AVAILABILITY OF CREDIT TO CERTAIN LESSORS.

SEC. 108. AVAILABILITY OF CREDIT TO CERTAIN LESSORS. (a) In General—Section 46(d) (relating to limitations with respect to certain persons) is amended by adding at the end thereof the following new paragraph: “(3) Noncorporate lessors—A credit shall be allowed by section 38 to a person which is not a corporation with respect to property of which such person is the lessor only if— “(A) the property subject to the lease has been manufactured or produced by the lessor, or “(B) the term of the lease (taking into account options to renew) is less than 50 percent of the useful life of the property, and for the period consisting of the first 12 months after the date on which the property is transferred to the lessee the sum of the deductions with respect to such property which are allowable to the lessor solely by reason of section 162 (other than rents and reimbursed amounts with respect to such property) exceeds 15 percent of the rental income produced by such property. In the case of property of which a partnership is the lessor, the credit otherwise allowable under section 38 with respect to such property to any partner which is a corporation shall be allowed notwithstanding the first sentence of this paragraph. For purposes of this paragraph, an electing small business corporation (as defined in section 1371) shall be treated as a person which is not a corporation.” (b) Credit May Be Used by Lessee—Section 48(d) (relating to certain leased property) is amended by striking out “section 46(d)” and inserting in lieu thereof “section 46(d) (1)”. (c) Certain Property Leased for Short Term—Section 48(d) (relating to investment credit for certain leased property) is amended to read as follows: “(d) Certain Leased Property— “(1) General rule.— A person (other than a person referred to in section 46(d)(1)) who is a lessor of property may (at such time, in such manner, and subject to such conditions as are provided by regulations prescribed by the Secretary or his delegate) elect with respect to any new section 38 property (other than property described in paragraph (4)) to treat the lessee as having acquired such property for an amount equal to— “(A) except as provided in subparagraph (B), the fair market value of such property, or “(B) if the property is leased by a corporation which is a component member of a controlled group (within the meaning 85 Stat. 508of section 46(a)(5)) to another corporation which is a component member of the same controlled group, the basis of such property to the lessor. “(2) Special rule for certain short-term leases— “(A) In general.—A person (other than a person referred to in section 46(d)(1)) who is a lessor of property described in paragraph (4) may (at such time, in such manner, and subject to such conditions as are provided by regulations prescribed by the Secretary or his delegate) elect with respect to such property to treat the lessee as having acquired a portion of such property for the amount determined under subparagraph (B). “(B) Determination of lessee’s investment.—The amount for which a lessee of property described in paragraph (4) shall be treated as having acquired a portion of such property is an amount equal to a fraction, the numerator of which is the term of the lease and the denominator of which is the class life of the property leased (determined under section 167(m)), of the amount for which the lessee would be treated as having acquired the property under paragraph (1). “(C) Determination of lessor’s qualified investment.—The qualified investment of a lessor of property described in paragraph (4) in any such property with respect to which he has made an election under this paragraph is an amount equal to his qualified investment in such property (as determined under section 46(c)) multiplied by a fraction equal to the excess of one over the fraction used under subparagraph (B) to determine the lessee’s investment in such property. “(3) Limitations—The elections provided by paragraphs (1) and (2) may be made with respect to property which would be new section 38 property if acquired by the lessee. For purposes of the preceding sentence and section 46(c), the useful life of property in the hands of the lessee is the useful life of such property in the hands of the lessor. If a lessor makes the election provided by paragraph (1) with respect to any property, the lessee shall be treated for all purposes of this subpart as having acquired such property. If a lessor makes the election provided by paragraph (2) with respect to any property, the lessee shall be treated for all purposes of this subpart as having acquired a fractional portion of such property equal to the fraction determined under paragraph (2)(B) with respect to such property. “(4) Property to which paragraph (2) applies—Paragraph (2) shall apply only to property which— “(A) is new section 38 property, “(B) has a class life (determined under section 167(m)) in excess of 14 years. “(C) is leased for a period which is less than 80 percent of its class life, and “(D) is not leased subject to a net lease (within the meaning of section 57(c)(2)).” (d) Effective Dates—The amendments made by subsections (a) and (b) shall apply to leases entered into after September 22, 1971. The amendment made by subsection (c) shall apply to leases entered into after November 8, 1971.