§ 263. Capital expenditures

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 77 · 68A Stat. 77

   Enacted · 26 U.S.C. § 263

   Aug. 16, 1954, ch. 736, 68A Stat. 77

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 77

2. 1960

   Pub. L. 86–779 § 6(c) · 74 Stat. 998

   Added · 26 U.S.C. § 263(a)(1)(D)

   Pub. L. 86–779 added subpar. (D)

   Source evidence

   Code amendment note
   Subsec. (a)(1)(D). Pub. L. 86–779 added subpar. (D).

   Enacted provision · exact public law section
   (c) Section 263(a)(1) of such Code (relating to capital expenditures) 26 USC 263. is amended— (1) by striking out “or” at the end of subparagraph (B); (2) by striking out the period at the end of subparagraph (C) and inserting in lieu thereof “, or”; and (3) by adding after subparagraph (C) the following new subparagraph: “(D) expenditures by farmers for fertilizer, etc., deductible under section 180.”

3. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 21(b) · 76 Stat. 960

   Added · 26 U.S.C. § 263(a)(1)(E)

   Pub. L. 87–834 added subpar. (E)

   Source evidence

   Code amendment note
   Subsec. (a)(1)(E). Pub. L. 87–834 added subpar. (E).

   Enacted provision · exact public law section
   (b) Technical and Clerical Amendments.— (1) Section 901 (relating to foreign tax credit) is amended by striking out “section 902” and inserting in lieu thereof “sections 902 and 960”. (2) Section 904(g) (as redesignated by section 10(a) of this Ante, p. 1002. Act) is amended to read as follows: “(g) Cross References.— “(1) For increase of applicable limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(b). Ante, p. 1020. “(2) For special rule relating to the application of the credit provided by section 901 in the case of affiliated groups which include Western Hemisphere trade corporations for years in which the limitation provided by subsection (a)(2) applies, see section 1503(d).” 74 Stat. 1011. (3) The table of subparts for part III of subchapter N of chapter 1 is amended by adding at the end thereof the following: 26 USC 901–905. “Subpart F. Controlled foreign corporations. “Subpart G. Export trade corporations.” (4) Section 1016(a) (relating to adjustments to basis) is Ante, p. 972. amended by adding after paragraph (19) (as added by section 2(f) of this Act) the following new paragraph: “(20) to the extent provided in section 961 in the case of stock in controlled foreign corporations (or foreign corporations which were controlled foreign corporations) and of property by reason of which a person is considered as owning such stock.”

4. 1964

   Interest Equalization Tax Act

   Pub. L. 88–563 § 4 · 78 Stat. 809

   Added · 26 U.S.C. § 263(a)(3)

   Pub. L. 88–563 added par. (3)

   Source evidence

   Code amendment note
   Subsec. (a)(3). Pub. L. 88–563 added par. (3).

   Enacted provision · exact public law section
   SEC. 4. DISALLOWANCE OF DEDUCTION FOR AMOUNT PAID AS INTEREST EQUALIZATION TAX. Section 263(a) (relating to capital expenditures) is amended by 26 USC 263. adding at the end thereof the following new paragraph: “(3) Any amount paid as tax under section 4911 (relating to imposition of interest equalization tax) except to the extent that any amount attributable to the amount paid as tax is included in gross income for the taxable year.”

5. 1965

   Interest Equalization Tax Extension Act of 1965

   Pub. L. 89–243 § 4(p)(1) · 79 Stat. 954

   1. Inserted · 26 U.S.C. § 263(a)(3)

      Pub. L. 89–243, § 4(p)(1), inserted “Except as provided in subsection (d)”

   2. Struck · 26 U.S.C. § 263(a)(3)

      Pub. L. 89–243, § 4(p)(1), struck out “except to the extent that any amount attributable to the amount paid as tax is included in gross income for the taxable year” after parenthetical provision

   Source evidence

   Code amendment note
   Subsec. (a)(3). Pub. L. 89–243, § 4(p)(1), inserted “Except as provided in subsection (d)”, and struck out “except to the extent that any amount attributable to the amount paid as tax is included in gross income for the taxable year” after parenthetical provision.

   Enacted provision · exact public law section
   (1) Section 263(a)(3) is amended to read as follows: “(3) Except as provided in subsection (d), any amount paid as tax under section 4911 (relating to imposition of interest equalization tax).”

6. 1965

   Interest Equalization Tax Extension Act of 1965

   Pub. L. 89–243 § 4(p)(2) · 79 Stat. 954

   Added · 26 U.S.C. § 263(d)

   Pub. L. 89–243, § 4(p)(2), added subsec. (d)

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 89–243, § 4(p)(2), added subsec. (d).

   Enacted provision · exact public law section
   (2) Section 263 is amended by adding at the end thereof the following new subsection: “(d) Reimbursement of Interest Equalization Tax.— The 68A Stat. 45, 69. 26 USC 162, 212. deduction allowed by section 162(a) or 212 (whichever is appropriate) shall include any amount paid or accrued in the taxable year or a preceding taxable year as fax under section 4911 (relating to imposition of interest equalization tax) to the extent that any amount attributable to the amount paid or accrued as tax is included in gross income for the taxable year. Under regulations prescribed by the Secretary or his delegate, the preceding sentence shall not apply with respect Io any amount attributable to that part of the tax so paid or accrued which is attributable to an amount for which a deduction has been claimed for the taxable year or a preceding taxable year under section 171 (relating to amortization of bond premium).” 68A Stat. 61. 26 USC 171.

7. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title VII § 706(a) · 83 Stat. 487

   Added · 26 U.S.C. § 263(e)

   Pub. L. 91–172 added subsec. (e)

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 91–172 added subsec. (e).

   Enacted provision · exact public law section
   (a) In General.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: “(e) Expenditures in Connection With Certain Railroad Rolling Stock.— In the case of expenditures in connection with the rehabilitation of a unit of railroad rolling stock (except a locomotive) used by a domestic common carrier by railroad which would, but for this subsection, be properly chargeable to capital account, such expenditures, if during any 12-month period they do not exceed an amount equal to 20 percent of the basis of such unit in the hands of the taxpayer, shall be treated (notwithstanding subsection (a)) as deductible repairs under section 162 or 212.”

8. 1971

   Revenue Act of 1971

   Pub. L. 92–178 § 109(c) · 85 Stat. 494

   1. Substituted · 26 U.S.C. § 263(e)

      Pub. L. 92–178, § 109(c), substituted “shall, at the election of the taxpayer, be treated” for “shall be treated”

   2. Inserted · 26 U.S.C. § 263(e)

      Pub. L. 92–178, § 109(c), inserted provisions respecting making of election under this subsection for any taxable year at such time and in such manner as Secretary or his delegate prescribed by regulation and prohibiting making of election for any taxable year to which an election under subsec. (f) applies to railroad rolling stock (other than locomotives)

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 92–178, § 109(c), substituted “shall, at the election of the taxpayer, be treated” for “shall be treated” and inserted provisions respecting making of election under this subsection for any taxable year at such time and in such manner as Secretary or his delegate prescribed by regulation and prohibiting making of election for any taxable year to which an election under subsec. (f) applies to railroad rolling stock (other than locomotives).

   Enacted provision · exact public law section
   (c) Railroad Rolling Stock— Section 263(e) (relating to expenditures in connection with certain railroad rolling stock) is amended— (1) by striking out “shall be treated” and inserting in lieu thereof “shall, at the election of the taxpayer, be treated”, and (2) by adding at the end thereof the following new sentences: “An election under this subsection shall be made for any taxable year at such time and in such manner as the Secretary or his delegate prescribes by regulations. An election may not be made under this subsection for any taxable year to which an election under subsection (f) applies to railroad rolling stock (other than locomotives).”

9. 1971

   Revenue Act of 1971

   Pub. L. 92–178 § 109(b) · 85 Stat. 494

   Added · 26 U.S.C. § 263(f)

   Pub. L. 92–178, § 109(b), added subsec. (f)

   Source evidence

   Code amendment note
   Subsec. (f). Pub. L. 92–178, § 109(b), added subsec. (f).

   Enacted provision · exact public law section
   (b) Reasonable Repair Allowance— Section 263 (relating to 68A Stat. 77; 83 Stat. 674. 26 USC 263. capital expenditures) is amended by adding at the end thereof the following new subsection: “(f) Reasonable Repair Allowance— The Secretary or his delegate may by regulations provide that the taxpayer may make an election under which amounts representing either repair expenses or specified repair, rehabilitation, or improvement expenditures for any class of depreciable property— “(1) are allowable as a deduction under section 162(a) or 212 68A Stat. 45, 69. (whichever is appropriate) to the extent of the repair allowance for that class, and “(2) to the extent such amounts exceed for the taxable year such repair allowance, are chargeable to capital account. Any allowance prescribed under this subsection shall reasonably reflect the anticipated repair experience of the class of property in the industry or other group.”

10. 1976

    Pub. L. 94–455 § 2122(b)(2) · 90 Stat. 1520

    Added · 26 U.S.C. § 263(a)(1)(F)

    Pub. L. 94–455, § 2122(b)(2), added subpar. (F)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(F). Pub. L. 94–455, § 2122(b)(2), added subpar. (F).

    Enacted provision · exact public law section
    (2) Section 263(a)(1) (relating to capital expenditures) is 26 USC 263. amended— (A) by striking out “or” at the end of subparagraph (D) thereof, (B) by striking out the period at the end of subsection (E) thereof and inserting in lieu thereof a comma and the word “or”, and (C) by adding at the end thereof the following new subparagraph: “(F) expenditures for removal of architectural and transportation barriers to the handicapped and elderly which the taxpayer elects to deduct under section 190.”

11. 1976

    Pub. L. 94–455 § 1904(b)(10)(A)(i)(I) · 90 Stat. 1520

    Struck · 26 U.S.C. § 263(a)(3)

    Pub. L. 94–455, § 1904(b)(10)(A)(i)(I), struck out par. (3) which provided that no deduction be allowed for amounts paid as tax under section 4911 (relating to imposition of interest equalization tax) except as provided in subsec. (d)

    Source evidence

    Code amendment note
    Subsec. (a)(3). Pub. L. 94–455, § 1904(b)(10)(A)(i)(I), struck out par. (3) which provided that no deduction be allowed for amounts paid as tax under section 4911 (relating to imposition of interest equalization tax) except as provided in subsec. (d).

    Enacted provision · exact public law section
    (I) Section 263, as amended by this Act, is amended 26 USC 263. by striking out subsections (a)(3) and (d) (relating to the allowance of deductions for payment of interest equalization tax), and by redesignating subsections (e), (f), and (g) as subsections (d), (c),and (f), respectively.

12. 1976

    Pub. L. 94–455 title XVII § 1701(a) · 90 Stat. 1520

    1. Redesignated · 26 U.S.C. § 263(d)

       Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), (II), 1906(b)(13)(A), redesignated subsec. (e) as (d)

    2. Struck · 26 U.S.C. § 263(d)

       Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), (II), 1906(b)(13)(A), struck out “or his delegate” after “Secretary”

    3. Substituted · 26 U.S.C. § 263(d)

       Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), (II), 1906(b)(13)(A), substituted “subsection (e)” for “subsection (f)”. Former subsec. (d) was struck out

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), (II), 1906(b)(13)(A), redesignated subsec. (e) as (d) and struck out “or his delegate” after “Secretary” and substituted “subsection (e)” for “subsection (f)”. Former subsec. (d) was struck out.

    Enacted provision · exact public law section
    (a) Treatment of Certain Railroad Tees.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: “(g) Railroad Ties.— In the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material (and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood (and fastenings related to such ties).”

13. 1976

    Pub. L. 94–455 title XVII § 1701(a) · 90 Stat. 1520

    1. Redesignated · 26 U.S.C. § 263(e)

       Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), 1906(b)(13)(A), redesignated subsec. (f) as (e)

    2. Redesignated · 26 U.S.C. § 263(e)

       Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Former subsec. (e) redesignated (d)

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 94–455, §§ 1904(b)(10)(A)(i)(I), 1906(b)(13)(A), redesignated subsec. (f) as (e) and struck out “or his delegate” after “Secretary”. Former subsec. (e) redesignated (d).

    Enacted provision · exact public law section
    (a) Treatment of Certain Railroad Tees.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: “(g) Railroad Ties.— In the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material (and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood (and fastenings related to such ties).”

14. 1976

    Pub. L. 94–455 title XVII § 1701(a) · 90 Stat. 1520

    Redesignated · 26 U.S.C. § 263(f)

    Pub. L. 94–455, §§ 1701(a), 1904(b)(10)(A)(i)(I), added subsec. (f). Former subsec. (f) redesignated (e)

    Source evidence

    Code amendment note
    Subsec. (f). Pub. L. 94–455, §§ 1701(a), 1904(b)(10)(A)(i)(I), added subsec. (f). Former subsec. (f) redesignated (e).

    Enacted provision · exact public law section
    (a) Treatment of Certain Railroad Tees.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: “(g) Railroad Ties.— In the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material (and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood (and fastenings related to such ties).”

15. 1978

    Energy Tax Act of 1978

    Pub. L. 95–618 title IV § 402(a) · 92 Stat. 3174

    Inserted · 26 U.S.C. § 263(c)

    Pub. L. 95–618 inserted “and geothermal wells” after “gas wells” in heading and in text inserted provision that such regulations also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined in section 613(e)(3)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 95–618 inserted “and geothermal wells” after “gas wells” in heading and in text inserted provision that such regulations also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined in section 613(e)(3)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells.

    Enacted provision · exact public law section
    (a) In General.— Subsection (c) of section 263 (relating to 26 USC 263. intangible drilling and and development costs in the case of oil and gas wells) is amended— (1) by adding at the end thereof the following new sentence: “Such regulations shall also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined in section 613(e) Post, p. 3203. (3)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells.”, and (2) by amending the subsection heading to read as follows: “(c) Intangible Drilling and Development Costs in the Case of Oil and Gas Wells and Geothermal Wells.—”.

16. 1980

    Pub. L. 96–223 title II § 251(a)(2)(B) · 94 Stat. 229

    Added · 26 U.S.C. § 263(a)(1)(G)

    Pub. L. 96–223 added subpar. (G)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(G). Pub. L. 96–223 added subpar. (G).

    Enacted provision · exact public law section
    (B) Section 263(a)(1) (relating to capital expenditures) is amended— (i) by striking out “or” at the end of subparagraph (E), (ii) by striking out the period at the end of subparagraph (F) and inserting in lieu thereof “, or”, and (iii) by adding at the end thereof the following new subparagraph: “(G) expenditures for tertiary injectants with respect to which a deduction is allowed under section 193.” Ante, p. 286. 26 USC 1245.

17. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 202(d)(1) · 95 Stat. 175

    Added · 26 U.S.C. § 263(a)(1)(H)

    Pub. L. 97–34, § 202(d)(1), added subpar. (H)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(H). Pub. L. 97–34, § 202(d)(1), added subpar. (H).

    Enacted provision · exact public law section
    (1) Paragraph (1) of section 263(a) (relating to capital expenditures) 26 USC 263. is amended— (A) by striking “or” at the end of subparagraph (F); (B) by striking out the period at the end of subparagraph (G) and inserting in lieu thereof a semicolon and “or”, and (C) by adding at the end thereof the following new subparagraph: “(H) expenditures for which a deduction is allowed under section 179.”

18. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 201(c) · 95 Stat. 175

    Struck · 26 U.S.C. § 263(e)

    Pub. L. 97–34, § 201(c), struck out subsec. (e) which related to the allowance of repair expenses or specified repair, rehabilitation, or improvement expenditures

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 97–34, § 201(c), struck out subsec. (e) which related to the allowance of repair expenses or specified repair, rehabilitation, or improvement expenditures.

    Enacted provision · exact public law section
    (c) Repeal of Section 263(e).— Subsection (e) of section 263 is 26 USC 263. hereby repealed.

19. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 502 · 95 Stat. 175

    Added · 26 U.S.C. § 263(g)

    Pub. L. 97–34, § 502, added subsec. (g)

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 97–34, § 502, added subsec. (g).

    Enacted provision · exact public law section
    SEC. 502. CAPITALIZATION OF CERTAIN INTEREST AND CARRYING CHARGES IN THE CASE OF STRADDLES. Section 263 (relating to capital expenditures) is amended by adding 26 USC 263. at the end thereof the following new subsection: “(g) Certain Interest and Carrying Costs in the Case of Straddles.— “(1) General rule.— No deduction shall be allowed for interest and carrying charges properly allocable to personal property which is part of a straddle (as defined in section 1092(c)). Any Ante, p. 323. amount not allowed as a deduction by reason of the preceding sentence shall be chargeable to the capital account with respect to the personal property to which such amount relates. “(2) Interest and carrying charges defined.— For purposes of paragraph (1), the term ‘interest and carrying charges’ means the excess of— “(A) the sum of— “(i) interest on indebtedness incurred or continued to purchase or carry the personal property, and “(ii) amounts paid or incurred to insure, store, or transport the personal property, over “(B) the sum of— “(i) the amount of interest (including original issue discount) includible in gross income for the taxable year with respect to the property described in subparagraph (A), and “(ii) any amount treated as ordinary income under section 1232(a)(4)(A) with respect to such property for Post, p. 331. the taxable year. “(3) Exception for hedging transactions.— This subsection shall not apply in the case of any hedging transaction (as defined in section 1256(e)).”

20. 1982

    Pub. L. 97–248 § 204(c)(1) · 96 Stat. 324

    Inserted · 26 U.S.C. § 263(c)

    Pub. L. 97–248, § 204(c)(1), inserted provision that this subsection not apply with respect to any costs to which any deduction is allowed under section 58(i) or 291

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 97–248, § 204(c)(1), inserted provision that this subsection not apply with respect to any costs to which any deduction is allowed under section 58(i) or 291.

    Enacted provision · exact public law section
    SEC. 204. 15 PERCENT REDUCTION IN CERTAIN CORPORATE PREFERENCE ITEMS. (a) In General.— Subchapter B of chapter 1 (relating to computation of taxable income) is amended by adding at the end thereof the following new part: “PART XI— SPECIAL RULES RELATING TO CORPORATE PREFERENCE ITEMS “Sec. 291. Special rules relating to corporate preference items. “SEC. 291. SPECIAL RULES RELATING TO CORPORATE PREFERENCE ITEMS. “(a) 15-Percent Reduction In Certain Preference Items, Etc.— For purposes of this subtitle, in the case of an applicable corporation— “(1) Section 1250 capital gain treatment.— In the case of section 1250 property which is disposed of during the taxable year, 15 percent of the excess (if any) of— “(A) the amount which would be treated as ordinary income if such property was section 1245 property or section 1245 recovery property, over “(B) the amount treated as ordinary income under section 1250, shall be treated as gain which is ordinary income and shall be recognized notwithstanding any other provision of this title. “(2) Reduction in percentage depletion.— In the case of iron ore and coal (including lignite), the amount allowable as a deduction under section 613 with respect to any property (as defined in section 614) shall be reduced by 15 percent of the amount of the excess (if any) of— “(A) the amount of the deduction allowable under section 613 for the taxable year (determined without regard to this paragraph), over “(B) the adjusted basis of the property at the close of the taxable year (determined without regard to the depletion deduction for the taxable year). “(3) Certain financial institution preference items.— The amount allowable as a deduction under this chapter (determined without regard to this section) with respect to any financial institution preference item shall be reduced by 15 percent. “(4) Certain deferred disc income.— If an applicable corporation is a shareholder of a DISC, in the case of taxable years beginning after December 31, 1982, section 995(b)(1)(F)(i) shall be applied with respect to such corporation by substituting ‘57.5 percent’ for ‘one-half’. “(5) Amortization of pollution control facilities.— If an election is made under section 169 with respect to any certified 26 USC 169. pollution control facility, the amortizable basis of such facility for purposes of such section shall be reduced by 15 percent. “(b) Special Rules for Treatment of Intangible Drilling Costs and Mineral Exploration and Development Costs.— For purposes of this subtitle, in the case of an applicable corporation— “(1) In general.— The amount allowable as a deduction for any taxable year (determined without regard to this section)— “(A) under section 263(c) in the case of an integrated oil company, or “(B) under section 616(a) or 617, shall be reduced by 15 percent. “(2) Special rule for amounts not allowable as deductions under paragraph (1).— “(A) Intangible drilling costs.— The amount not allowable as a deduction under section 263(c) for any taxable year by reason of paragraph (1) shall be allowable as a deduction ratably over the 36-month period beginning with the month in which the costs are paid or incurred. “(B) Mineral exploration and development costs.— In the case of any amount not allowable as a deduction under section 616(a) or 617 for any taxable year by reason of paragraph (1)— “(i) the applicable percentage of the amount not so allowable as a deduction shall be allowable as a deduction for the taxable year in which the costs are paid or incurred and in each of the 4 succeeding taxable years, and “(ii) such costs shall be treated, for purposes of determining the amount of the credit allowable under section 38 for the taxable year in which paid or incurred, as qualified investment (within the meaning of subsections (c) and (d) of section 46) with respect to property placed in service during such year. “(3) Applicable percentage.— For purposes of paragraph (2)(B), the term ‘applicable percentage’ means the percentage determined in accordance with the following table: “Taxable Year: Applicable percentage: 1 15 2 22 3 21 4 21 5 21. “(4) Dispositions.— “(A) Oil, gas, and geothermal property.— In the case of any disposition of any oil, gas, or geothermal property to which section 1254 applies (determined without regard to this section) any deduction under paragraph (2)(A) with respect to intangible drilling and development costs under section 263(c) which are allocable to such property shall, for purposes of section 1254, be treated as a deduction allowable under section 263(c). “(B) Application of section 617(d).— In the case of any disposition of mining property to which section 617(d) 26 USC 617. applies (determined without regard to this section), any amount allowable as a deduction under paragraph (2)(B) which is allocable to such property shall, for purposes of section 617(d), be treated as a deduction allowable under section 617(a). “(C) Recapture of investment credit.— In the case of any disposition of any property to which the credit allowable under section 38 by reason of pa ragraph (2)(B) is allocable, such disposition shall , for purposes of section 47, be treated as a disposition of section 38 recovery property which is not 3-year property. “(5) Integrated oil company defined.— For purposes of this subsection, the term ‘integrated oil company’ means, with respect to any taxable year, any producer (within the meaning of section 4996(a)(1)) of crude oil other than an independent producer (within the meaning of section 4992(b)). “(6) Coordination with cost depletion.— The portion of the adjusted basis of any property which is attributable to intangible drilling and development costs or mining exploration and development costs shall not be taken into account for purposes of determining depletion under section 611. “(c) Special Rules Relating to Pollution Control Facilities.— For purposes of this subtitle— “(1) Accelerated cost recovery deduction.— For purposes of subclause (I) of section 168(d)(1)(A)(ii), a taxpayer shall not be 95 Stat. 204. treated as electing the amortization deduction under section 169 with respect to that portion of the basis not taken into account under section 169 by reason of subsection (a)(5). “(2) 1250 recapture.— Subsection (a)(1) shall not apply to any section 1250 property which is part of a certified pollution control facility (within the meaning of section 169(d)(1)) with respect to which an election under section 169 was made. “(d) Special Rule for Real Estate Investment Trusts.— In the case of a real estate investment trust (as defined in section 856), the difference between the amounts described in subparagraphs (A) and (B) of subsection (a)(1) shall be reduced to the extent that a capital gain dividend (as defined in section 857(b)(3)(C), applied without regard to this section) is treated as paid out of such difference. Any capital gain dividend treated as having been paid out of such difference to a shareholder which is an applicable corporation retains its character in the hands of the shareholder as gain from the disposition of section 1250 property for purposes of applying subsection (a)(1) to such shareholder . For purposes of this section— “(1) Financial institution preference item.— The term ‘financial institution preference item’ includes the following: “(A) Excess reserves for losses on bad debts of financial institutions.— In the case of a financial institution to which section 585 or 593 applies, the excess of— “(i) the amount which would, but for this section, be allowable as a deduction for the taxable year for a reasonable addition to a reserve for bad debts, over “(ii) the amount which would have been allowable had such institution maintained its bad debt reserve for all taxable years on the basis of actual experience. “(B) Interest on debt to carry tax-exempt obligations acquired after december 31, 1982.— “(i) In general.— In the case of a financial institution to which section 585 or 593 applies, the amount of interest on indebtedness incurred or continued to purchase or carry obligations acquired after December 31, 1982, the interest on which is exempt from taxes for the taxable year, to the extent that a deduction would (but for this paragraph) be allowable with respect to such interest for such taxable year. “(ii) Determination of interest allocable to indebtedness on tax-exempt obligations.— Unless the taxpayer (under regulations prescribed by the Secretary) establishes otherwise, the amount determined under clause (i) shall be an amount which bears the same ratio to the aggregate amount allowable (determined without regard to this section) to the taxpayer as a deduction for interest for the taxable year as— “(I) the taxpayer’s average adjusted basis (within the meaning of section 1016) of obligations described in clause (i), bears to “(II) such average adjusted basis for all assets of the taxpayer. “(2) Applicable corporation.— For purposes of this section, the term ‘applicable corporation’ means any corporation other than an electing small business corporation (as defined in section 1371(b)). “(3) Section 1245 and 1250 property.— The terms ‘section 1245 property’, ‘section 1245 recovery property’, and ‘section 1250 property’ have the meanings given such terms by sections 1245(a)(3), 1245(a)(5), and 1250(c), respectively.” 95 Stat. 222. (b) Coordination With Minimum Tax.— Section 57(b) (relating to 26 USC 1245. 26 USC 57. adjusted itemized deductions) is amended to read as follows: “(b) Application With Section 291.— “(1) In general.— In the case of any item of tax preference of an applicable corporation described in— “(A) paragraph (4) or (7) of subsection (a), or “(B) paragraph (8) of subsection (a) (but only to the extent such item is allocable to a deduction for depletion for iron ore and coal (including lignite)), only 71.6 percent of the amount of such item of tax preference (determined without regard to this subsection) shall be taken into account as an item of tax preference. “(2) Certain capital gains.— In determining the net capital gain of any applicable corporation for purposes of paragraph (9)(B) of subsection (a), there shall be taken into account only 71.6 percent of any gain from the sale or exchange of section 1250 property which is equal to 85 percent of the excess determined under section 291(a)(1) with respect to such property. Ante, p. 423. “(3) Applicable corporation defined.— For purposes of this subsection, the term ‘applicable corporation’ has the meaning given such term by section 291(e)(2).” (c) Conforming Amendments.— (1) Subsection (c) of section 263 (relating to intangible drilling 26 USC 263. and development costs) is amended by adding at the end thereof the following new sentence: “This subsection shall not apply with respect to any costs to which any deduction is allowed under section 58(i) or 291.” Ante, pp. 417, 423. (2) The table of parts for subchapter B of chapter 1 is amended by adding at the end thereof the following: “Part XI. Special rules relating to corporate preference items.” (d) Effective Dates.— (1) In general.— Except as provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 1982. (2) 1250 gain.— Section 291(a)(1) of the Internal Revenue Code Ante, p. 423. of 1954 shall apply to sales or other dispositions after December 31, 1982, in taxable years ending after such date. (3) Pollution control facilities.— Section 291(a)(5) of such Code shall apply to property placed in service after December 31, 1982, in taxable years ending after such date. (4) Drilling and mining costs.— Section 291(b) of such Code shall apply to expenditures after December 31, 1982, in taxable years ending after such date. (5) Reduction in percentage depletion for coal and iron ore.— Section 291(a)(2) of such Code shall apply to taxable years beginning after December 31, 1983. (6) Minimum tax.— The amendment made by subsection (b) shall apply to taxable years ending after December 31, 1982, with respect to items of tax preference described in section 57(b) Ante, p. 426. of such Code to which section 291 of such Code applies; except that in the case of an item described in section 291(a)(2) of such Code, such amendment shall apply to taxable years beginning after December 31, 1983. SEC. 205. AMENDMENTS TO INVESTMENT CREDIT. (a) Basis Adjustment to Reflect Investment Tax Credit.— (1) In general.— Section 48 (relating to definitions and special 26 USC 48. rules involving section 38 property) is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection: “(q) Basis Adjustment to Section 38 Property.— “(1) In general.— For purposes of this subtitle, if a credit is determined under section 46(a)(2) with respect to section 38 property, the basis of such property shall be reduced by 50 percent of the amount of the credit so determined. “(2) Certain dispositions.— If during any taxable year there is a recapture amount determined with respect to any section 38 property the basis of which was reduced under paragraph (1), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to 50 percent of such recapture amount. For purposes of the “Recapture amounts.” preceding sentence, the term ‘recapture amount’ means any increase in tax (or adjustment in carrybacks or carryovers) determined under section 47. “(3) Special rule for qualified rehabilitated buildings.— In the case of any credit determined under section 46(a)(2) for any qualified rehabilitation expenditure in connection with a qualified rehabilitated building other than a certified historic structure, paragraphs (1) and (2) shall be applied without regard to the phrase ‘50 percent of’. “(4) Election of reduced credit in lieu of basis adjustment for regular percentage.— “(A) In general.— If the taxpayer elects to have this paragraph apply with respect to any recovery property— “(i) paragraphs (1) and (2) shall not apply to so much of the credit determined under section 46(a)(2) with 26 USC 46. respect to such property as is attributable to the regular percentage set forth in section 46(a)(2)(B); and “(ii) the amount of the credit allowable under section 38 with respect to such property shall be determined under subparagraph (B). “(B) Reduction in credit.— In the case of any recovery property to which an election under subparagraph (A) applies— “(i) solely for the purposes of applying the regular percentage, the applicable percentage under subsection (c) or (d) of section 46 shall be deemed to be 100 percent, and “(ii) notwithstanding section 46(a)(2)(B), the regular percentage shall be— “(I) 8 percent in the case of recovery property other than 3-year property, or “(II) 4 percent in the case of recovery property which is 3-year property. For purposes of the preceding sentence, RRB replacement property (within the meaning of section 168(f)(3)(B)) shall be 95 Stat. 204. treated as property which is not 3-year property. “(C) Time and manner of making election.— “(i) In general.— An election under this subsection with respect to any property shall be made on the taxpayer’s return of the tax imposed by this chapter for the taxpayer’s taxable year in which such property is placed in service (or in the case of property to which an election under section 46(d) applies, for the first taxable year for which qualified progress expenditures were taken into account with respect to such property). “(ii) Revocable only with consent.— An election under this subsection with respect to any property, once made, may be revoked only with the consent of the Secretary. “(5) Recapture of reductions.— “(A) In general.— For purposes of sections 1245 and 1250, any reduction under this subsection shall be treated as a deduction allowed for depreciation. “(B) Special rule for section 1250.— For purposes of section 1250(b), the determination of what would have been the depreciation adjustments under the straight line method shall be made as if the re had been no reduction under this section.” (2) Allowance of deduction for certain unused investment credits.— Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section: “SEC. 196. DEDUCTION FOR CERTAIN UNUSED INVESTMENT CREDITS. “(a) Allowance of Deductions.— If— “(1) the amount of the credit determined under section 46(a)(2) for any taxable year exceeds the limitation provided by 26 USC 46. section 46(a)(3) for such taxable year, and “(2) the amount of such excess has not, after the application of section 46(b), been allowed to the taxpayer as a credit under section 38 for any taxable year, then an amount equal to 50 percent of the amount of such excess (to the extent attributable to property the basis of which is reduced under section 48(q)) not so allowed as a credit shall be allowed to the Ante, p. 427. taxpayer as a deduction for the first taxable year following the last taxable year in which such excess could under section 46(b) have been allowed as a credit. “(b) Taxpayers Dying or Ceasing to Exist.— If a taxpayer dies or ceases to exist prior to the first taxable year following the last taxable year in which the excess described in subsection (a) could under section 46(b) have been allowed as a credit, the amount described in subsection (a), or the proper portion thereof, shall, under regulations prescribed by the Secretary, be allowed to the taxpayer as a deduction for the taxable year in which such death or cessation occurs. “(c) Special rule for qualified rehabilitated buildings.— In the case of any credit to which section 48(q)(3) applies, subsection (a) shall be applied without regard to the phrase ‘50 percent of’.” (3) Basis adjustment not taken into account for purposes of earnings and profits.— Section 312(k) (relating to effect of 26 USC 312. depreciation on earnings and profits) is amended by adding at the end thereof the following new paragraph: “(5) Basis adjustment not taken into account.— In computing the earnings and profits of a corporation for any taxable year, the allowance for depreciation (and amortization, if any) shall be computed without regard to any basis adjustment under section 48(q).” (4) Special rules for certain leased property.— Section 48(d) (relating to certain leased property) is amended by adding 26 USC 48. at the end thereof the following new paragraph: “(5) Coordination with basis adjustment.— In the case of any property with respect to which an election is made under this subsection— “(A) subsection (q) (other than paragraph (4)) shall not apply with respect to such property, “(B) the lessee of such property shall include ratably in gross income over the shortest recovery period which could be applicable under section 168 with respect to such property an amount equal to 50 percent of the amount of the credit allowable under section 38 to the lessee with respect to such property, and “(C) in the case of a disposition of such property to which section 47 applies, this paragraph shall be applied in accordance with regulations prescribed by the Secretary.” (5) Conforming amendments.— (A) Section 48(g) (relating to special rules for qualified rehabilitated buildings) is amended by striking out paragraph (5). (B) Paragraph (24) of section 1016(a) (relating to adjustments 95 Stat. 239. to basis) is amended by striking out “section 48(g)(5)” and inserting in lieu thereof “section 48(q)” (C) The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: “Sec. 196. Deduction for certain unused investment credits.” (b) Investment Credit Limited to 85 Percent of Tax Liability Instead of 90 Percent.— (1) In general.— Subparagraph (B) of section 46(a)(3) (relating 26 USC 46. to limitation based on amount of tax) is amended to read as follows: “(B) 85 percent of so much of the liability for tax for the taxable year as exceeds $25,000.” (2) Technical amendments.— (A) Subsection (a) of section 46 is amended by striking out paragraphs (7) and (8) and by redesignating paragraph (9) as paragraph (7). (B) Clause (i) of section 46(a)(7)(B), as redesignated by subparagraph (A), is amended to read as follows: “(i) paragraph (3)(B) shall be applied by substituting ‘100 percent’ for ‘85 percent’, and”. (C) Subparagraph (B) of section 46(a)(7), as redesignated by subparagraph (A), is amended by striking clause (ii) and by redesignating clause (iii) as clause (ii). (c) Effective Dates.— (1) Subsection (a). — (A) General rule.— Except as otherwise provided in this paragraph, the amendments made by subsection (a) shall apply to periods after December 31, 1982, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1954. (B) Exception.— The amendments made by subsection (a) shall not apply to any property which— (i) is constructed, reconstructed, erected, or acquired pursuant to a contract which was entered into after August 13, 1981, and was, on July 1, 1982, and at all times thereafter, binding on the taxpayer, (ii) is placed in service after December 31, 1982, and before January 1, 1986, (iii) with respect to which an election under section 168(f)(8)(A) of such Code is not in effect at any time, and Post, p. 442. (iv) is not described in section 167(1)(3)(A) of such Code. (C) Special rule for integrated manufacturing facilities.— (i) In general.— In the case of any integrated manufacturing facility, the requirements of clause (i) of subparagraph (B) shall be treated as met if— (I) the on-site construction of the facility began before July 1, 1982, and (II) during the period beginning after August 13, 1981, and ending on July 1, 1982, the taxpayer constructed (or entered into binding contracts for the construction of) more than 20 percent of the cost of such facility. (ii) Integrated manufacturing facility.— For purposes of clause (i), the term ‘integrated manufacturing facility’ means 1 or more facilities— (I) located on a single site, (II) for the manufacture of 1 or more manufactured products from raw materials by the application of 2 or more integrated manufacturing processes. (D) Special rule for historic structures.— In the case of any certified historic structure (as defined in section 48(g)(3) of the Internal Revenue Code of 1954), clause (i) of 26 USC 48. subparagraph (B) shall be applied by substituting “December 31, 1980” for “August 13, 1981.” (E) Certain projects with respect to historic structures.— In the case of any certified historic structure (as so defined), the requirements of clause (i) of subparagraph (B) shall be treated as met with respect to such property— (i) if the rehabilitation begins after December 31, 1980, and before July 1, 1982, or (ii) if— (I) before July 1, 1982, a public offering with respect to interests in such property was registered with the Securities and Exchange Commission, (II) before such date an application with respect to such property was filed under section 8 of the United States Housing Act of 1937, and 42 USC 1437f. (III) such property is placed in service before July 1, 1984. (2) Subsection (b).— The amendments made by subsection (b) 26 USC 46 note. shall apply to taxable years beginning after December 31, 1982. SEC. 206. REPEAL OF 1985 AND 1986 INCREASES IN ACCELERATED COST RECOVERY DEDUCTIONS. (a) IN GENERAL.— Paragraph (1) of section 168(b) (relating to 95 Stat. 204. amount of accelerated cost recovery deduction) is amended— (1) by striking out “tables” and inserting in lieu thereof “table”; (2) by striking out: “(A) For property placed in service after december 31, 1980, and before january 1, 1985.—”; and (3) by striking out subparagraphs (B) and (C). (b) Conforming Amendments.— Paragraph (4) of section 168(e) (relating to property excluded from application of section) is amended— (1) by striking out subparagraph (H); and (2) by striking out “l986” in the heading thereof and inserting in lieu thereof “1981”. SEC. 207. SECTION 189 MADE APPLICABLE TO CERTAIN CORPORATIONS FOR NONRESIDENTIAL REAL PROPERTY. (a) In General.— Subsection (a) of section 189 is amended to read 26 USC 189. as follows: “(a) Capitalization of Construction Period Interest and Taxes.— Except as otherwise provided in this section or in section 266 (relating to carrying charges), no deduction shall be allowed for real property construction period interest and taxes.” (b) Exclusion of Certain Property.— Subsection (d) of section 95 Stat. 264. 189 (relating to certain property excluded) is amended— (1) by striking out “or” at the end of paragraph (1), (2) by redesignating paragraph (2) as paragraph (3), and (3) by inserting after pa ragraph (1) the following new paragraph: “(2) residential real property (other than low income housing) acquired, constructed, or carried by a corporation other than an electing small business corporation (within the meaning of section 1371(b)), a personal holding company (within the meaning of section 542), or a foreign personal holding company (within the meaning of section 552), or”. (c) Allocation of Interest.— Paragraph (1) of section 189(e) 26 USC 189. (relating to construction period interest and taxes) is amended by adding at the end thereof the following sentence: “The Secretary shall prescribe regulations which provide for the allocation of interest to real property under construction.” (d) Conforming Amendment.— Paragraph (1) of section 189(e) (relating to construction period interest and taxes) is amended— (1) by striking out “construction period interest and taxes” and inserting in lieu thereof “real property construction period interest and taxes”, and (2) by striking out the caption thereof and inserting in lieu thereof: “(1) Real property construction period interest and taxes.—”. (e) Effective Date.— (1) In general.— Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1982, with respect to construction which commences after such date. (2) Certain planned construction.— The amendments made by this section shall not apply with respect to construction of property which is used in a trade or business described in section 48(a)(3)(B) of the Internal Revenue Code of 1954 or which is a hospital or nursing home if— (A) such construction is conducted pursuant to a written plan of the taxpayer which was in existence on July 1, 1982, and as to which approval from a governmental unit has been requested in writing, and (B) such construction commences before January 1, 1984, and shall not apply to the Alaska Natural Gas Transportation System (15 U.S.C. 719) and its related facilities.

21. 1983

    Pub. L. 97–448 § 105(b)(1) · 96 Stat. 2365

    Substituted · 26 U.S.C. § 263(g)(2)(A)(ii)

    Pub. L. 97–448, § 105(b)(1), substituted “all other amounts (including charges for temporary use of the personal property in a short sale, or to insure, store, or transport the personal property) paid or incurred to carry the personal property, over” for “amounts paid or incurred to insure, store, or transport the personal property, over”

    Source evidence

    Code amendment note
    Subsec. (g)(2)(A)(ii). Pub. L. 97–448, § 105(b)(1), substituted “all other amounts (including charges for temporary use of the personal property in a short sale, or to insure, store, or transport the personal property) paid or incurred to carry the personal property, over” for “amounts paid or incurred to insure, store, or transport the personal property, over”.

    Enacted provision · exact public law section
    (1) In general.— Clause (ii) of section 263(g)(2)(A) (defining interest and carrying charges) is amended to read as follows: “(ii) all other amounts (including charges for temporary use of the personal property in a short sale, or to insure, store, or transport the personal property) paid or incurred to carry the personal property, over”.

22. 1983

    Pub. L. 97–448 § 306(a)(9)(A) · 96 Stat. 2365

    Substituted · 26 U.S.C. § 263(g)(2)(B)(ii)

    Pub. L. 97–448, § 306(a)(9)(A), substituted “section 1232(a)(3)(A)” for “section 1232(a)(4)(A)”

    Source evidence

    Code amendment note
    Subsec. (g)(2)(B)(ii). Pub. L. 97–448, § 306(a)(9)(A), substituted “section 1232(a)(3)(A)” for “section 1232(a)(4)(A)”.

    Enacted provision · exact public law section
    (A) Clause (ii) of section 263(g)(2)(B) (defining interest and 26 USC 263. carrying charges) is amended by striking out “section 1232(a)(4)(A)” and inserting in lieu thereof “section 1232(a)(3)(A)”.

23. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 102(e)(7) · 98 Stat. 494

    1. Amended · 26 U.S.C. § 263(g)(2)

       Pub. L. 98–369, § 102(e)(7), amended par. (2) generally

    2. Struck · 26 U.S.C. § 263(g)(2)

       Pub. L. 98–369, § 102(e)(7), striking out “charges for temporary use of the personal property in a short sale, or” after “(including” in subpar. (A)(ii)

    3. Substituted · 26 U.S.C. § 263(g)(2)

       Pub. L. 98–369, § 102(e)(7), substituting “any amount treated as ordinary income under section 1271(a)(3)(A), 1278, or 1281(a) with respect to such property for the taxable year, and” for “any amount treated as ordinary income under section 1232(a)(3)(A) with respect to such property for the taxable year” in subpar. (B)(ii)

    4. Added · 26 U.S.C. § 263(g)(2)

       Pub. L. 98–369, § 102(e)(7), adding subpar. (B)(iii)

    Source evidence

    Code amendment note
    Subsec. (g)(2). Pub. L. 98–369, § 102(e)(7), amended par. (2) generally, striking out “charges for temporary use of the personal property in a short sale, or” after “(including” in subpar. (A)(ii), substituting “any amount treated as ordinary income under section 1271(a)(3)(A), 1278, or 1281(a) with respect to such property for the taxable year, and” for “any amount treated as ordinary income under section 1232(a)(3)(A) with respect to such property for the taxable year” in subpar. (B)(ii), and adding subpar. (B)(iii).

    Enacted provision · exact public law section
    (7) Paragraph (2) of section 263(g) (defining interest and carrying charges) is amended to read as follows: “(2) Interest and carrying charges defined.— For purposes of paragraph (1), the term ‘interest and carrying charges’ means the excess of— “(A) the sum of— “(i) interest on indebtedness incurred or continued to purchase or carry the personal property, and “(ii) all other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property, over “(B) the sum of— “(i) the amount of interest (including original issue discount) includible in gross income for the taxable year with respect to the property described in subparagraph (A), “(ii) any amount treated as ordinary income under section 1271(a)(3)(A), 1278, or 1281(a) with respect to such property for the taxable year, and “(iii) the excess of any dividends includible in gross income with respect to such property for the taxable year over the amount of any deduction allowable with respect to such dividends under section 243, 244, or 245. For purposes of subparagraph (A), the term ‘interest’ includes any amount paid or incurred in connection with personal property used in a short sale.”

24. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 102(e)(8) · 98 Stat. 494

    Added · 26 U.S.C. § 263(g)(4)

    Pub. L. 98–369, § 102(e)(8), added par. (4)

    Source evidence

    Code amendment note
    Subsec. (g)(4). Pub. L. 98–369, § 102(e)(8), added par. (4).

    Enacted provision · exact public law section
    (8) Subsection (g) of section 263 (relating to certain interest 26 USC 263. and carrying charges in the case of straddles) is amended by adding at the end thereof the following new paragraph: “(4) Application with other provisions.— “(A) Subsection (c) — In the case of any short sale, this subsection shall be applied after subsection (h). “(B) Section 1277 or 1282.— In the case of any obligation to which section 1277 or 1282 applies, this subsection shall Ante, pp. 545, 549. be applied after section 1277 or 1282.”

25. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 56(a) · 98 Stat. 494

    Added · 26 U.S.C. § 263(h)

    Pub. L. 98–369, § 56(a), added subsec. (h)

    Source evidence

    Code amendment note
    Subsec. (h). Pub. L. 98–369, § 56(a), added subsec. (h).

    Enacted provision · exact public law section
    (a) Short Sale Payments Attributable to Dividends.— Section 263 (relating to capital expenditures) is amended by adding at the 26 USC 263. end thereof the following new subsection: “(h) Payments in Lieu of Dividends in Connection With Short Sales.— “(1) In general.— If— “(A) a taxpayer makes any payment with respect to any stock used by such taxpayer in a short sale and such payment is in lieu of a dividend payment on such stock, and “(B) the closing of such short sale occurs on or before the 45th day after the date of such short sale, then no deduction shall be allowed for such payment. The basis of the stock used to close the short sale shall be increased by the amount not allowed as a deduction by reason of the preceding sentence. “(2) Longer period in case of extraordinary dividends.— If the payment described in paragraph (1)(A) is in respect of an extraordinary dividend, paragraph (1)(B) shall be applied by substituting ‘the day 1 year after the date of such short sale’ for ‘the 45th day after the date of such short sale’. “(3) Extraordinary dividend.— For purposes of this subsection, the term ‘extraordinary dividend’ has the meaning given to such term by section 1059(c); except that such section shall be Ante, p. 565. applied by treating the amount realized by the taxpayer in the short sale as his adjusted basis in the stock. “(4) Special rule where risk of loss diminished.— The running of any period of time applicable under paragraph (1)(B) (as modified by paragraph (2)) shall be suspended during any period in which— “(A) the taxpayer holds, has an option to buy, or is under a contractual obligation to buy, substantially identical stock or securities, or “(B) under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property. “(5) Deduction allowable to extent of ordinary income from amounts paid by lending broker for use of collateral.— “(A) In general.— Paragraph (1) shall apply only to the extent that the payments or distributions with respect to any short sale exceed the amount which— “(i) is treated as ordinary income by the taxpayer, and “(ii) is received by the taxpayer as compensation for the use of any collateral with respect to any stock used in such short sale. “(B) Exception not to apply to extraordinary dividends.— Subparagraph (A) shall not apply if one or more payments or distributions is in respect of an extraordinary dividend. “(6) Application of this subsection with subsection (g).— In the case of any short sale, this subsection shall be applied before subsection (g).”

26. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 402(b)(1) · 100 Stat. 2085

    1. Struck · 26 U.S.C. § 263(a)(1)(E)(H)

       Pub. L. 99–514, § 402(b)(1), struck out subpar. (E) relating to nonapplication of par. (1) to expenditures by farmers for clearing land deductible under section 182

    2. Redesignated · 26 U.S.C. § 263(a)(1)(E)(H)

       Pub. L. 99–514, § 402(b)(1), redesignated subpars. (F) to (H) as (E) to (G), respectively

    Source evidence

    Code amendment note
    Subsec. (a)(1)(E) to (H). Pub. L. 99–514, § 402(b)(1), struck out subpar. (E) relating to nonapplication of par. (1) to expenditures by farmers for clearing land deductible under section 182, and redesignated subpars. (F) to (H) as (E) to (G), respectively.

    Enacted provision · exact public law section
    (1) Paragraph (1) of section 263(a) (relating to capital expenditures) is amended by striking out subparagraph (E) and by redesignating subparagraphs (F), (G), and (H) as subparagraphs (E), (F), and (G), respectively.

27. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 701(e)(4)(D) · 100 Stat. 2085

    Substituted · 26 U.S.C. § 263(c)

    Pub. L. 99–514, § 701(e)(4)(D), substituted “59(d)” for “58(i)”

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 99–514, § 701(e)(4)(D), substituted “59(d)” for “58(i)”.

    Enacted provision · exact public law section
    (D) Section 173(b), 174(e)(2), 263(c), and 1016(a)(24) (as redesignated by section 634(b)(2)) are each amended by striking out “section 58(i)” and inserting in lieu thereof “section 59(d)”.

28. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 411(b)(1)(B) · 100 Stat. 2085

    Inserted · 26 U.S.C. § 263(c)

    Pub. L. 99–514, § 411(b)(1)(B), inserted “and except as provided in subsection (i),”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 99–514, § 411(b)(1)(B), inserted “and except as provided in subsection (i),”.

    Enacted provision · exact public law section
    (B) Conforming amendment.— Section 263(c) is amended by inserting “and except as provided in subsection (i),” after “subsection (a),”.

29. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 411(b)(1)(A) · 100 Stat. 2085

    Added · 26 U.S.C. § 263(i)

    Pub. L. 99–514, § 411(b)(1)(A), added subsec. (i)

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 99–514, § 411(b)(1)(A), added subsec. (i).

    Enacted provision · exact public law section
    (A) In general.— Section 263 (relating to capital expenditures) is amended by adding at the end thereof the following new subsection: (i) Special Rules for Intangible Drilling and Development Costs Incurred Outside the United States.— In the case of intangible drilling and development costs paid or incurred with respect to an oil, gas, or geothermal well located outside the United States— “(1) subsection (c) shall not apply, and “(2) such costs shall— “(A) at the election of the taxpayer, be included in adjusted basis for purposes of computing the amount of any deduction allowable under section 611 (determined without regard to section 613), or “(B) if subparagraph (A) does not apply, be allowed as a deduction ratably over the 10-taxable year period beginning with the taxable year in which such costs were paid or incurred. This subsection shall not apply to costs paid or incurred with respect to a nonproductive well.”

30. 1986

    Pub. L. 99–541 § 1808(b) · 100 Stat. 3035

    Added · 26 U.S.C. § 263(g)(2)(B)(iv)

    Pub. L. 99–541, § 1808(b), added cl. (iv)

    Source evidence

    Code amendment note
    Subsec. (g)(2)(B)(iv). Pub. L. 99–541, § 1808(b), added cl. (iv).

31. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 title I § 1007(g)(5) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 263(c)

    Pub. L. 100–647 substituted “section 59(e)” for “section 59(d)”

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 100–647 substituted “section 59(e)” for “section 59(d)”.

    Enacted provision · exact public law section
    (5) Sections 173(b), 174(e)(2), and 263(c) of the 1986 Code are each amended by striking out “section 59(d)” and inserting in lieu thereof “section 59(e)”.

32. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(a)(16) · 104 Stat. 1388

    Struck · 26 U.S.C. § 263(b)

    Pub. L. 101–508, § 11801(a)(16), struck out subsec. (b) “Expenditures for advertising and good will” which read as follows: “If a corporation has, for the purpose of computing its excess profits tax credit under chapter 2E or subchapter D of chapter 1 of the Internal Revenue Code of 1939 claimed the benefits of the election provided in section 733 or section 451 of such code, as the case may be, no deduction shall be allowable under section 162 to such corporation for expenditures for advertising or the promotion of good will which, under the rules and regulations prescribed under section 733 or section 451 of such code, as the case may be, may be regarded as capital investments.”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 101–508, § 11801(a)(16), struck out subsec. (b) “Expenditures for advertising and good will” which read as follows: “If a corporation has, for the purpose of computing its excess profits tax credit under chapter 2E or subchapter D of chapter 1 of the Internal Revenue Code of 1939 claimed the benefits of the election provided in section 733 or section 451 of such code, as the case may be, no deduction shall be allowable under section 162 to such corporation for expenditures for advertising or the promotion of good will which, under the rules and regulations prescribed under section 733 or section 451 of such code, as the case may be, may be regarded as capital investments.”

    Enacted provision · exact public law section
    (16) Subsection (b) of section 263 (relating to expenditures for advertising and good will).

33. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11815(b)(3) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 263(c)

    Pub. L. 101–508, § 11815(b)(3), substituted “section 613(e)(2)” for “section 613(e)(3)”

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 101–508, § 11815(b)(3), substituted “section 613(e)(2)” for “section 613(e)(3)”.

    Enacted provision · exact public law section
    (3) Sections 57(a)(2)(D)(ii), 263(c), and 465(c)(1)(E) are each amended by striking “section 613 (e)(3)” and inserting “section 613(e)(2)”.

34. 1997

    Pub. L. 105–34 title XVI § 1604(a)(1) · 111 Stat. 788

    Added · 26 U.S.C. § 263(a)(1)(H)

    Pub. L. 105–34 added subpar. (H)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(H). Pub. L. 105–34 added subpar. (H).

    Enacted provision · exact public law section
    (1) Paragraph (1) of section 263(a) is amended by striking “or” at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting “; or”, and by adding at the end the following new subparagraph: “(H) expenditures for which a deduction is allowed under section 179A.”.

35. 2004

    Working Families Tax Relief Act of 2004

    Pub. L. 108–311 title IV § 408(a)(10) · 118 Stat. 1166

    Substituted · 26 U.S.C. § 263(g)(2)(B)(ii)

    Pub. L. 108–311 substituted “1276” for “1278”

    Source evidence

    Code amendment note
    Subsec. (g)(2)(B)(ii). Pub. L. 108–311 substituted “1276” for “1278”.

    Enacted provision · exact public law section
    (10) Clause (ii) of section 263(g)(2)(B) is amended by striking “1278” and inserting “1276”.

36. 2004

    Pub. L. 108–357 title III § 338(b)(1) · 118 Stat. 1418

    Added · 26 U.S.C. § 263(a)(1)(I)

    Pub. L. 108–357 added subpar. (I)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(I). Pub. L. 108–357 added subpar. (I).

    Enacted provision · exact public law section
    (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.” .

37. 2005

    Energy Tax Incentives Act of 2005

    Pub. L. 109–58 § 1323(b)(2) · 119 Stat. 594

    Added · 26 U.S.C. § 263(a)(1)(J)

    Pub. L. 109–58, § 1323(b)(2), added subpar. (J)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(J). Pub. L. 109–58, § 1323(b)(2), added subpar. (J).

    Enacted provision · exact public law section
    (2) Section 263(a)(1) is amended by striking “or” at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting “, or”, and by inserting after subparagraph (I) the following new subparagraph: “(J) expenditures for which a deduction is allowed under section 179C.” .

38. 2005

    Energy Tax Incentives Act of 2005

    Pub. L. 109–58 § 1331(b)(4) · 119 Stat. 594

    Added · 26 U.S.C. § 263(a)(1)(K)

    Pub. L. 109–58, § 1331(b)(4), added subpar. (K)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(K). Pub. L. 109–58, § 1331(b)(4), added subpar. (K).

    Enacted provision · exact public law section
    (4) Section 263(a)(1), as amended by this Act, is amended by striking “or” at the end of subparagraph (I), by striking the period at the end of subparagraph (J) and inserting “, or”, and by inserting after subparagraph (J) the following new subparagraph: “(K) expenditures for which a deduction is allowed under section 179D.” .

39. 2006

    Tax Relief and Health Care Act of 2006

    Pub. L. 109–432 div. A title IV § 404(b)(1) · 120 Stat. 2922

    Added · 26 U.S.C. § 263(a)(1)(L)

    Pub. L. 109–432 added subpar. (L)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(L). Pub. L. 109–432 added subpar. (L).

    Enacted provision · exact public law section
    (1) Section 263(a)(1) 26 USC 263. is amended by striking “or” at the end of subparagraph (J), by striking the period at the end of subparagraph (K) and inserting “, or”, and by inserting after subparagraph (K) the following new subparagraph: “(L) expenditures for which a deduction is allowed under section 179E.” .

40. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(34)(D) · 128 Stat. 4010

    Struck · 26 U.S.C. § 263(a)(1)(H)

    Pub. L. 113–295, § 221(a)(34)(D), struck out subpar. (H) which read as follows: “expenditures for which a deduction is allowed under section 179A,”

    Source evidence

    Code amendment note
    Subsec. (a)(1)(H). Pub. L. 113–295, § 221(a)(34)(D), struck out subpar. (H) which read as follows: “expenditures for which a deduction is allowed under section 179A,”.

    Enacted provision · exact public law section
    (D) Section 263(a)(1) is amended by striking subparagraph (H).

41. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 221(a)(41)(G) · 128 Stat. 4010

    Struck · 26 U.S.C. § 263(g)(2)(B)(iii)

    Pub. L. 113–295, § 221(a)(41)(G), struck out “, 244,” after “section 243”

    Source evidence

    Code amendment note
    Subsec. (g)(2)(B)(iii). Pub. L. 113–295, § 221(a)(41)(G), struck out “, 244,” after “section 243”.

    Enacted provision · exact public law section
    (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and (D) of section 805(a)(4), 805(b)(5), 812(e)(2)(A), 815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), and 1059(b)(2)(B) are each amended by striking “, 244,” each place it appears.

42. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(60) · 132 Stat. 348

    Substituted · 26 U.S.C. § 263(a)(1)(F); 26 U.S.C. § 263(a)(1)(G)

    Pub. L. 115–141, § 401(a)(60), substituted comma for semicolon at end

    Source evidence

    Code amendment note
    Subsec. (a)(1)(F), (G). Pub. L. 115–141, § 401(a)(60), substituted comma for semicolon at end.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

43. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(61) · 132 Stat. 348

    Redesignated · 26 U.S.C. § 263(a)(1)(H)(L)

    Pub. L. 115–141, § 401(a)(61), redesignated subpars. (I) to (L) as (H) to (K), respectively

    Source evidence

    Code amendment note
    Subsec. (a)(1)(H) to (L). Pub. L. 115–141, § 401(a)(61), redesignated subpars. (I) to (L) as (H) to (K), respectively.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

44. 2025

    Pub. L. 119–21 title VII § 70302(b)(7)(A) · 139 Stat. 192

    Inserted · 26 U.S.C. § 263(a)(1)(B)

    Pub. L. 119–21 inserted “or 174A” after “174”

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (a)(1)(B). Pub. L. 119–21 inserted “or 174A” after “174”.

    Effective date note
    Amendment by Pub. L. 119–21 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2024, subject to election for retroactive application by certain small businesses and election to deduct certain unamortized amounts paid or incurred in taxable years beginning before Jan. 1, 2025, see section 70302(e), (f) of Pub. L. 119–21, set out as an Effective Date note under section 174A of this title.

50 of 53 references resolved to an enrolled provision · 2 partial · 1 unresolved