In the case of a small business refiner (as defined in ) which elects the application of this section, there shall be allowed as a deduction an amount equal to 75 percent of qualified costs (as defined in ) which are paid or incurred by the taxpayer during the taxable year and which are properly chargeable to capital account.
In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on
(1) In general
For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a).
(2) Ordinary income recapture
For purposes of section 1245, the amount of the deduction allowable under subsection (a) with respect to any property which is of a character subject to the allowance for depreciation shall be treated as a deduction allowed for depreciation under section 167.
Section 280B shall not apply to amounts which are treated as expenses under this section.
(1) In general
If—
(A) a small business refiner to which subsection (a) applies is an organization to which part I of subchapter T applies, and
(B) one or more persons directly holding an ownership interest in the refiner are organizations to which part I of subchapter T apply,
the refiner may elect to allocate all or a portion of the deduction allowable under subsection (a) to such persons. Such allocation shall be equal to the person’s ratable share of the total amount allocated, determined on the basis of the person’s ownership interest in the taxpayer. The taxable income of the refiner shall not be reduced under section 1382 by reason of any amount to which the preceding sentence applies.
(2) Form and effect of election
An election under paragraph (1) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year.
(3) Written notice to owners
If any portion of the deduction available under subsection (a) is allocated to owners under paragraph (1), the cooperative shall provide any owner receiving an allocation written notice of the amount of the allocation. Such notice shall be provided before the date on which the return described in paragraph (2) is due.