Page:United States Statutes at Large Volume 100 Part 3.djvu/329

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2137

tion 167(1)) using the method (including the period, first and last year convention, and salvage value) used to compute regulated tax expense under clause (i), the taxpayer must make adjustments to a reserve to reflect the deferral of taxes resulting from such difference. "(B) USE OF INCONSISTENT ESTIMATES AND PROJECTIONS, ETC.—

"(i) IN GENERAL.—One way in which the requirements of subparagraph (A) are not met is if the taxpayer, for ratemaking purposes, uses a procedure or adjustment which is inconsistent with the requirements of subparagraph (A). "(ii) U S E OF INCONSISTENT ESTIMATES AND PROJEC-

TIONS.—The procedures and adjustments which are to be treated as inconsistent for purposes of clause (i) shall include any procedure or adjustment for ratemaking purposes which uses an estimate or projection of the taxpayer's, tax expense, depreciation expense, or reserve for deferred taxes under subparagraph (A)(ii) unless such estimate or projection is also used, for ratemaking purposes, with respect to the other 2 such items and with respect to the rate base. "(iii) REGULATORY AUTHORITY.—The Secretary may

by regulations prescribe procedures and adjustments (in addition to those specified in clause (ii)) which are to be treated as inconsistent for purposes of clause (i). "(C) PUBLIC UTILITY PROPERTY WHICH DOES NOT MEET

NORMALIZATION RULES.—In the case of any public utility property to which this section does not apply by reason of subsection (fK2), the allowance for depreciation under section 167(a) shall be an amount computed using the method and period referred to in subparagraph (A)(i). "(10) PUBLIC UTILITY PROPERTY.—The term 'public utility property' has the meaning given such term by section 167(1)(3)(A). "(11) RESEARCH AND EXPERIMENTATION.—The term 'research and experimentation' has the same meaning as the term research and experimental has under section 174. "(12) SECTION 1245 AND 1250 PROPERTY.—The terms 'section 1245 property' and 'section 1250 property' have the meanings given such terms by sections 1245(a)(3) and 1250(c), respectively." (b) SYSTEM USED FOR PURPOSES OF EARNINGS AND PROFITS.—Para-

graph (3) of section 312(k) is amended to read as follows: "(3) EXCEPTION FOR TANGIBLE PROPERTY.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), in the case of tangible property to which section 168 applies, the adjustment to earnings and profits for depreciation for any taxable year shall be determined under the alternative depreciation system (within the meaning of section 168(g)(2)). "(B) TREATMENT OF AMOUNTS DEDUCTIBLE UNDER SECTION

179.—For purposes of computing the earnings and profits of a corporation, any amount deductible under section 179 shall be allowed as a deduction ratably over the period of 5 taxable years (beginning with the taxable year for which such amount is deductible under section 179)."

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