To amend the Internal Revenue Code of 1986 to allow taxpayers using the income forecast method of depreciation to treat costs contingent on income in the same manner as fixed costs to the extent determined by reference to the estimated income under such method, and for other purposes.

Amends Internal Revenue Code provisions concerning depreciation under the income forecast method to provide that in the case of property for which the depreciation deduction is determined using such method, a taxpayer may determine the adjusted basis of such property solely for depreciation purposes by including the estimated income-contingent costs with respect to such property in such basis for the taxable year in which such property is placed in service.

[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1272 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 1272

To amend the Internal Revenue Code of 1986 to allow taxpayers using the 
  income forecast method of depreciation to treat costs contingent on 
 income in the same manner as fixed costs to the extent determined by 
  reference to the estimated income under such method, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 28, 2001

Mr. Foley (for himself and Mr. Becerra) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to allow taxpayers using the 
  income forecast method of depreciation to treat costs contingent on 
 income in the same manner as fixed costs to the extent determined by 
  reference to the estimated income under such method, and for other 
                               purposes.

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

SECTION 1. MODIFICATION OF APPLICATION OF INCOME FORECAST METHOD OF 
              DEPRECIATION IN CERTAIN CASES.

    (a) Treatment of Income-Contingent Costs.--Subsection (g) of 
section 167 of the Internal Revenue Code of 1986 (relating to 
depreciation under income forecast method) is amended by adding at the 
end the following new paragraph:
            ``(7) Treatment of income-contingent costs.--
                    ``(A) In general.--In the case of property for 
                which the depreciation deduction allowable under this 
                section is determined under this subsection, the 
                taxpayer may determine the adjusted basis of such 
                property solely for purposes of this section by 
                including the estimated income-contingent costs with 
                respect to such property in such basis for the taxable 
                year in which such property is placed in service. 
                Depreciation computed under this paragraph shall be 
                allowable as a deduction notwithstanding sections 404 
                and 419.
                    ``(B) Estimated income-contingent costs.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `estimated 
                        income-contingent costs' means, with respect to 
                        any property, the amount which would be the 
                        income-contingent costs with respect to such 
                        property if the income estimated (for purposes 
                        of this subsection) to be earned in connection 
                        with the property before the close of the 10th 
                        taxable year referred to in paragraph (1)(A) 
                        were earned as of the close of the taxable year 
                        in which such property is placed in service.
                            ``(ii) Income-contingent costs.--The term 
                        `income-contingent costs' means, with respect 
                        to any property, costs the amount of which by 
                        contract varies with the amount of income 
                        earned in connection with such property.
                    ``(C) Special rule relating to recomputation 
                years.--If the adjusted basis of any property is 
                determined under this paragraph, paragraph (4) shall be 
                applied by substituting `for each taxable year in such 
                period' for `for such period'.
                    ``(D) Basis adjustments.--The Secretary shall 
                prescribe appropriate adjustments to the basis of 
                property for the additional amounts allowable as a 
                deduction solely by reason of this paragraph.
                    ``(E) Coordination with section 461(h).--For 
                purposes of section 461(h), economic performance with 
                respect to income-contingent costs occurs as the 
                services or property are provided to the taxpayer.''
    (b) Additional Recomputation Year.--Paragraph (4) of section 167(g) 
of such Code is amended--
            (1) by striking ``the 3d and the 10th'' and inserting ``the 
        3d, 7th, and 10th'', and
            (2) by striking ``3d or'' and inserting ``3d, 7th, or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.
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