118 STAT. 1438 PUBLIC LAW 108–357—OCT. 22, 2004 imposed a tax of 0.1 cent per gallon on any liquid other than gasoline (as defined in section 4083)— ‘‘(A) sold by any person to an owner, lessee, or other operator of a diesel powered train for use as a fuel in such train, or ‘‘(B) used by any person as a fuel in a diesel powered train unless there was a taxable sale of such fuel under subparagraph (A). No tax shall be imposed by this paragraph on the sale or use of any liquid if tax was imposed on such liquid under section 4081.’’. (B) Subsection (f) of section 4082 is amended by striking ‘‘section 4041(a)(1)’’ and inserting ‘‘subsections (a)(1) and (d)(3) of section 4041’’. (C) Subparagraph (B) of section 6421(f)(3) is amended to read as follows: ‘‘(B) so much of the rate specified in section 4081(a)(2)(A) as does not exceed the rate applicable under section 4041(a)(1)(C)(ii).’’. (D) Subparagraph (B) of section 6427(l)(3) is amended to read as follows: ‘‘(B) so much of the rate specified in section 4081(a)(2)(A) as does not exceed the rate applicable under section 4041(a)(1)(C)(ii).’’. (b) FUEL USED ON INLAND WATERWAYS.—Subparagraph (C) of section 4042(b)(2) is amended to read as follows: ‘‘(C) The deficit reduction rate is— ‘‘(i) 3.3 cents per gallon after December 31, 2004, and before July 1, 2005, ‘‘(ii) 2.3 cents per gallon after June 30, 2005, and before January 1, 2007, and ‘‘(iii) 0 after December 31, 2006.’’. (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on January 1, 2005. SEC. 242. MODIFICATION OF APPLICATION OF INCOME FORECAST METHOD OF DEPRECIATION. (a) IN GENERAL.—Section 167(g) (relating to depreciation under income forecast method) is amended by adding at the end the following new paragraph: ‘‘(7) TREATMENT OF PARTICIPATIONS AND RESIDUALS.— ‘‘(A) IN GENERAL.—For purposes of determining the depreciation deduction allowable with respect to a property under this subsection, the taxpayer may include participa tions and residuals with respect to such property in the adjusted basis of such property for the taxable year in which the property is placed in service, but only to the extent that such participations and residuals relate to income estimated (for purposes of this subsection) to be earned in connection with the property before the close of the 10th taxable year referred to in paragraph (1)(A). ‘‘(B) PARTICIPATIONS AND RESIDUALS.—For purposes of this paragraph, the term ‘participations and residuals’ means, with respect to any property, costs the amount of which by contract varies with the amount of income earned in connection with such property. 26 USC 4041 note.
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