To amend the Internal Revenue Code of 1986 to provide that the percentage of completion method of accounting shall be required to be used with respect to contracts for the manufacture of property if no payments are required to be made before the completion of the manufacture of such property.

January 7, 2003

Mr. EHLERS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide that the percentage of completion method of accounting shall be required to be used with respect to contracts for the manufacture of property if no payments are required to be made before the completion of the manufacture of such property.

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

SECTION 1. EXCEPTION FROM PERCENTAGE OF COMPLETION METHOD FOR CERTAIN MANUFACTURING CONTRACTS.

(a) IN GENERAL- Paragraph (2) of section 460(f) of the Internal Revenue Code of 1986 (relating to special rule for manufacturing contracts) is amended by striking `unless' and all that follows and inserting `unless--

`(A) such contract involves the manufacture of--

`(i) any unique item of a type which is not normally included in the finished goods inventory of the taxpayer, or

`(ii) any item which normally requires more than 12 calendar months to complete (without regard to the period of the contract), and

`(B) any payment for the manufacture of such item is required to be made before the manufacture of such item is completed.'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to contracts entered into after the date of the enactment of this Act.

END