118 STAT. 1601 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(4) CAPITALIZATION ALLOWED WITH RESPECT TO EQUITY OF PERSONS OTHER THAN ISSUER AND RELATED PARTIES.—If the disqualified debt instrument of a corporation is payable in equity held by the issuer (or any related party) in any other person (other than a related party), the basis of such equity shall be increased by the amount not allowed as a deduction by reason of paragraph (1) with respect to the instrument.’’. (c) EXCEPTION FOR CERTAIN INSTRUMENTS ISSUED BY DEALERS IN SECURITIES.—Section 163(l), as amended by subsection (b), is amended by redesignating paragraphs (5) and (6) as paragraphs (6) and (7) and by inserting after paragraph (4) the following new paragraph: ‘‘(5) EXCEPTION FOR CERTAIN INSTRUMENTS ISSUED BY DEALERS IN SECURITIES.—For purposes of this subsection, the term ‘disqualified debt instrument’ does not include indebted ness issued by a dealer in securities (or a related party) which is payable in, or by reference to, equity (other than equity of the issuer or a related party) held by such dealer in its capacity as a dealer in securities. For purposes of this para graph, the term ‘dealer in securities’ has the meaning given such term by section 475.’’. (d) CONFORMING AMENDMENT.—Paragraph (3) of section 163(l) is amended by striking ‘‘or a related party’’ in the material preceding subparagraph (A) and inserting ‘‘or any other person’’. (e) EFFECTIVE DATE.—The amendments made by this section shall apply to debt instruments issued after October 3, 2004. Part III—Leasing SEC. 847. REFORM OF TAX TREATMENT OF CERTAIN LEASING ARRANGEMENTS. (a) CLARIFICATION OF RECOVERY PERIOD FOR TAX EXEMPT USE PROPERTY SUBJECT TO LEASE.—Subparagraph (A) of section 168(g)(3) (relating to special rules for determining class life) is amended by inserting ‘‘(notwithstanding any other subparagraph of this paragraph)’’ after ‘‘shall’’. (b) LIMITATION ON DEPRECIATION AND AMORTIZATION PERIODS FOR INTANGIBLES LEASED TO TAX EXEMPT ENTITY.— (1) COMPUTER SOFTWARE.—Paragraph (1) of section 167(f) is amended by adding at the end the following new subpara graph: ‘‘(C) TAX EXEMPT USE PROPERTY SUBJECT TO LEASE.— In the case of computer software which would be tax exempt use property as defined in subsection (h) of section 168 if such section applied to computer software, the useful life under subparagraph (A) shall not be less than 125 percent of the lease term (within the meaning of section 168(i)(3)).’’. (2) CERTAIN INTERESTS OR RIGHTS ACQUIRED SEPARATELY.— Paragraph (2) of section 167(f) is amended by adding at the end the following new sentence: ‘‘If such property would be tax exempt use property as defined in subsection (h) of section 168 if such section applied to such property, the useful life under such regulations shall not be less than 125 percent of the lease term (within the meaning of section 168(i)(3)).’’. 26 USC 163 note.
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