B) Smart electric meter
          For purposes of subparagraph (A), the term "smart electric
        meter" means any time-based meter and related communication
        equipment which is capable of being used by the taxpayer as
        part of a system that - 
            (i) measures and records electricity usage data on a time-
          differentiated basis in at least 24 separate time segments
          per day,
            (ii) provides for the exchange of information between
          supplier or provider and the customer's electric meter in
          support of time-based rates or other forms of demand
          response,
            (iii) provides data to such supplier or provider so that
          the supplier or provider can provide energy usage information
          to customers electronically, and
            (iv) provides net metering.
      (19) Qualified smart electric grid systems
        (A) In general
          The term "qualified smart electric grid system" means any
        smart grid property which - 
            (i) is used as part of a system for electric distribution
          grid communications, monitoring, and management placed in
          service by a taxpayer who is a supplier of electric energy or
          a provider of electric energy services, and
            (ii) does not have a class life (determined without regard
          to subsection (e)) of less than 10 years.
        (B) Smart grid property
          For the purposes of subparagraph (A), the term "smart grid
        property" means electronics and related equipment that is
        capable of - 
            (i) sensing, collecting, and monitoring data of or from all
          portions of a utility's electric distribution grid,
            (ii) providing real-time, two-way communications to monitor
          or manage such grid, and
            (iii) providing real time analysis of and event prediction
          based upon collected data that can be used to improve
          electric distribution system reliability, quality, and
          performance.
    (j) Property on Indian reservations
      (1) In general
        For purposes of subsection (a), the applicable recovery period
      for qualified Indian reservation property shall be determined in
      accordance with the table contained in paragraph (2) in lieu of
      the table contained in subsection (c).
      (2) Applicable recovery period for Indian reservation property
        For purposes of paragraph (1) - 


                     In the case of:                           2The     
                                                            applicable  
                                                             recovery   
                                                            period is:  
    --------------------------------------------------------------------
      3-year property                                            2 years
      5-year property                                            3 years
      7-year property                                            4 years
      10-year property                                           6 years
      15-year property                                           9 years
      20-year property                                          12 years
      Nonresidential real property                             22 years.
    --------------------------------------------------------------------

      (3) Deduction allowed in computing minimum tax
        For purposes of determining alternative minimum taxable income
      under section 55, the deduction under subsection (a) for property
      to which paragraph (1) applies shall be determined under this
      section without regard to any adjustment under section 56.
      (4) Qualified Indian reservation property defined
        For purposes of this subsection - 
        (A) In general
          The term "qualified Indian reservation property" means
        property which is property described in the table in paragraph
        (2) and which is - 
            (i) used by the taxpayer predominantly in the active
          conduct of a trade or business within an Indian reservation,
            (ii) not used or located outside the Indian reservation on
          a regular basis,
            (iii) not acquired (directly or indirectly) by the taxpayer
          from a person who is related to the taxpayer (within the
          meaning of section 465(b)(3)(C)), and
            (iv) not property (or any portion thereof) placed in
          service for purposes of conducting or housing class I, II, or
          III gaming (as defined in section 4 of the Indian Regulatory
          Act (25 U.S.C. 2703)).
        (B) Exception for alternative depreciation property
          The term "qualified Indian reservation property" does not
        include any property to which the alternative depreciation
        system under subsection (g) applies, determined - 
            (i) without regard to subsection (g)(7) (relating to
          election to use alternative depreciation system), and
            (ii) after the application of section 280F(b) (relating to
          listed property with limited business use).
        (C) Special rule for reservation infrastructure investment
          (i) In general
            Subparagraph (A)(ii) shall not apply to qualified
          infrastructure property located outside of the Indian
          reservation if the purpose of such property is to connect
          with qualified infrastructure property located within the
          Indian reservation.
          (ii) Qualified infrastructure property
            For purposes of this subparagraph, the term "qualified
          infrastructure property" means qualified Indian reservation
          property (determined without regard to subparagraph (A)(ii))
          which - 
              (I) benefits the tribal infrastructure,
              (II) is available to the general public, and
              (III) is placed in service in connection with the
            taxpayer's active conduct of a trade or business within an
            Indian reservation.

          Such term includes, but is not limited to, roads, power
          lines, water systems, railroad spurs, and communications
          facilities.
      (5) Real estate rentals
        For purposes of this subsection, the rental to others of real
      property located within an Indian reservation shall be treated as
      the active conduct of a trade or business within an Indian
      reservation.
      (6) Indian reservation defined
        For purposes of this subsection, the term "Indian reservation"
      means a reservation, as defined in - 
          (A) section 3(d) of the Indian Financing Act of 1974 (25
        U.S.C. 1452(d)), or
          (B) section 4(10) of the Indian Child Welfare Act of 1978 (25
        U.S.C. 1903(10)).

      For purposes of the preceding sentence, such section 3(d) shall
      be applied by treating the term "former Indian reservations in
      Oklahoma" as including only lands which are within the
      jurisdictional area of an Oklahoma Indian tribe (as determined by
      the Secretary of the Interior) and are recognized by such
      Secretary as eligible for trust land status under 25 CFR Part 151
      (as in effect on the date of the enactment of this sentence).
      (7) Coordination with nonrevenue laws
        Any reference in this subsection to a provision not contained
      in this title shall be treated for purposes of this subsection as
      a reference to such provision as in effect on the date of the
      enactment of this paragraph.
      (8) Termination
        This subsection shall not apply to property placed in service
      after December 31, 2011.
    (k) Special allowance for certain property acquired after December
      31, 2007, and before January 1, 2013
      (1) Additional allowance
        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 include an allowance equal to 50 percent of the adjusted
        basis of the qualified property, and
          (B) the adjusted basis of the qualified property shall be
        reduced by the amount of such deduction before computing the
        amount otherwise allowable as a depreciation deduction under
        this chapter for such taxable year and any subsequent taxable
        year.
      (2) Qualified property
        For purposes of this subsection - 
        (A) In general
          The term "qualified property" means property - 
            (i)(I) to which this section applies which has a recovery
          period of 20 years or less,
            (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,
            (III) which is water utility property, or
            (IV) which is qualified leasehold improvement property,
            (ii) the original use of which commences with the taxpayer
          after December 31, 2007,
            (iii) which is - 
              (I) acquired by the taxpayer after December 31, 2007, and
            before January 1, 2013, but only if no written binding
            contract for the acquisition was in effect before January
            1, 2008, or
              (II) acquired by the taxpayer pursuant to a written
            binding contract which was entered into after December 31,
            2007, and before January 1, 2013, and

            (iv) which is placed in service by the taxpayer before
          January 1, 2013, or, in the case of property described in
          subparagraph (B) or (C), before January 1, 2014.
        (B) Certain property having longer production periods treated
          as qualified property
          (i) In general
            The term "qualified property" includes any property if such
          property - 
              (I) meets the requirements of clauses (i), (ii), (iii),
            and (iv) of subparagraph (A),
              (II) has a recovery period of at least 10 years or is
            transportation property,
              (III) is subject to section 263A, and
              (IV) meets the requirements of clause (iii) of section
            263A(f)(1)(B) (determined as if such clauses also apply to
            property which has a long useful life (within the meaning
            of section 263A(f))).
          (ii) Only pre-January 1, 2013, basis eligible for additional
            allowance
            In the case of property which is qualified property solely
          by reason of clause (i), paragraph (1) shall apply only to
          the extent of the adjusted basis thereof attributable to
          manufacture, construction, or production before January 1,
          2013.
          (iii) Transportation property
            For purposes of this subparagraph, the term "transportation
          property" means tangible personal property used in the trade
          or business of transporting persons or property.
          (iv) Application of subparagraph
            This subparagraph shall not apply to any property which is
          described in subparagraph (C).
        (C) Certain aircraft
          The term "qualified property" includes property - 
            (i) which meets the requirements of clauses (ii), (iii),
          and (iv) of subparagraph (A),
            (ii) which is an aircraft which is not a transportation
          property (as defined in subparagraph (B)(iii)) other than for
          agricultural or firefighting purposes,
            (iii) which is purchased and on which such purchaser, at
          the time of the contract for purchase, has made a
          nonrefundable deposit of the lesser of - 
              (I) 10 percent of the cost, or
              (II) $100,000, and

            (iv) which has - 
              (I) an estimated production period exceeding 4 months,
            and
              (II) a cost exceeding $200,000.
        (D) Exceptions
          (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) Qualified New York Liberty Zone leasehold improvement
            property
            The term "qualified property" shall not include any
          qualified New York Liberty Zone leasehold improvement
          property (as defined in section 1400L(c)(2)).
          (iii) 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.
        (E) Special rules
          (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 (iii) of subparagraph (A) shall be
          treated as met if the taxpayer begins manufacturing,
          constructing, or producing the property after December 31,
          2007, and before January 1, 2013.
          (ii) Sale-leasebacks
            For purposes of clause (iii) and subparagraph (A)(ii), if
          property is - 
              (I) originally placed in service after December 31, 2007,
            by a person, and
              (II) 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).
          (iii) Syndication
            For purposes of subparagraph (A)(ii), if - 
              (I) property is originally placed in service after
            December 31, 2007, by the lessor of such property,
              (II) such property is sold by such lessor or any
            subsequent purchaser within 3 months after the date such
            property was originally placed in service (or, in the case
            of multiple units of property subject to the same lease,
            within 3 months after the date the final unit is placed in
            service, so long as the period between the time the first
            unit is placed in service and the time the last unit is
            placed in service does not exceed 12 months), and
              (III) the user of such property after the last sale
            during such 3-month period remains the same as when such
            property was originally placed in service,

          such property shall be treated as originally placed in
          service not earlier than the date of such last sale.
          (iv) Limitations related to users and related parties
            The term "qualified property" shall not include any
          property if - 
              (I) the user of such property (as of the date on which
            such property is originally placed in service) or a person
            which is related (within the meaning of section 267(b) or
            707(b)) to such user or to the taxpayer had a written
            binding contract in effect for the acquisition of such
            property at any time on or before December 31, 2007, or
              (II) in the case of property manufactured, constructed,
            or produced for such user's or person's own use, the
            manufacture, construction, or production of such property
            began at any time on or before December 31, 2007.
        (F) 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 property, the
          Secretary shall increase the limitation under section
          280F(a)(1)(A)(i) by $8,000.
          (ii) Listed property
            The deduction allowable under paragraph (1) shall be taken
          into account in computing any recapture amount under section
          280F(b)(2).
        (G) Deduction allowed in computing minimum tax
          For purposes of determining alternative minimum taxable
        income under section 55, the deduction under subsection (a) for
        qualified property shall be determined under this section
        without regard to any adjustment under section 56.
      (3) Qualified leasehold improvement property
        For purposes of this subsection - 
        (A) In general
          The term "qualified leasehold improvement property" means any
        improvement to an interior portion of a building which is
        nonresidential real property if - 
            (i) such improvement is made under or pursuant to a lease
          (as defined in subsection (h)(7)) - 
              (I) by the lessee (or any sublessee) of such portion, or
              (II) by the lessor of such portion,

            (ii) such portion is to be occupied exclusively by the
          lessee (or any sublessee) of such portion, and
            (iii) such improvement is placed in service more than 3
          years after the date the building was first placed in
          service.
        (B) Certain improvements not included
          Such term shall not include any improvement for which the
        expenditure is attributable to - 
            (i) the enlargement of the building,
            (ii) any elevator or escalator,
            (iii) any structural component benefiting a common area,
          and
            (iv) the internal structural framework of the building.
        (C) Definitions and special rules
          For purposes of this paragraph - 
          (i) Commitment to lease treated as lease
            A commitment to enter into a lease shall be treated as a
          lease, and the parties to such commitment shall be treated as
          lessor and lessee, respectively.
          (ii) Related persons
            A lease between related persons shall not be considered a
          lease. For purposes of the preceding sentence, the term
          "related persons" means - 
              (I) members of an affiliated group (as defined in section
            1504), and
              (II) persons having a relationship described in
            subsection (b) of section 267; except that, for purposes of
            this clause, the phrase "80 percent or more" shall be
            substituted for the phrase "more than 50 percent" each
            place it appears in such subsection.
      (4) Election to accelerate the AMT and research credits in lieu
        of bonus depreciation
        (A) In general
          If a corporation elects to have this paragraph apply for the
        first taxable year of the taxpayer ending after March 31, 2008,
        in the case of such taxable year and each subsequent taxable
        year - 
            (i) paragraph (1) shall not apply to any eligible qualified
          property placed in service by the taxpayer,
            (ii) the applicable depreciation method used under this
          section with respect to such property shall be the straight
          line method, and
            (iii) each of the limitations described in subparagraph (B)
          for any such taxable year shall be increased by the bonus
          depreciation amount which is - 
              (I) determined for such taxable year under subparagraph
            (C), and
              (II) allocated to such limitation under subparagraph (E).
        (B) Limitations to be increased
          The limitations described in this subparagraph are - 
            (i) the limitation imposed by section 38(c), and
            (ii) the limitation imposed by section 53(c).
        (C) Bonus depreciation amount
          For purposes of this paragraph - 
          (i) In general
            The bonus depreciation amount for any taxable year is an
          amount equal to 20 percent of the excess (if any) of - 
              (I) the aggregate amount of depreciation which would be
            allowed under this section for eligible qualified property
            placed in service by the taxpayer during such taxable year
            if paragraph (1) applied to all such property, over
              (II) the aggregate amount of depreciation which would be
            allowed under this section for eligible qualified property
            placed in service by the taxpayer during such taxable year
            if paragraph (1) did not apply to any such property.

          The aggregate amounts determined under subclauses (I) and
          (II) shall be determined without regard to any election made
          under subsection (b)(2)(C), (b)(3)(D), or (g)(7) and without
          regard to subparagraph (A)(ii).
          (ii) Maximum amount
            The bonus depreciation amount for any taxable year shall
          not exceed the maximum increase amount under clause (iii),
          reduced (but not below zero) by the sum of the bonus
          depreciation amounts for all preceding taxable years.
          (iii) Maximum increase amount
            For purposes of clause (ii), the term "maximum increase
          amount" means, with respect to any corporation, the lesser of
          - 
              (I) $30,000,000, or
              (II) 6 percent of the sum of the business credit increase
            amount, and the AMT credit increase amount, determined with
            respect to such corporation under subparagraph (E).
          (iv) Aggregation rule
            All corporations which are treated as a single employer
          under section 52(a) shall be treated - 
              (I) as 1 taxpayer for purposes of this paragraph, and
              (II) as having elected the application of this paragraph
            if any such corporation so elects.
        (D) Eligible qualified property
          For purposes of this paragraph, the term "eligible qualified
        property" means qualified property under paragraph (2), except
        that in applying paragraph (2) for purposes of this paragraph -
        
            (i) "March 31, 2008" shall be substituted for "December 31,
          2007" each place it appears in subparagraph (A) and clauses
          (i) and (ii) of subparagraph (E) thereof,
            (ii) "April 1, 2008" shall be substituted for "January 1,
          2008" in subparagraph (A)(iii)(I) thereof, and
            (iii) only adjusted basis attributable to manufacture,
          construction, or production - 
              (I) after March 31, 2008, and before January 1, 2010, and
              (II) after December 31, 2010, and before January 1, 2013,

          shall be taken into account under subparagraph (B)(ii)
          thereof.
        (E) Allocation of bonus depreciation amounts
          (i) In general
            Subject to clauses (ii) and (iii), the taxpayer shall, at
          such time and in such manner as the Secretary may prescribe,
          specify the portion (if any) of the bonus depreciation amount
          for the taxable year which is to be allocated to each of the
          limitations described in subparagraph (B) for such taxable
          year.
          (ii) Limitation on allocations
            The portion of the bonus depreciation amount which may be
          allocated under clause (i) to the limitations described in
          subparagraph (B) for any taxable year shall not exceed - 
              (I) in the case of the limitation described in
            subparagraph (B)(i), the excess of the business credit
            increase amount over the bonus depreciation amount
            allocated to such limitation for all preceding taxable
            years, and
              (II) in the case of the limitation described in
            subparagraph (B)(ii), the excess of the AMT credit increase
            amount over the bonus depreciation amount allocated to such
            limitation for all preceding taxable years.
          (iii) Business credit increase amount
            For purposes of this paragraph, the term "business credit
          increase amount" means the amount equal to the portion of the
          credit allowable under section 38 (determined without regard
          to subsection (c) thereof) for the first taxable year ending
          after March 31, 2008, which is allocable to business credit
          carryforwards to such taxable year which are - 
              (I) from taxable years beginning before January 1, 2006,
            and
              (II) properly allocable (determined under the rules of
            section 38(d)) to the research credit determined under
            section 41(a).
          (iv) AMT credit increase amount
            For purposes of this paragraph, the term "AMT credit
          increase amount" means the amount equal to the portion of the
          minimum tax credit under section 53(b) for the first taxable
          year ending after March 31, 2008, determined by taking into
          account only the adjusted minimum tax for taxable years
          beginning before January 1, 2006. For purposes of the
          preceding sentence, credits shall be treated as allowed on a
          first-in, first-out basis.
        (F) Credit refundable
          For purposes of section 6401(b), the aggregate increase in
        the credits allowable under part IV of subchapter A for any
        taxable year resulting from the application of this paragraph
        shall be treated as allowed under subpart C of such part (and
        not any other subpart).
        (G) Other rules
          (i) Election
            Any election under this paragraph (including any allocation
          under subparagraph (E)) may be revoked only with the consent
          of the Secretary.
          (ii) Partnerships with electing partners
            In the case of a corporation making an election under
          subparagraph (A) and which is a partner in a partnership, for
          purposes of determining such corporation's distributive share
          of partnership items under section 702 - 
              (I) paragraph (1) shall not apply to any eligible
            qualified property, and
              (II) the applicable depreciation method used under this
            section with respect to such property shall be the straight
            line method.
          (iii) Special rule for passenger aircraft
            In the case of any passenger aircraft, the written binding
          contract limitation under paragraph (2)(A)(iii)(I) shall not
          apply for purposes of subparagraphs (C)(i)(I) and (D).
        (H) Special rules for extension property
          (i) Taxpayers previously electing acceleration
            In the case of a taxpayer who made the election under
          subparagraph (A) for its first taxable year ending after
          March 31, 2008 - 
              (I) the taxpayer may elect not to have this paragraph
            apply to extension property, but
              (II) if the taxpayer does not make the election under
            subclause (I), in applying this paragraph to the taxpayer a
            separate bonus depreciation amount, maximum amount, and
            maximum increase amount shall be computed and applied to
            eligible qualified property which is extension property and
            to eligible qualified property which is not extension
            property.
          (ii) Taxpayers not previously electing acceleration
            In the case of a taxpayer who did not make the election
          under subparagraph (A) for its first taxable year ending
          after March 31, 2008 - 
              (I) the taxpayer may elect to have this paragraph apply
            to its first taxable year ending after December 31, 2008,
            and each subsequent taxable year, and
              (II) if the taxpayer makes the election under subclause
            (I), this paragraph shall only apply to eligible qualified
            property which is extension property.
          (iii) Extension property
            For purposes of this subparagraph, the term "extension
          property" means property which is eligible qualified property
          solely by reason of the extension of the application of the
          special allowance under paragraph (1) pursuant to the
          amendments made by section 1201(a) of the American Recovery
          and Reinvestment Tax Act of 2009 (and the application of such
          extension to this paragraph pursuant to the amendment made by
          section 1201(b)(1) of such Act).
        (I) Special rules for round 2 extension property
          (i) In general
            In the case of round 2 extension property, this paragraph
          shall be applied without regard to - 
              (I) the limitation described in subparagraph (B)(i)
            thereof, and
              (II) the business credit increase amount under
            subparagraph (E)(iii) thereof.
          (ii) Taxpayers previously electing acceleration
            In the case of a taxpayer who made the election under
          subparagraph (A) for its first taxable year ending after
          March 31, 2008, or a taxpayer who made the election under
          subparagraph (H)(ii) for its first taxable year ending after
          December 31, 2008 - 
              (I) the taxpayer may elect not to have this paragraph
            apply to round 2 extension property, but
              (II) if the taxpayer does not make the election under
            subclause (I), in applying this paragraph to the taxpayer
            the bonus depreciation amount, maximum amount, and maximum
            increase amount shall be computed and applied to eligible
            qualified property which is round 2 extension property.

          The amounts described in subclause (II) shall be computed
          separately from any amounts computed with respect to eligible
          qualified property which is not round 2 extension property.
          (iii) Taxpayers not previously electing acceleration
            In the case of a taxpayer who neither made the election
          under subparagraph (A) for its first taxable year ending
          after March 31, 2008, nor made the election under
          subparagraph (H)(ii) for its first taxable year ending after
          December 31, 2008 - 
              (I) the taxpayer may elect to have this paragraph apply
            to its first taxable year ending after December 31, 2010,
            and each subsequent taxable year, and
              (II) if the taxpayer makes the election under subclause
            (I), this paragraph shall only apply to eligible qualified
            property which is round 2 extension property.
          (iv) Round 2 extension property
            For purposes of this subparagraph, the term "round 2
          extension property" means property which is eligible
          qualified property solely by reason of the extension of the
          application of the special allowance under paragraph (1)
          pursuant to the amendments made by section 401(a) of the Tax
          Relief, Unemployment Insurance Reauthorization, and Job
          Creation Act of 2010 (and the application of such extension
          to this paragraph pursuant to the amendment made by section
          401(c)(1) of such Act).
      (5) Special rule for property acquired during certain pre-2012
        periods
        In the case of qualified property acquired by the taxpayer
      (under rules similar to the rules of clauses (ii) and (iii) of
      paragraph (2)(A)) after September 8, 2010, and before January 1,
      2012, and which is placed in service by the taxpayer before
      January 1, 2012 (January 1, 2013, in the case of property
      described in subparagraph (2)(B) or (2)(C)), paragraph (1)(A)
      shall be applied by substituting "100 percent" for "50 percent".
    (l) Special allowance for cellulosic biofuel plant property
      (1) Additional allowance
        In the case of any qualified cellulosic biofuel plant property -
       
          (A) the depreciation deduction provided by section 167(a) for
        the taxable year in which such property is placed in service
        shall include an allowance equal to 50 percent of the adjusted
        basis of such property, and
          (B) the adjusted basis of such property shall be reduced by
        the amount of such deduction before computing the amount
        otherwise allowable as a depreciation deduction under this
        chapter for such taxable year and any subsequent taxable year.
      (2) Qualified cellulosic biofuel plant property
        The term "qualified cellulosic biofuel plant property" means
      property of a character subject to the allowance for depreciation
      - 
          (A) which is used in the United States solely to produce
        cellulosic biofuel,
          (B) the original use of which commences with the taxpayer
        after the date of the enactment of this subsection,
          (C) which is acquired by the taxpayer by purchase (as defined
        in section 179(d)) after the date of the enactment of this
        subsection, but only if no written binding contract for the
        acquisition was in effect on or before the date of the
        enactment of this subsection, and
          (D) which is placed in service by the taxpayer before January
        1, 2013.
      (3) Cellulosic biofuel
        The term "cellulosic biofuel" means any liquid fuel which is
      produced from any lignocellulosic or hemicellulosic matter that
      is available on a renewable or recurring basis.
      (4) Exceptions
        (A) Bonus depreciation property under subsection (k)
          Such term shall not include any property to which section
        168(k) applies.
        (B) Alternative depreciation property
          Such term shall not include any property described in section
        168(k)(2)(D)(i).
        (C) Tax-exempt bond-financed property
          Such term shall not include any property any portion of which
        is financed with the proceeds of any obligation the interest on
        which is exempt from tax under section 103.
        (D) Election out
          If a taxpayer makes an election under this subparagraph 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.
      (5) Special rules
        For purposes of this subsection, rules similar to the rules of
      subparagraph (E) of section 168(k)(2) shall apply, except that
      such subparagraph shall be applied - 
          (A) by substituting "the date of the enactment of subsection
        (l)" for "December 31, 2007" each place it appears therein, and
          (B) by substituting "qualified cellulosic biofuel plant
        property" for "qualified property" in clause (iv) thereof.
      (6) Allowance against alternative minimum tax
        For purposes of this subsection, rules similar to the rules of
      section 168(k)(2)(G) shall apply.
      (7) Recapture
        For purposes of this subsection, rules similar to the rules
      under section 179(d)(10) shall apply with respect to any
      qualified cellulosic biofuel plant property which ceases to be
      qualified cellulosic biofuel plant property.
      (8) Denial of double benefit
        Paragraph (1) shall not apply to any qualified cellulosic
      biofuel plant property with respect to which an election has been
      made under section 179C (relating to election to expense certain
      refineries).
    (m) Special allowance for certain reuse and recycling property
      (1) In general
        In the case of any qualified reuse and recycling property - 
          (A) the depreciation deduction provided by section 167(a) for
        the taxable year in which such property is placed in service
        shall include an allowance equal to 50 percent of the adjusted
        basis of the qualified reuse and recycling property, and
          (B) the adjusted basis of the qualified reuse and recycling
        property shall be reduced by the amount of such deduction
        before computing the amount otherwise allowable as a
        depreciation deduction under this chapter for such taxable year
        and any subsequent taxable year.
      (2) Qualified reuse and recycling property
        For purposes of this subsection - 
        (A) In general
          The term "qualified reuse and recycling property" means any
        reuse and recycling property - 
            (i) to which this section applies,
            (ii) which has a useful life of at least 5 years,
            (iii) the original use of which commences with the taxpayer
          after August 31, 2008, and
            (iv) which is - 
              (I) acquired by purchase (as defined in section
            179(d)(2)) by the taxpayer after August 31, 2008, but only
            if no written binding contract for the acquisition was in
            effect before September 1, 2008, or
              (II) acquired by the taxpayer pursuant to a written
            binding contract which was entered into after August 31,
            2008.
        (B) Exceptions
          (i) Bonus depreciation property under subsection (k)
            The term "qualified reuse and recycling property" shall not
          include any property to which section 168(k) applies.
          (ii) Alternative depreciation property
            The term "qualified reuse and recycling property" shall not
          include any property to which the alternative depreciation
          system under subsection (g) applies, determined without
          regard to paragraph (7) of subsection (g) (relating to
          election to have system apply).
          (iii) 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.
        (C) Special rule for self-constructed property
          In the case of a taxpayer manufacturing, constructing, or
        producing property for the taxpayer's own use, the requirements
        of clause (iv) of subparagraph (A) shall be treated as met if
        the taxpayer begins manufacturing, constructing, or producing
        the property after August 31, 2008.
        (D) Deduction allowed in computing minimum tax
          For purposes of determining alternative minimum taxable
        income under section 55, the deduction under subsection (a) for
        qualified reuse and recycling property shall be determined
        under this section without regard to any adjustment under
        section 56.
      (3) Definitions
        For purposes of this subsection - 
        (A) Reuse and recycling property
          (i) In general
            The term "reuse and recycling property" means any machinery
          and equipment (not including buildings or real estate), along
          with all appurtenances thereto, including software necessary
          to operate such equipment, which is used exclusively to
          collect, distribute, or recycle qualified reuse and
          recyclable materials.
          (ii) Exclusion
            Such term does not include rolling stock or other equipment
          used to transport reuse and recyclable materials.
        (B) Qualified reuse and recyclable materials
          (i) In general
            The term "qualified reuse and recyclable materials" means
          scrap plastic, scrap glass, scrap textiles, scrap rubber,
          scrap packaging, recovered fiber, scrap ferrous and
          nonferrous metals, or electronic scrap generated by an
          individual or business.
          (ii) Electronic scrap
            For purposes of clause (i), the term "electronic scrap"
          means - 
              (I) any cathode ray tube, flat panel screen, or similar
            video display device with a screen size greater than 4
            inches measured diagonally, or
              (II) any central processing unit.
        (C) Recycling or recycle
          The term "recycling" or "recycle" means that process
        (including sorting) by which worn or superfluous materials are
        manufactured or processed into specification grade commodities
        that are suitable for use as a replacement or substitute for
        virgin materials in manufacturing tangible consumer and
        commercial products, including packaging.
    (n) Special allowance for qualified disaster assistance property
      (1) In general
        In the case of any qualified disaster assistance property - 
          (A) the depreciation deduction provided by section 167(a) for
        the taxable year in which such property is placed in service
        shall include an allowance equal to 50 percent of the adjusted
        basis of the qualified disaster assistance property, and
          (B) the adjusted basis of the qualified disaster assistance
        property shall be reduced by the amount of such deduction
        before computing the amount otherwise allowable as a
        depreciation deduction under this chapter for such taxable year
        and any subsequent taxable year.
      (2) Qualified disaster assistance property
        For purposes of this subsection - 
        (A) In general
          The term "qualified disaster assistance property" means any
        property - 
            (i)(I) which is described in subsection (k)(2)(A)(i), or
            (II) which is nonresidential real property or residential
          rental property,
            (ii) substantially all of the use of which is - 
              (I) in a disaster area with respect to a federally
            declared disaster occurring before January 1, 2010, and
              (II) in the active conduct of a trade or business by the
            taxpayer in such disaster area,

            (iii) which - 
              (I) rehabilitates property damaged, or replaces property
            destroyed or condemned, as a result of such federally
            declared disaster, except that, for purposes of this
            clause, property shall be treated as replacing property
            destroyed or condemned if, as part of an integrated plan,
            such property replaces property which is included in a
            continuous area which includes real property destroyed or
            condemned, and
              (II) is similar in nature to, and located in the same
            county as, the property being rehabilitated or replaced,

            (iv) the original use of which in such disaster area
          commences with an eligible taxpayer on or after the
          applicable disaster date,
            (v) which is acquired by such eligible taxpayer by purchase
          (as defined in section 179(d)) on or after the applicable
          disaster date, but only if no written binding contract for
          the acquisition was in effect before such date, and
            (vi) which is placed in service by such eligible taxpayer
          on or before the date which is the last day of the third
          calendar year following the applicable disaster date (the
          fourth calendar year in the case of nonresidential real
          property and residential rental property).
        (B) Exceptions
          (i) Other bonus depreciation property
            The term "qualified disaster assistance property" shall not
          include - 
              (I) any property to which subsection (k) (determined
            without regard to paragraph (4)), (l), or (m) applies,
              (II) any property to which section 1400N(d) applies, and
              (III) any property described in section 1400N(p)(3).
          (ii) Alternative depreciation property
            The term "qualified disaster assistance property" shall not
          include any property to which the alternative depreciation
          system under subsection (g) applies, determined without
          regard to paragraph (7) of subsection (g) (relating to
          election to have system apply).
          (iii) Tax-exempt bond financed property
            Such term shall not include any property any portion of
          which is financed with the proceeds of any obligation the
          interest on which is exempt from tax under section 103.
          (iv) Qualified revitalization buildings
            Such term shall not include any qualified revitalization
          building with respect to which the taxpayer has elected the
          application of paragraph (1) or (2) of section 1400I(a).
          (v) 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.
        (C) Special rules
          For purposes of this subsection, rules similar to the rules
        of subparagraph (E) of subsection (k)(2) shall apply, except
        that such subparagraph shall be applied - 
            (i) by substituting "the applicable disaster date" for
          "December 31, 2007" each place it appears therein,
            (ii) without regard to "and before January 1, 2013" in
          clause (i) thereof, and
            (iii) by substituting "qualified disaster assistance
          property" for "qualified property" in clause (iv) thereof.
        (D) Allowance against alternative minimum tax
          For purposes of this subsection, rules similar to the rules
        of subsection (k)(2)(G) shall apply.
      (3) Other definitions
        For purposes of this subsection - 
        (A) Applicable disaster date
          The term "applicable disaster date" means, with respect to
        any federally declared disaster, the date on which such
        federally declared disaster occurs.
        (B) Federally declared disaster
          The term "federally declared disaster" has the meaning given
        such term under section 165(h)(3)(C)(i).
        (C) Disaster area
          The term "disaster area" has the meaning given such term
        under section 165(h)(3)(C)(ii).
        (D) Eligible taxpayer
          The term "eligible taxpayer" means a taxpayer who has
        suffered an economic loss attributable to a federally declared
        disaster.
      (4) Recapture
        For purposes of this subsection, rules similar to the rules
      under section 179(d)(10) shall apply with respect to any
      qualified disaster assistance property which ceases to be
      qualified disaster assistance property.