Page:United States Statutes at Large Volume 100 Part 3.djvu/553

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2361

long-term contract unless such contract involves the manufacture of— "(A) any unique item of a type which is not normally included in the finished goods inventory of the taxpayer, or "(B) any item which normally requires more than 12 calendar months to complete (without regard to the period of the contract). "(3) AGGREGATION, ETC.—For purposes of this subsection, under regulations prescribed by the Secretary— "(A) 2 or more contracts which are interdependent (by reason of pricing or otherwise) may be treated as 1 contract, and "(B) a contract which is properly treated as an aggregation of separate contracts may be so treated. "(g) CONTRACT COMMENCEMENT DATE.—For purposes of this section, the term 'contract commencement date' means, with respect to any contract, the first date on which any costs (other than bidding expenses or expenses incurred in connection with negotiating the contract) allocablie to such contract are incurred." (b) CHANGE IN REGULATIONS.—The Secretary of the Treasury or

his delegate shall modify the income tax regulations relating to accounting for long-term contracts to carry out the provisions of section 460 of the Internal Revenue Code of 1986 (as added by subsection (a)). (c) CONFORMING AMENDMENT.—The table of sections for subpart B of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 460. Special rules for long-term contracts." (d) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section shall apply to any contract entered into after February 28, 1986. (2) CLARIFICATION OF TREATMENT OF INDEPENDENT RESEARCH AND DEVELOPMENT EXPENSES.—

(A) IN GENERAL.—For periods before, on, or after the date of enactment of this Act— (i) any independent research and development expenses taken into account in determining the total contract price shall not be severable from the contract, and (ii) any independent research and development expenses shall not be treated as amounts chargeable to capital account. (B)

INDEPENDENT

RESEARCH

AND DEVELOPMENT

EX-

PENSES.—For purposes of subparagraph (A), the term "independent research and development expenses" has the meaning given to such term by section 263A(c)(5) of the Internal Revenue Code of 1986, as added by this section. SEC. 805. REPEAL OF RESERVE FOR BAD DEBTS OF TAXPAYERS OTHER THAN FINANCIAL INSTITUTIONS.

(a) GENERAL RULE.—Subsection (c) of section 166 (relating to reserve for bad debts) is hereby repealed. (b) REPEAL OF RESERVE FOR CERTAIN GUARANTEED DEBT OBLIGA-

TIONS.—Section 166 is amended by striking out subsection (f) and by redesignating subsection (g) as subsection (f). (c) TECHNICAL AMENDMENTS.—

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