Division I — Ways and Means

“(F) Exemption for health coverage under TRICARE or the Veterans Administration—Solely for purposes of determining whether an employer is an applicable large employer under this paragraph for any month, an employer may elect not to take into account for a month as an employee any individual who, for such month, has medical coverage under—

“(i) chapter 55 of title 10, United States Code, including coverage under the TRICARE program, or

“(ii) under a health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary.”

“(a) In general—For purposes of section 38, the research credit determined under this section for the taxable year shall be an amount equal to the sum of—

“(1) 20 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent of the average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined,

“(2) 20 percent of so much of the basic research payments for the taxable year as exceeds 50 percent of the average basic research payments for the 3 taxable years preceding the taxable year for which the credit is being determined, plus

“(3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research.”

“(6) Inflation adjustment

“(A) In general—In the case of any taxable year beginning after 2014, the dollar amounts in paragraphs (1) and (2) shall each be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins, determined by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.

“(B) Rounding—The amount of any increase under subparagraph (A) shall be rounded to the nearest multiple of $10,000.”

“(7) Recognition period

“(A) In general—The term recognition period means the 5-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e), the preceding sentence shall be applied without regard to the phrase “5-year”.

“(B) Installment sales—If an S corporation sells an asset and reports the income from the sale using the installment method under section 453, the treatment of all payments received shall be governed by the provisions of this paragraph applicable to the taxable year in which such sale was made.”

“(2) Qualified property—For purposes of this subsection—

“(A) In general—The term “qualified property” means property—

“(i)

“(I) to which this section applies which has a recovery period of 20 years or less,

“(II) which is computer software (as defined in section 167(f)(1)(B)) for which a deduction is allowable under section 167(a) without regard to this subsection,

“(III) which is water utility property,

“(IV) which is qualified leasehold improvement property, or

“(V) which is qualified retail improvement property, and

“(ii) the original use of which commences with the taxpayer.

“(B) Exception for alternative depreciation property—The term “qualified property” shall not include any property to which the alternative depreciation system under subsection (g) applies, determined—

“(i) without regard to paragraph (7) of subsection (g) (relating to election to have system apply), and

“(ii) after application of section 280F(b) (relating to listed property with limited business use).

“(C) Special rules

“(i) Sale-leasebacks—For purposes of clause (ii) and subparagraph (A)(ii), if property is—

“(I) originally placed in service by a person, and

“(II) sold and leased back by such person within 3 months after the date such property was originally placed in service,

“(ii) Syndication—For purposes of subparagraph (A)(ii), if—

“(I) property is originally placed in service by the lessor of such property,

“(II) such property is sold by such lessor or any subsequent purchaser within 3 months after the date such property was originally placed in service (or, in the case of multiple units of property subject to the same lease, within 3 months after the date the final unit is placed in service, so long as the period between the time the first unit is placed in service and the time the last unit is placed in service does not exceed 12 months), and

“(III) the user of such property after the last sale during such 3-month period remains the same as when such property was originally placed in service,

“(D) Coordination with section 280F—For purposes of section 280F—

“(i) Automobiles—In the case of a passenger automobile (as defined in section 280F(d)(5)) which is qualified property, the Secretary shall increase the limitation under section 280F(a)(1)(A)(i) by $8,000.

“(ii) Listed property—The deduction allowable under paragraph (1) shall be taken into account in computing any recapture amount under section 280F(b)(2).

“(iii) Inflation adjustment—In the case of any taxable year beginning in a calendar year after 2014, the $8,000 amount in clause (i) shall be increased by an amount equal to—

“(I) such dollar amount, multiplied by

“(II) the automobile price inflation adjustment determined under section 280F(d)(7)(B)(i) for the calendar year in which such taxable year begins by substituting “2013” for “1987” in subclause (II) thereof.

“(E) Deduction allowed in computing minimum tax—For purposes of determining alternative minimum taxable income under section 55, the deduction under section 167 for qualified property shall be determined without regard to any adjustment under section 56.”

“(4) Election to accelerate amt credits in lieu of bonus depreciation

“(A) In general—If a corporation elects to have this paragraph apply for any taxable year—

“(i) paragraphs (1)(A), (2)(D)(i), and (5)(A)(i) shall not apply for such taxable year,

“(ii) the applicable depreciation method used under this section with respect to any qualified property shall be the straight line method, and

“(iii) the limitation imposed by section 53(c) for such taxable year shall be increased by the bonus depreciation amount which is determined for such taxable year under subparagraph (B).

“(B) Bonus depreciation amount—For purposes of this paragraph—

“(i) In general—The bonus depreciation amount for any taxable year is an amount equal to 20 percent of the excess (if any) of—

“(I) the aggregate amount of depreciation which would be allowed under this section for qualified property placed in service by the taxpayer during such taxable year if paragraph (1) applied to all such property, over

“(II) the aggregate amount of depreciation which would be allowed under this section for qualified property placed in service by the taxpayer during such taxable year if paragraph (1) did not apply to any such property.

“(ii) Limitation—The bonus depreciation amount for any taxable year shall not exceed the lesser of—

“(I) 50 percent of the minimum tax credit under section 53(b) for the first taxable year ending after December 31, 2013, or

“(II) the minimum tax credit under section 53(b) for such taxable year determined by taking into account only the adjusted net minimum tax for taxable years ending before January 1, 2014 (determined by treating credits as allowed on a first-in, first-out basis).

“(iii) Aggregation rule—All corporations which are treated as a single employer under section 52(a) shall be treated—

“(I) as 1 taxpayer for purposes of this paragraph, and

“(II) as having elected the application of this paragraph if any such corporation so elects.

“(C) Credit refundable—For purposes of section 6401(b), the aggregate increase in the credits allowable under part IV of subchapter A for any taxable year resulting from the application of this paragraph shall be treated as allowed under subpart C of such part (and not any other subpart).

“(D) Other rules

“(i) Election—Any election under this paragraph may be revoked only with the consent of the Secretary.

“(ii) Partnerships with electing partners—In the case of a corporation which is a partner in a partnership and which makes an election under subparagraph (A) for the taxable year, for purposes of determining such corporation’s distributive share of partnership items under section 702 for such taxable year—

“(I) paragraphs (1)(A), (2)(D)(i), and (5)(A)(i) shall not apply, and

“(II) the applicable depreciation method used under this section with respect to any qualified property shall be the straight line method.

“(iii) Certain partnerships—In the case of a partnership in which more than 50 percent of the capital and profits interests are owned (directly or indirectly) at all times during the taxable year by 1 corporation (or by corporations treated as 1 taxpayer under subparagraph (B)(iii)), each partner shall compute its bonus depreciation amount under clause (i) of subparagraph (B) by taking into account its distributive share of the amounts determined by the partnership under subclauses (I) and (II) of such clause for the taxable year of the partnership ending with or within the taxable year of the partner.”