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TITLE 1--SUBCHAPTER S EXPANSION -- (Senate - July 22, 1999)

Mr. President, I cite continued efforts to increase the Federal investment in biomedical research i n order to highlight the public policy importance of scientific investment. I believe that the Federal government also has the responsibility to provide an economic environment that promotes Research a nd Development i n biomedical research i n the private sector as well. To make good business decisions, particularly relating to investment in R&D, biomedical and ``biotech'' firms need to have reliable and well defined tax l aws. Today I am introducing legislation that would establish a 10 percent tax c redit f or investment in biomedical research, and would extend the R & D tax c redit t o 10 years.

The purpose of the investment tax c redit i s to encourage biomedical research a nd to stimulate the economy, as well as to enhance our long-term competitiveness in the global biomedical arena. The investment tax c redit w ould provide a 10 percent tax c redit f or purchases of capital equipment, instruments and supplies used in a laboratory setting by a biotechnology company. Without this tax c redit, American companies will be competing with one hand tied behind their backs.

The R & D tax c redit h as proven to be critical to the U.S. biomedical research i ndustry. The credit h as allowed for many successes in U.S. scientific research a nd innovation, such as rapid progress in finding cures for life threatening diseases such as AIDS, cancer, and multiple sclerosis. My Subcommittee has held hearings on the state of affairs in biomedical research, and I understand from many scientists that we are on the cusp of breakthroughs many of today's most complex diseases--Alzheimer's, AIDS, heart disease, diabetes, and arthritis, to name a few. But, the scientists caution, it will only be through sustained investment, both public and private, that we will reap the rewards of biomedical research. If we cut investment in medical progress today, the consequence may be irrevocable and society may rue that decision for years to come.

As we prepare for the 21st century, we must remain committed to providing an environment that fosters technological investment, scientific exploration, and global competitiveness. Future economic growth and the prosperity of all Americans depends on continued R&D in all sectors of our nation.

Mr. President, we must act now to extend the R&D credit a nd send the right signal to our nation's researchers. Failure to act will not only jeopardize our research e fforts, but it will also threaten the United States's world leadership in R&D and perpetuate the rising health care costs we so desperately have tried to contain. It should be noted that everything that is good and desirable is not necessarily worthy of a tax c redit, but targeted tax c redits are particularly appropriate where an activity engaged in by one company or individual provides such considerable benefits to society at large.

We must constantly remind ourselves that medical innovation is the most via ble, long-term solution for cost-effective quality care. Our task in Congress should be to assure that the path of innovation remains open, unobstructed and attractive to both public and private investors.

For me, creating a better atmosphere for investment in medical research i s more than a symbolic goal. It is a recognition that expanding our base of scientific knowledge inevitably leads to better health, lower health care costs, and an improved quality of life for all Americans. Mr. President, I urge my colleagues to support this important legislation, and urge its swift adoption.

In my capacity as chairman of the Appropriations Subcommittee for Labor, Health, Human Services and Education, our subcommittee has the responsibility for funding the National Institutes of Health. The Senate passed a resolution targeting a doubling of National Institutes of Health funding over a 5-year period. That requires an enormous increase.

Last year, with the cooperation of my distinguished ranking member, Senator HARKIN, we increased NIH funding by $2 billion. The year before the Senate voted an increase of some $950 million, which was conferenced out at $907 million.

This year the subcommittee faces a 302(b) allocation--if anyone is listening on C-Span II, that's how much money the subcommittee is allotted under the budget--that is some $12 billion under the President's request, about $12 billion under any logical sum of money to fund those three departments: The Department of Labor, the Department of Health and Human Services, and the Department of Education. We are struggling to try to find the funds to match last year's $2 billion increase. If we were to reach the goal set by the sense-of-the-Senate resolution we would have to come up with $2.3 billion.

In talking to the people in the biotech industry, they are very much interested in having an investment tax c redit. An investment tax c redit o f 10 percent would provide a real tax i ncentive to induce biotech companies to do

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research. We are on the brink of some phenomenal advances as a result of what happened with stem cell research l ate last year. Stem cell research h as the potential to be a veritable fountain of youth, to tackle ailments like Alzheimer's or Parkinson's, or perhaps heart disease or cancer.

There is a controversy on that question, as to whether embryos may appropriately be used for research. So far the Department of Health and Human Services and their legal counsel concluded that the current limitation on research w ould not apply to research o n stem cells after they are extracted from embryos. Realistically, there ought to be no limitation at all, because in dealing with embryos we are not dealing with an entity which could produce life. These are discarded embryos from in vitro fertilization.

This controversy is very similar to the controversy which existed with respect to fetal tissue, where arguments were made that using fetal tissue would lead to induced abortions where the fact of the matter was the fetal tissue was discarded fetal tissue, did not induce abortions.

But the opportunities for phenomenal advances in medical research a re virtually unlimited. In the absence of the ability of the Congress, given budget limitations, to meet the doubling goal within 5 years, an investment tax c redit w ould be an enormous help in stimulating investments by the biotech companies.

The research a nd development t ax c redit h as been extended year by year, and a firm statement by Congress extending it for 10 years again would be an inducement for biotech.

Mr. President, I ask unanimous consent that a copy of the bill be printed in the RECORD.

S. 1425

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Biotechnology Tax C redit A ct of 1999''.

SEC. 2. TEN YEAR EXTENSION OF THE RESEARCH A ND DEVELOPMENT T AX C REDIT.< /b>

(a) IN GENERAL.--Section 41 of the Internal Revenue Code of 1986 (relating to credit f or increasing research a ctivities) is amended by striking subsection (h) and in its place, insert the following new section:

``(h) IN GENERAL.--This section shall not apply to any amount paid or incurred after June 30, 2009.''

(b) CONFORMING AMENDMENT.--Paragraph (1) of section 45C(b) of such Code is amended by striking subparagraph (D).

SEC. 3. BIOTECHNOLOGY INVESTMENT TAX C REDIT.< /b>

(a) ALLOWANCE OF CREDIT.< /b>--Section 46(a) of the Internal Revenue Code of 1986 (relating to amount of investment credit) is amended by striking ``and'' at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting ``, and'', and by adding at the end thereof the following new paragraph:

``(4) the biotechnology investment credit.' '

(b) AMOUNT OF CREDIT.< /b>--Section 48 of such Code is amended by adding at the end thereof the following new subsection:

``(c) BIOTECHNOLOGY INVESTMENT CREDIT.- -

``(1) IN GENERAL.--For purposes of section 46, the biotechnology investment credit f or any taxable year is an amount equal to 10 percent of the qualified investment for such taxable year.

``(2) QUALIFIED INVESTMENT.--

``(A) IN GENERAL.--For purposes of paragraph (1), the qualified investment for any taxable year is the aggregate of--

``(i) the applicable percentage of the basis of each new biotechnology property placed in service by the taxpayer during such taxable year, plus

``(ii) the applicable percentage of the cost of each used biotechnology property placed in service by the taxpayer during such taxable year.

``(B) APPLICABLE PERCENTAGE.--For purposes of subparagraph (A), the applicable percentage for any property shall be determined under paragraphs (2) and (7) of section 46(c) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

``(C) CERTAIN RULES MADE APPLICABLE.--The provisions of subsections (b) and (c) of section 48 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this paragraph.

``(3) DEFINITIONS.--For purposes of this section:

``(A) `Biotechnology Property' means capital equipment, instruments and supplies used in a laboratory setting by a biotechnology company. These items would include but would not be limited to microscopes, various laboratory machines, glassware, chemical reagents, and technical books and manuals purchased by a manufacturer for research p urposes. Also included are computers and software used primarily to develop data for research a nd development.

``(B) `Biotechnology Company' is an organization that deals with the application of technologies, such as recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, biological cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to develop microorganisms for specific uses, to identify targets for small molecular pharmaceutical development, to transform biological systems into useful processes and products or to develop microorganisms for specific uses. Potential endpoints for these products, developments and uses shall be for societal benefit through improving human healthcare.''

``(4) COORDINATION WITH OTHER CREDITS.--This subsection shall not apply to any property to which the energy credit o r rehabilitation credit w ould apply unless the taxpayer elects to waive the application of such credits to such property.

``(5) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE.--Rules similar to rules of subsection (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990 shall apply for purposes of this subsection.''

(c) TECHNICAL AMENDMENTS.--

(1) Subparagraph (C) of section 49(a)(1) of such code is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting ,`and', and by adding at the end thereof the following new clause:

``(iv) the basis of any new biotechnology property and the cost of any used biotechnology property.''

(2) Subparagraph (E) of section 50(a)(2) of such Code is amended by striking `section 48(a)(5)(A)' and inserting `section 48(a)(5) or 48(c)(5)'.

(3) Paragraph (5) of section 50(a) of such Code is amended by adding at the end thereof the following new subparagraph:

``(D) SPECIAL RULES FOR CERTAIN PROPERTY.--In the case of any biotechnology property which is 3-year property (within the meaning of section 168(e))--

``(i) the percentage set forth in clause (ii) of the table contained in paragraph (1)(B) shall be 66 percent,

``(ii) the percentage set forth in clause (iii) of such table shall be 33 percent, and

``(iii) clauses (iv) and (v) of such table shall not apply.'

(4)(A) The section heading for section 48 of such Code is amended to read as follows:

``Section 48: OTHER CREDITS.''

(B) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 48 and inserting the following:

``SEC. 48. Other Credits.''

SEC. 4. EFFECTIVE DATE.

The amendments made by this bill shall apply to amounts paid or incurred after June 30, 1999.

By Mr. HARKIN (for himself, Mr. DASCHLE, Mr. LEAHY, Mr. KERREY, Mr. CONRAD, and Mr. JOHNSON):

S. 1426. A bill to amend the Food Security Act of 1985 to promote the conservation of soil and related resources, and for other purposes; to the Committee on Agriculture, Nutrition, and Forestry.

THE CONSERVATION SECURITY ACT OF 1999

Mr. HARKIN. Mr. President, I will take a few minutes to talk about America's farmers and ranchers and the promise they hold for us and the future for our environment, for production of bountiful, safe, and nourishing food for us and for the population around the globe.

Specifically on the issue of conservation, it became a national priority in the days of the Dust Bowl, leading to the creation in the 1930s of the Soil Conservation Service at the Department of Agriculture, which is now the Natural Resources Conservation Service. With the very foundation of our food supply at risk, the Government stepped forward with billions of dollars in assistance to help farmers preserve their precious soils.

Since that time, Federal spending on conservation has steadily declined. Yet today agriculture faces a wide range of environmental challenges, from overgrazing and manure management to fertilizer runoff and water pollution. Urban and rural citizens alike are increasingly concerned about the environmental impact of agriculture.

Farmers and ranchers pride themselves on being good stewards of the land, and there are farm-based solutions to these problems being implemented all over the country. But every dollar spent on constructing a filter strip or developing a nutrient management plan is a dollar that farmers don't have in hard times like these. And even in better times, there is a lot of competition for that dollar.

So who benefits from conservation on farm lands? As much or more than the

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farmer, it is the rest of us, who depend on the careful stewardship of the water that travels across fields and pastures before reaching rivers, streams, and our groundwater. Farmers and ranchers tend not only to their crops and animals, but also to our public resources.
   Since we all share in these benefits, it is only right that we share in their costs. It is time to enter into a true conservation partnership with our farmers and ranchers to help ensure that conservation is not a luxury that comes and goes but an essential and permanent part of sustainable agricultural production nationwide.
   In the 1985 farm bill, we required that farmers who wanted to participate in USDA farm programs develop soil conservation plans for their highly erodible land. This provision helped put new conservation plans in place for our most fragile farmlands. In the most recent farm bill, we streamlined conservation programs and established new cost-share and incentive payments for certain practices.
   Today I am introducing the Conservation Security Act of 1999, proposed legislation that builds on our past successes and takes a bold step forward in farm and conservation policy.
   My bill would establish a universal and voluntary incentive payment program to support and encourage conservation activities by all farmers and ranchers. Under this program, farmers and ranchers could receive up to $50,000 per year in conservation payments. Under this conservation security program, farmers would enter into 3- to 5-year contracts with USDA and choose from one of three classes of conservation practices for which they would receive a payment based on the number of acres covered and the county rental rate for those acres.
   This program is directed toward conservation on working lands. It is not a set-aside. It is not an easement program.
   It is not a conservation reserve program. It is a conservation program so that we farm in the best way possible to conserve our resources and to prevent pollution.
   For implementing a basic set of practices, farmers would receive an annual payment of 10 percent of the rental rate of the land covered. I call this basic category class I, and it would include such practices as nutrient management, conservation tillage, and runoff and drainage control.
   There would be a class II under which farmers could receive up to 20 percent of the rental rate, where farmers would add to their class I practices by choosing from a menu of class II practices that would be established by the USDA--such things as nutrient management, composting, intensive grazing, partial field practices such as buffer strips and windbreaks, wetland restoration, and wildlife habitat enhancement.
   Then the third class, farmers who wanted to do class III conservation practices would enroll their whole farm under a total resource management plan that addresses all aspects of air, land, water, and wildlife. For that, the farmers would receive a 40-percent payment, 40 percent of the rental rate of land in that county.
   This bill also provides an incentive for livestock producers. In payment for preparing and adopting comprehensive manure management plans, producers raising under 1,000 animal units at any given time--that would be 2,500 hogs, 1,000 beef cattle, 700 dairy cattle, 55,000 turkeys, or 100,000 chickens--they would be given a per animal incentive payment equal to 10 percent of the 5-year average market price.
   This program would not replace or otherwise affect any other conservation program, not at all, this is to add on, except that a farmer could not receive incentive payments under this program in addition to incentive payments under another program in addition to incentive payments for land already enrolled in a program such as the Conservation Reserve Program. In other words, you couldn't have your land in the Conservation Reserve Program and then enter this program with that same land.
   Again, I emphasize, the Conservation Security Program would be totally voluntary. It would be up to the farmer to decide if they want to do it. If they do, then they would get additional payments. A lot of these practices farmers are already doing now, for which they receive little or no support.

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