AMENDMENTS TO UNIFORM CAPITALIZATION RULES.

SEC. 6026. AMENDMENTS TO UNIFORM CAPITALIZATION RULES. (a) Treatment of Certain Producers of Creative Property.—Section 263A of the 1986 Code is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: “(h) Exemption for Free Lance Authors, Photographers, and Artists.— “(1) In general.—Nothing in this section shall require the capitalization of any qualified creative expense. “(2) Qualified creative expense.— For purposes of this subsection, the term ‘qualified creative expense’ means any expense— “(A) which is paid or incurred by an individual in the trade or business of such individual (other than as an employee) of being a writer, photographer, or artist, and “(B) which, without regard to this section, would be allowable as a deduction for the taxable year. Such term does not include any expense related to printing, photographic plates, motion picture films, video tapes, or similar items. 102 STAT. 3692 “(3) Definitions.— For purposes of this subsection— “(A) Writer.—The term ‘writer’ means any individual if the personal efforts of such individual create (or may reasonably be expected to create) a literary manuscript, musical composition (including any accompanying words), or dance score. “(B) Photographer.—The term ‘photographer’ means any individual if the personal efforts of such individual create (or may reasonably be expected to create) a photograph or photographic negative or transparency. “(C) Artist.— “(i) In general.—The term ‘artist’ means any individual if the personal efforts of such individual create (or may reasonably be expected to create) a picture, painting, sculpture, statue, etching, drawing, cartoon, graphic design, or original print edition. “(ii) Criteria.—In determining whether any expense is paid or incurred in the trade or business of being an artist, the following criteria shall be taken into account: “(I) The originality and uniqueness of the item created (or to be created). “(II) The predominance of aesthetic value over utilitarian value of the item created (or to be created). “(D) Treatment of certain personal service corporations.— “(i) In general.—In the case of a personal service corporation, this subsection shall apply to any expense of such corporation which directly relates to the activities of the qualified employee-owner in the same manner as if such expense were incurred by such employee-owner. “(ii) Qualified employee-owner.—The term ‘qualified employee-owner’ means any individual who is an employee-owner of the personal service corporation and who is a writer, photographer, or artist, but only if substantially all of the stock of such corporation is owned by such individual and members of his family (as defined in section 267(c)(4)). “(iii) Personal service corporation.—For purposes of this subparagraph, the term ‘personal service corporation’ means any personal service corporation (as defined in section 269A(b)).” (b) Treatment of Animals Produced in Farming Business.— (1) In general.— Subparagraph (A) of section 263A(d)(1) of the 1986 Code (relating to exception for fanning businesses) is amended to read as follows: “(A) In general.—This section shall not apply to any of the following which is produced by the taxpayer in a farming business: “(i) Any animal. “(ii) Any plant which has a preproductive period of 2 years or less.” (2) Conforming amendments.— (A) The heading of paragraph (1) of section 263A(d) of the 1986 Code is amended to read as follows: 102 STAT. 3693 “(1) Section not to apply to certain property.—”. (B) Subsections (d)(3) and (e) of section 263A of the 1986 Code are each amended by striking out “or animal” each place it appears. (c) Treatment of Pistachio Trees.—Subparagraph (B) of section 263A(d)(3) of the 1986 Code (relating to certain persons not eligible) is amended to read as follows: “(B) Certain persons not eligible.—No election may be made under this paragraph by a corporation, partnership, or tax shelter, if such corporation, partnership, or tax shelter is required to use an accrual method of accounting under section 447 or 448(a)(3).” (d) Effective Dates.— (1) In general.—Except as otherwise provided in this paragraph, the amendments made by this section shall take effect as if included in the amendments made by section 803 of the Tax Reform Act of 1986. (2) Subsection (b).— (A) In general.—The amendments made by subsection (b) shall apply to costs incurred after December 31, 1988, in taxable years ending after such date. (B) Revocation of election.—If the taxpayer made an election under section 263A(d)(3) of the 1986 Code for a taxable year beginning before January 1, 1989, such taxpayer may, without the consent of the Secretary of the Treasury or his delegate, revoke such election effective for the taxpayer’s 1st taxable year beginning after December 31, 1988.