A bill to amend the Internal Revenue Code of 1954 to provide a simplified cost recovery system for recovery property.

Amends the Internal Revenue Code to allow individuals and corporations a deduction from gross income for a percentage of the cost of recovery property that is depreciable tangible property (equipment or machinery) used in a trade or business or held for the production of income, which is placed in service after December 31, 1980.

Establishes four classes and recovery periods for such property: (1) Class 1, two years; (2) Class 2, four years; (3) Class 3, seven years; and (4) Class 4, ten years. Requires assignment of property to the class which has a recovery period at least 40 percent shorter than its present midpoint useful life under the Asset Depreciation Range (ADR) system. Permits the taxpayer to elect placement of any item of property in the class with the next longer recovery period than the class to which it would otherwise belong.

Defines the recovery percentage as the percentage (100 percent, 150 percent, or 200 percent) selected by the taxpayer for a class of items, divided by the number of years in the corresponding recovery period. Requires a taxpayer to establish a recovery account for each class of recovery property. Sets forth formulae for additions to and reductions in such account. Limits the amount of a recovery reduction to the aggregate determined by applying the recovery percentage for each class of property to the balance in the recovery account for such class at the end of such year. Denies eligibility for such deduction to livestock property subject to amortization, and property depreciable on a basis other than time, public utility property, oil or gas fired boilers, and property used predominantly outside the United States.

Increases from 20 percent to 30 percent the ADR variance from class life for public utility property.

Revises the applicable percentage for determination of the investment tax credit to make eligible for such credit: (1) 40 percent of the basis of an asset if its useful life is between two and four years (currently, 33 1/3 percent if its useful life is between three and five years); (2) 75 percent of asset basis if its useful life is between four and seven years (currently, 66 2/3 percent if its useful life is between five and seven years); and (3) 100 percent of basis if its useful life is seven years or greater (currently, the same).

Makes the applicable percentage for recovery property for purposes of applying the energy percentage and employee plan percentage: (1) 66 2/3 percent of the basis of an asset if its useful life is between two and four years; and (2) 100 percent of basis if its useful life is four years or greater.

Allows election of: (1) 20 year straight line depreciation, with Section 1250 recapture, for structures and structural components; and (2) 15 year straight line depreciation, with Section 1250 recapture, for low income housing; and (3) 15 year depreciation computed under the declining balance method at a rate not exceeding 150 percent of the straight line depreciation rate, with Section 1245 recapture, for certain qualified owner- occupied industrial and commercial buildings. Disallows component depreciation for any taxpayer who elects either the 20 or 15 year straight line depreciation or the 15 year depreciation computed under the declining balance method.

Allows an election to treat the first $25,000 ($12,500 in the case of a married individual filing a separate return) of expenditures for recovery property which is purchased for use in a trade or business as currently deductible non-capital expenses. Provides for later recapture of such deductions. Limits such election to recovery property placed in service after December 31, 1980.

Sets forth rules for treatment of the depreciation allowance for any recovery property in computing the earnings and profits of a corporation.

Revises the progress expenditure rules to eliminate the useful life requirement for depreciable property being constructed by or for a taxpayer for use in trade or business (qualified progress expenditure property) and to apply to such property the revised percentages for determining the investment tax credit under this Act.

Allows current depreciation of any qualified progress expenditure property not yet placed in service with respect to which a qualified progress expenditure (an amount chargeable during the taxable year to capital account with respect to self-constructed property or the cost of the construction of such property by another during the taxable year) has been made.

Increases from ten to 25 percent the rehabilitation tax credit for nonresidential structures.