EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.

SEC. 338. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.(a) In General.—Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179A the following new section:“SEC. 179B. DEDUCTION FOR CAPITAL COSTS INCURRED IN COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.“(a) Allowance of Deduction.—In the case of a small business refiner (as defined in section 45H(c)(1)) which elects the application of this section, there shall be allowed as a deduction an amount equal to 75 percent of qualified capital costs (as defined in section 45H(c)(2)) which are paid or incurred by the taxpayer during the taxable year.“(b) Reduced Percentage.—In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on December 31, 2002, in excess of 155,000 barrels, the number of percentage points described in subsection (a) shall be reduced (not below zero) by the product of such number (before 118 STAT. 1481 the application of this subsection) and the ratio of such excess to 50,000 barrels.“(c) Basis Reduction.—“(1) In general.—For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a).“(2) Ordinary income recapture.—For purposes of section 1245, the amount of the deduction allowable under subsection (a) with respect to any property which is of a character subject to the allowance for depreciation shall be treated as a deduction allowed for depreciation under section 167.” .“(d) Coordination With Other Provisions.—Section 280B shall not apply to amounts which are treated as expenses under this section.”.(b) Conforming Amendments.—(1) Section 263(a)(1), as amended by this Act, is amended by striking “or” at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting “, or”, and by adding at the end the following new subparagraph:“(I) expenditures for which a deduction is allowed under section 179B.”.(2) Section 263A(c)(3) is amended by inserting “179B,” after “section”.(3) Section 312(k)(3)(B) is amended by striking “or 179A” each place it appears in the heading and text and inserting “179A, or 179B”.(4) Section 1016(a) is amended by striking “and” at the end of paragraph (28), by striking the period at the end of paragraph (29) and inserting “, and”, and by inserting after paragraph (29) the following new paragraph:“(30) to the extent provided in section 179B(c).”.(5) Paragraphs (2)(C) and (3)(C) of section 1245(a) are each amended by inserting “179B,” after “179A,”.(6) The table of sections for part VI of subchapter B of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 179A the following new item: “Sec. 179B. Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations.”. (c) Effective Date.—The amendment made by this section shall apply to expenses paid or incurred after December 31, 2002, in taxable years ending after such date.