AMORTIZATION OF RAILROAD ROLLING STOCK AND RIGHT-OF-WAY IMPROVEMENTS.

SEC. 705. AMORTIZATION OF RAILROAD ROLLING STOCK AND RIGHT-OF-WAY IMPROVEMENTS. (a) Allowance.—Part VI of subchapter B or chapter 1 (relating to itemized deductions for individuals and corporations) is amended by adding after section 183 (as added by section 213 of this Act) the following new sections: “SEC. 184. AMORTIZATION OF CERTAIN RAILROAD ROLLING STOCK. “(a) Allowance of Deduction.—Every person, at his election, shall be entitled to a deduction with respect to the amortization of the adjusted basis (for determining gain) of any qualified railroad rolling stock (as defined in subsection (d)), based on a period of 60 months. Such amortization deduction shall be an amount, with respect to each month of such period within the taxable year, equal to the adjusted basis of the qualified railroad rolling stock at the end of such month divided by the number of months (including the month for which the deduction is computed) remaining in the period. Such adjusted basis at the end of the month shall be computed without regard to the amortization deduction for such month. The amortization deduction provided by this section with respect to any qualified railroad rolling stock for any month shall be in lieu of the depreciation deduction with respect to such rolling stock for such month provided by section 167. The 60-month period shall begin, as to any qualified railroad rolling stock, at the election of the taxpayer, with the month following the month in which such rolling stock was placed in service or with the succeeding taxable year. “(b) Election of Amortization.—The election of the taxpayer to take the amortization deduction and to begin the 60-month period with the month following the month in which the qualified railroad rolling stock was placed in service, or with the taxable year succeeding the 83 Stat. 671 taxable year in which such rolling stock is placed in service, shall be made by filing with the Secretary or his delegate, in such manner, in such form, and within such time, as the Secretary or his delegate may by regulations prescribe, a statement of such election. “(c) Termination of Amortization Deduction.—A taxpayer which has elected under subsection (b) to take the amortization deduction provided by subsection (a) may, at any time after making such election, discontinue the amortization deduction with respect to the remainder of the amortization period, such discontinuance to begin as of the beginning of any month specified by the taxpayer in a notice in writing filed with the Secretary or his delegate before the beginning of such month. The depreciation deduction provided under section 167 shall be allowed, beginning with the first month as to which the amortization deduction does not apply, and the taxpayer shall not be entitled to any further amortization deduction under this section with respect to such rolling stock. “(d) Qualified Railroad Rolling Stock.—Except as provided in subsection (e)(4), the term ‘qualified railroad rolling stock’ means, for purposes of this section, rolling stock of the type used by a common carrier engaged in the furnishing or sale of transportation by railroad and subject to the jurisdiction of the Interstate Commerce Commission if— “(1) such rolling stock is— “(A) used by a domestic common carrier by railroad on a full-time basis, or on a part-time basis if its only additional use is an incidental use by a Canadian or Mexican common carrier by railroad on a per diem basis, or “(B) owned and used by a switching or terminal company all of whose stock is owned by one or more domestic common carriers by railroad, and “(2) the original use of such rolling stock commences with the taxpayer after December 31, 1968. “(e) Special Rules.— “(1) In general.—Except as otherwise provided in this subsection, this section shall apply to qualified railroad rolling stock placed in service after 1968 and before 1975. “(2) Placed in service in 1969.—If any qualified railroad rolling stock is placed in service in 1969— “(A) the month as to which the amortization period shall begin with respect to such rolling stock shall be determined as if such rolling stock were placed in service on December 31, 1969, and “(B) subsections (a) and (b) shall be applied by substituting ‘48’ for ‘60’ each place that it appears in such subsections. This section shall not apply to any qualified railroad rolling stock placed in service in 1969 and owned by any person who is not a domestic common carrier by railroad, or a corporation at least 95 percent of the stock of which is owned by one or more such common carriers. “(3) Placed in service in 1970.—If any qualified railroad rolling stock is placed in service in 1970 by a domestic common carrier by railroad or by a corporation at least 95 percent of the stock of which is owned by one or more such common carriers, then subsection (a) shall be applied, without regard to paragraph (2), as if such rolling stock were placed in service on December 31, 1969. “(4) Railroad rolling stock not in short supply.—The Secretary or his delegate shall determine (with the assistance of the Secretary of Transportation) which types of railroad rolling 83 Stat. 672 stock are not in short supply and shall prescribe regulations designating such types. The term ‘qualified railroad rolling stock’ shall not include any rolling stock which— “(A) is of the type of rolling stock designated by such regulations as not in short supply, and “(B) is placed in service after (i) 1972, or (ii) 30 days after the date on which such regulations are promulgated, whichever is later. “(5) Adjusted basis.— “(A) The adjusted basis of any qualified railroad rolling stock, with respect to which an election has been made under this section, shall not be increased, for purposes of this section, for amounts chargeable to capital account for additions or improvements after the amortization period has begun. “(B) Costs incurred in connection with a used unit of railroad rolling stock which are properly chargeable to capital account shall be treated as a separate unit of railroad rolling stock for purposes of this section. “(C) The depreciation deduction provided by section 167 shall, despite the provisions of subsection (a), be allowed with respect to the portion of the adjusted basis which is not taken into account in applying this section. “(6) Constructive termination.—If at any time during the amortization period any qualified railroad rolling stock ceases to meet the requirements of subsection (d)(1), the taxpayer shall be deemed to have terminated under subsection (c) his election under this section. Such termination shall be effective beginning with the month following the month in which such cessation occurs. “(7) Method of accounting for date placed in service.—For purposes of subsections (a) and (b), in the case of qualified railroad rolling stock placed in service after December 31, 1969, and before January 1, 1970, the taxpayer may elect (unless paragraph (3) is applicable) to begin the 60-month period with the date when such rolling stock is treated as having been placed in service under a method of accounting for acquisitions and retirements of property which— “(A) prescribes a date when property is placed in service, and “(B) is consistently followed by the taxpayer. “(f) Life Tenant and Remainderman.—In the case of qualified railroad rolling stock leased to a domestic common carrier, and held by one person for life with remainder to another person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be allowable to the life tenant. “(g) Cross Reference.— “For treatment of certain gain derived from the disposition of property the adjusted basis of which is determined with regard to this section, see section 1245.” “SEC. 185. AMORTIZATION OF RAILROAD GRADING AND TUNNEL BORES. “(a) General Rule.—In the case of a domestic common carrier by railroad, the taxpayer shall, at his election, be entitled to a deduction with respect to the amortization of the adjusted basis (for determining gain) of his qualified railroad grading and tunnel bores. The amortization deduction provided by this section with respect to such property shall be in lieu of any depreciation deduction, or other amortization deduction, with respect to such property for any taxable year to which the election applies. 83 Stat. 673 “(b) Amount of Deduction.— “(1) In general.—The deduction allowable under subsection (a) for any taxable year shall be an amount determined by amortizing ratably over a period of 50 years the adjusted basis (for determining gain) of the qualified railroad grading and tunnel bores of the taxpayer. Such 50-year period shall commence with the first taxable year for which an election under this section is effective. “(2) Special rule.—In the case of qualified railroad grading and tunnel bores placed in service after the beginning of the first taxable year for which an election under this section is effective, the 50-year period with respect to such property shall begin with the year following the year the property is placed in service. “(c) Election of Amortization.—The election of the taxpayer to take the amortization deduction provided in subsection (a) may be made for any taxable year beginning after December 31, 1909. Such election shall be made by filing with the Secretary or his delegate, in such manner, in such form, and within such time, as the Secretary or his delegate may by regulations prescribe, a statement of such election. The election shall remain in effect for all taxable years subsequent to the first year for which it is effective and shall apply to all qualified railroad grading and tunnel bores of the taxpayer, unless, on application by the taxpayer, the Secretary or his delegate permits him, subject to such conditions as the Secretary or his delegate deems necessary, to revoke such election. “(d) Definitions.—For purposes of this section— “(1) Railroad grading and tunnel bores.—The term ‘railroad grading and tunnel bores’ 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. If expenditures for improvements described in the preceding sentence are incurred with respect to an existing roadbed or right-of-way for railroad track, such expenditures shall be considered, in applying this section, as costs for railroad grading or tunnel bores placed in service in the year in which such costs are incurred. “(2) Qualified railroad grading and tunnel bores.—The term ‘qualified railroad grading and tunnel bores’ means railroad grading and tunnel bores the original use of which commences after December 31, 1968. “(e) Treatment Upon Retirement.—If any qualified railroad grading or tunnel bore is retired or abandoned during a taxable year for which an election, under this section is in effect, no deduction shall be allowed on account of such retirement or abandonment and the amortization deduction under this section shall continue with respect to such property. This subsection shall not apply if the retirement or abandonment is attributable primarily to fire, storm, or other casualty. “(f) Investment Credit Not To Be Allowed.—Property eligible to be amortized under this section shall not be treated as section 38 property within the meaning of section 48(a). “(g) Regulations.—The Secretary or ins delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section. “(h) Cross Reference.— “For special rule with respect to certain gain derived from the disposition of property the adjusted basis of which is determined with regard to this section, see section 1245.” 83 Stat. 674 (b) Conforming Amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end thereof the following new items: “Sec. 184. Amortization of certain railroad rolling stock. “Sec. 185. Amortization of railroad grading and tunnel bores.” (c) Effective Date.—The amendments made by this section shall apply with respect to taxable years beginning after December 31, 1969.