REDUCTION IN PERCENTAGE OF ITEMS TAKEN INTO ACCOUNT UNDER COMPLETED CONTRACT METHOD.

SEC. 10203. REDUCTION IN PERCENTAGE OF ITEMS TAKEN INTO ACCOUNT UNDER COMPLETED CONTRACT METHOD. (a) In General.— Section 460(a) (relating to percentage of completion—capitalized cost method) is amended— (1) by striking out “40 percent” each place it appears in the text and heading thereof and inserting in lieu thereof “70 percent”, and (2) by striking out “60 percent” and inserting in lieu thereof “30 percent”. (b) Effective Dates.— (1) In general.— Except as provided in paragraph (2), the amendments made by this section shall apply to contracts entered into after October 13, 1987. (2) Special rule for certain ship contracts.— (A) In general.— The amendments made by this section shall not apply in the case of a qualified ship contract. (B) Qualified ship contract.— For purposes of subparagraph (A), the term “qualified ship contract” 107107 Copy read “ ‘qualified ship contract’ ”. means any contract for the construction in the United States of not more than 5 ships if— (i) such ships will not be constructed (directly or indirectly) for the Federal Government, and (ii) the taxpayer reasonably expects to complete such contract within 5 years of the contract commencement date (as defined in section 460(g) of the Internal Revenue Code of 1986).