Congress's tax double header.

• Author: Muntean, Mark A.

In August 2005, President Bush signed two major tax bills. While in recent years, it has become unusual to enact a single significant tax act in one year, 2005 has so far produced two. Each is industry-specific--the first addresses energy and the second, transportation.

EPA '05--Overview

On Aug. 8, 2005, the President signed the Energy Policy Act of 2005 (EPA '05). (1) Consistent with its title, the legislation is directed at the oil and gas industry and amends the Code to provide incentives ranging from depreciation of natural gas distribution lines (EPA '05 Section 1325(a) and (b)), to amortization of geological and geophysical expenditures (Section 1329(a) and (b)), to expensing by small refiners (Section 1323(a) and (b)).

The EPA '05 also includes a number of provisions relating to the electric industry, ranging from depreciation of power transmission lines (Section 1308(a) and (b)), to extending the income tax exemption for nuclear decommissioning transactions (Section 1304(a) and (b)), to incentives for clean coal (Section 1307(a) and (b)) and renewable energy sources (Section 1303(a)-(c)). Overall, the incentives will cost the Federal government $14.5 billion. (2) Such costs are partially offset by revenue raising provisions, including reinstating the Oil Spill Liability Trust Fund tax (if certain conditions exist in 2006) (Section 1361), and extending the Leaking Underground Storage Tank (LUST) Trust Fund through Sept. 30, 2011 (Section 1362(a)), provisions that will raise nearly $3 billion.

The EPA '05 is not entirely devoted to large energy and power companies, however. Some of its provisions will undoubtedly affect many individuals. For example, EPA '05 Section 110 extends daylight saving time. Beginning in 2007, it will start on the first Sunday in March (March 11, 2007) and end on the first Sunday in November (Nov. 4, 2007). The EPA '05 also includes energy efficiency and conservation measures.

Almost completely unrelated to oil and gas or electrical power, the EPA '05 also includes a change to the taxation of Sec. 197 intangibles, under Section 1363, amending Sec. 1245 (b) (9). If a taxpayer sells multiple intangible assets in a single transaction or series of transactions, any recapture is calculated as if the taxpayer sold a single asset. Thus, gain on the sale or disposition of Sec. 197 intangibles is recaptured as ordinary income to the extent of ordinary depreciation previously claimed on such assets, effective for...