DEFINITION OF SECTION 38 PROPERTY.

SEC. 104. DEFINITION OF SECTION 38 PROPERTY. (a) Storage Facilities— (1) In general—Section 48(a)(1)(B) (relating to other tangible property constituting section 38 property) is amended by striking out clause (ii) and inserting in lieu thereof the following: “(ii) constitutes a research facility used in connection with any of the activities referred to in clause (ii), or “(iii) constitutes a facility used in connection with any of the activities referred to in clause (i) for the bulk storage of fungible commodities (including commodities in a liquid or gaseous state), or”. (2) Conforming amendment—Section 1245(a) (3) (B) (relating to other property constituting section 1245 property) is amended by striking out “or” at the end of clause (i), and by striking out clause (ii) and inserting in lieu thereof the following: “(ii) constituted a research facility used in connection with any of the activities referred to in clause (i), or “(iii) constituted a facility used in connection with any of the activities referred to in clause (i) for the bulk storage of fungible commodities (including commodities in a liquid or gaseous state),”. (b) Coin-Operated Machines in Apartment Buildings—Section 48(a)(3) (relating to property used for lodging) is amended— (1) by striking out “and” at the end of subparagraph (A), (2) by striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, and”, and (3) by adding after subparagraph (B) the following new subparagraph: “(C) coin-operated vending machines and coin-operated washing machines and dryers.” (c) Certain Property Used in Furnishing Communication Services— (1) Section 48(a)(5) (relating to property used by governmental units) is amended by inserting after “international organization” the following: “(other than the International Telecommunications Satellite Consortium or any successor organization)”. (2) Section 48(a)(2)(B) (relating to exceptions from rule for property used outside the United States) is amended by striking out “and” at the end of clause (vi), by striking out the period at the end of clause (vii) and inserting in lieu thereof a semicolon, and by adding at the end thereof the following new clause: 85 Stat. 502 “(viii) any communications satellite (as defined in section 103(3) of the Communications Satellite Act of 1962, 47 U.S.C., sec. 702(3)), or any interest therein, of a United States person;”. (3) Section 48(a) (2) (B) (relating to exceptions from rule for property used outside the United States) is amended by inserting after clause (viii) (as added by paragraph (2)) the following new clause: “(ix) any cable, or any interest therein, of a domestic corporation engaged in furnishing telephone service to which section 46(c) (3) (B) (iii) applies (or of a wholly owned domestic subsidiary of such a corporation), if such cable is part of a submarine cable system which constitutes part of a communication link exclusively between the United States and one or more foreign countries; and”. (d) Certain Property Used To Explore for, Develop, Remove, and Transport Resources From Ocean Waters and Submarine Deposits—Section 48(a) (2) (B) (relating to exceptions from rule for property used outside the United States) is amended by inserting after clause (ix) (as added by subsection (c) (3)) the following new clause: “(x) any property (other than a vessel or an aircraft) of a United States person which is used in international or territorial waters for the purpose of exploring for, developing, removing or transporting resources from ocean waters or deposits under such waters.” (e) Livestock—Section 48(a)(6) (relating to livestock) is amended to read as follows: “(6) Livestock.—Livestock (other than horses) acquired by the taxpayer shall be treated as section 38 property, except that if substantially identical livestock is sold or otherwise disposed of by the taxpayer during the one-year period beginning 6 months before the date of such acquisition and if section 47(a) (relating to certain dispositions, etc., of section 38 property) does not apply to such sale or other disposition, then, unless such sale or other disposition constitutes an involuntary conversion (within the meaning of section 1033), the cost of the livestock acquired shall, for purposes of this subpart, be reduced by an amount equal to the amount realized on such sale or other disposition. Horses shall not be treated as section 38 property.” (f) Amortized Property— (1) In general—Section 48(a) (relating to definition of section 38 property) is amended by adding after paragraph (7) (as added by section 103 of this Act) the following new paragraph: “(8) Amortized property—Any property with respect to which an election under section 167(k), 169, 184, 187, or 188 applies shall not be treated as section 38 property. In the case of any property to which section 169 applies, the preceding sentence shall apply only to so much of the adjusted basis of the property as (after the application of section 169(f)) constitutes the amortizable basis for purposes of section 169.” (2) Conforming amendment—Section 169 (relating to amortization of pollution control facilities) is amended by striking out subsection (h). (g) Railroad Track—Section 48(a) (relating to definition of section 38 property) is amended by inserting after paragraph (8) (as added by subsection (f)) the following new paragraph: “(9) Railroad track—In the case of a railroad (including a railroad switching or terminal company) which uses the retirementreplacement method of accounting for depreciation of its 85 Stat. 503railroad track, the term ‘section 38 property’ includes replacement track material, if— “(A) the replacement is made pursuant to a scheduled program for replacement, “(B) the replacement is made pursuant to observations by maintenance-of-way personnel of specific track material needing replacement, “(C) the replacement is made pursuant to the detection by a rail-test car of specific track material needing replacement, or “(D) the replacement is made as a result of a casualty. Replacements made as a result of a casualty shall lie section 38 property only to the extent that, in the case of each casualty, the qualified investment with respect to the replacement track material exceeds $50,000. For purposes of this paragraph, the “term track material’ includes ties, rail, other track material, and ballast.” (h) Effective Dates—The amendments made by this section (other than by subsections (c)(1), (c)(2), and (g)) shall apply to property described in section 50 of the Internal Revenue Code of 1954. The amendments made by subsections (c) (1), (c) (2), and (g) shall apply to taxable years ending after December 31, 1961.