To amend the Internal Revenue Code of 1986 to expand the expense treatment for small businesses and to reduce the depreciation recovery period for restaurant buildings and franchise operations, and for other purposes.

March 6, 2003

Ms. GRANGER (for herself, Mr. WYNN, Mr. FROST, Mr. SCHROCK, Mr. CANNON, Ms. ROS-LEHTINEN, Mr. BOEHNER, Ms. GINNY BROWN-WAITE of Florida, Mr. ISAKSON, and Mr. CANTOR) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to expand the expense treatment for small businesses and to reduce the depreciation recovery period for restaurant buildings and franchise operations, 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. SHORT TITLE; AMENDMENT OF 1986 CODE.

(a) SHORT TITLE- This Act may be cited as the `Small Business Tax Fairness Act of 2003'.

(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 2. EXPANSION OF EXPENSE TREATMENT FOR SMALL BUSINESSES.

(a) IN GENERAL- Section 179(b)(1) is amended to read as follows:

`(1) DOLLAR LIMITATION-

`(A) IN GENERAL- The aggregate cost which may be taken into account under subsection (a) for any taxable year shall not exceed $100,000.

`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2003, the dollar amount contained in subparagraph (A) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting `calendar year 2002' for `calendar year 1992' in subparagraph (B) thereof.

If any amount as adjusted under this subparagraph is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.'.

(b) EXPANSION OF PHASE-OUT OF LIMITATION- Section 179(b)(2) is amended to read as follows:

`(2) REDUCTION IN LIMITATION-

`(A) IN GENERAL- The limitation under paragraph (1) for any taxable year shall be reduced (but not below zero) by the amount by which the cost of section 179 property for which a deduction is allowable (without regard to this subsection) under subsection (a) for such taxable year exceeds $400,000.

`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2003, the dollar amount contained in subparagraph (A) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting `calendar year 2002' for `calendar year 1992' in subparagraph (B) thereof.

If any amount as adjusted under this subparagraph is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.'.

(c) TIME OF DEDUCTION- The second sentence of section 179(a) (relating to election to expense certain depreciable business assets) is amended by inserting `(or, if the taxpayer elects, the preceding taxable year if the property was purchased in such preceding year)' after `service'.

(d) COMPUTER SOFTWARE ELIGIBLE FOR EXPENSING-

(1) IN GENERAL- The heading and first sentence of section 179(d)(1) are amended to read as follows:

`(1) SECTION 179 PROPERTY- For purposes of this section, the term `section 179 property' means property--

`(A) which is--

`(i) tangible property to which section 168 applies, or

`(ii) computer software (as defined in section 197(e)(3)(B)) to which section 167 applies,

`(B) which is section 1245 property (as defined in section 1245(a)(3)), and

`(C) which is acquired by purchase for use in the active conduct of a trade or business.'.

(2) NO COMPUTER SOFTWARE INCLUDED AS SECTION 197 INTANGIBLE-

(A) IN GENERAL- Section 197(e)(3)(A) is amended to read as follows:

`(A) IN GENERAL- Any computer software.'.

(B) CONFORMING AMENDMENT- Section 167(f)(1)(B) is amended by striking `; except that such term shall not include any such software which is an amortizable section 197 intangible'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

SEC. 3. DEPRECIATION RECOVERY PERIOD FOR RESTAURANT BUILDINGS AND FRANCHISE OPERATIONS.

(a) 15-YEAR RECOVERY PERIOD- Section 168(e)(3)(E) (relating to 15-year property) is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting a comma, and by adding at the end the following new clause:

`(iv) any section 1250 property which is a retail restaurant facility or an improvement thereto.'.

(b) RETAIL RESTAURANT FACILITY- Section 168(e) (relating to classification of property) is amended by adding at the end the following new paragraph:

`(6) RETAIL RESTAURANT FACILITY- The term `retail restaurant facility' means any building if--

`(A) more than 50 percent of the building's square footage is devoted to preparation of, and seating for on-premises consumption of, prepared meals, and

`(B) the building is owned by--

`(i) the person operating the meal preparation facility in such building, or

`(ii) a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the person described in clause (i).'.

(c) ALTERNATIVE SYSTEM- The table contained in section 168(g)(3)(B) is amended by inserting after the item relating to subparagraph (E)(iii) the following new item:

15'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act and to all improvements made after the date of enactment.

END