WORLD TRADE
ORGANIZATIONG/SCM/N/3/USA/Suppl.1
G/SCM/N/16/USA/Suppl.1G/SCM/N/25/USA/Suppl.1
G/SCM/N/38/USA
19 November 1998
(98-4649)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notifications Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the SCM Agreement
UNITED STATES
The following communication was received on 2 November 1998 from the Permanent
Mission of the United States.
______________
The following notification constitutes the United States’ new and full subsidies notification
for the calendar year 1998.  Especially where data on budgeted expenditures is concerned, this
notification generally contains information relevant to the fiscal year 1998 (1 October 1997 –
30 September 1998), while most information using actual expenditures is taken from 1997 fiscal year
amounts.
In this notification, we have also included information on programmes granted or maintained
at sub-federal levels in the United States (see Attachment I ).  For these programmes, this notification
serves as both the new and full notification for 1998 as well as a supplemental notification to those
previously submitted for 1995, 1996 and 1997.  In many cases, the programmes listed in Attachment I
were instituted prior to 1995, some were instituted throughout the 1995-1998 period, and some that
are listed are now expired.  Where available, we have attempted to show this information on aprogramme-specific basis.  In future notifications, we intend to reflect only those notifiable
programmes which remain in force for the relevant notification period.
As noted in previous US notifications, insofar as the notification obligation is a transparency-
oriented provision that, pursuant to Article 25.7 of the Agreement, carries no legal weight as to theactual identification of a subsidy, its actionability status, or its trade effects, the United States has
included certain activities in this notification which arguably are not (or are not always) “specific
subsidies” within the meaning of the Agreement.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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TABLE OF CONTENTS
Page
AEROSPACE & AERONAUTICS ................................................................................................... 5
1. Advanced Subsonic Technology Programme .......................................................................... 5
2. The X-33 Programme ........................................................................................................... ... 6
3. The X-34 Programme ........................................................................................................... ... 7
4. High Speed Research Programme............................................................................................ 8
5. The Spacecraft Technology Development Programme ........................................................... 9
AGRICULTURE ............................................................................................................................... 10
1. The Export Enhancemen t Programme (EEP) ........................................................................ 10
2. The Dairy Export Incentive Programme (DEIP) ................................................................... 123. Mandated Export Sales of Dairy Stocks ................................................................................ 13
Agricultural Sup port Programmes ................................................................................................ ...... 14
4. Agriculture Income Support and Marketing Assistance for the 1996 Crops of
Wheat, Feed Grains (Corn, Grain Sorghum, Barley, Oats and Rye), Upland and
Extra Long Staple (ELS) Cotton, Rice, an d Oilseeds (Soybeans, Sunflowerseed,
Flaxseed, Canola, Rapeseed, Safflower and Mustard Seed), and Price Support
for the 1996 Crops of Peanuts, Dairy Products, Sugar and Tobacco Programmes................ 14
Other Agricultural Programmes.................................................................................................. ........ 17
5. Expensing of Certain Capital Ou tlays Related to Agriculture............................................... 17
6. Expensing of Multiperiod Live stock and Crop Production Costs ......................................... 18
7 Tax Treatment of Loans Forgiven So lvent Farmers as if Insolvent....................................... 19
8. Capital Gains Treatment of Ce rtain Agricultural Income...................................................... 20
9. Farm Use Exemption from Deficit Reduction Component of Motor Fuel
Excise Tax..................................................................................................................... ......... 21
10. Exemption from Excise Tax for Tobacco Products Supplied to Tobacco
Industry Em ployees ............................................................................................................. .. 22
AUTOMOTIVES/ENGINES/MOTORS ........................................................................................ 22
1. The Electric Hybrid Propulsion Programme.......................................................................... 22CERAMICS & LIGHT-WEIGHT MATERIALS ......................................................................... 23
1. The Continuous Fibre Cera mic Composite Programme ........................................................ 23
CHEMICALS & PETROCHEMICALS ........................................................................................ 24
1. The Hydrogen Research & Development Programme........................................................... 24G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Page
ENERGY & FUELS (ENERGY DEVELOPMENT, STORAGE AND
TRANSPORTATION & OTHER RELATED SECTORS ........................................................... 26
1. The Superconductiv ity Programme ....................................................................................... 26
2. The Energy Storage Sy stems Programme.............................................................................. 27
3. The Hydropower Programme................................................................................................. 28
4. Expensing of Exploration and Development (E&D) Costs for Oil, Gas
and Other Fuels................................................................................................................ ...... 29
5. Excess of Percentage Over Cost Depletion for Oil, Gas and Other Fuels ............................. 296. Alternative Fuel Production Credit........................................................................................ 30
7. Capital Gains Treatment of Royalties on Coal ...................................................................... 31
8. Enhanced Oil Recovery (EOR) Credit................................................................................... 32
9. New Energy Technology Credit ............................................................................................ 33
10. Alcohol Fuel Credit and Partial Exempti on from Federal Excise Tax on Gasoline .............. 34
11. Credits for Electricity Produc tion from Wind and Biomass .................................................. 35
12. Exemption from the Deficit Reduction Component of Motor Fuel Excise Tax
for Helicopters Providing Transporta tion Services for the Development or
Removal of Hard Minerals, Oil or Gas.................................................................................. 36
FISHERIES ............................................................................................................................... ........ 37
1. Commercial Fishing Exemption from Deficit Reduction Rate Component of
Excise Tax on Motor Fuels.................................................................................................... 37
LUMBER & TIMBER ..................................................................................................................... 38
1. Capital Gains Treatment of  Certain Timber Income.............................................................. 38
2. Expensing of Multiperiod Timber Growing Costs ................................................................ 39
3. Investment Credit and Seven-Year Am ortization for Refore station Expenses...................... 39
4. Exemption from the Deficit Reduction Component of Motor Fuel Excise Tax
for Helicopters in Logging Operations and Other Timber-Rel ated Activities....................... 40
METALS, MINERALS AND EXTRACTION (NON-FUEL) ...................................................... 41
1. Expensing for Exploration and Development Costs for Non-Fuel Minerals......................... 41
2. Excess of Percentage Over Cost Depletion for Non-Fuel Minerals ...................................... 423. Capital Gains Treatment of Iron Ore ..................................................................................... 43
4. Special Rules for Mining  Reclamation Reserves................................................................... 44
TIMEPIECES ............................................................................................................................... .... 45
1. The Insular Possessions  Watch Programme .......................................................................... 45
OTHER ............................................................................................................................... ............... 46
1. Exemption from Off-Highway Use from the Deficit Reduction Rate Component
of the Motor Fuel  Excise Tax ................................................................................................ 46G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 4
Page
Federal-Level Programmes (Regional Assi stance)............................................................................. 47
1. Empowerment Zones and En terprise Co mmunities............................................................... 47
Federal-Level Programmes (Gen eral Export Programmes)................................................................ 49
1. The Export Credit Programmes of the US Export-Import Bank............................................ 49
APPENDIX A – Agricultural Support Programmes........................................................................... 51
APPENDIX B – Statistics of Production,  Consumption, Imports and Exports.................................. 52
Attachment 1 – Notification of State-Leve l Measures........................................................................ 56G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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AEROSPACE & AERONAUTICS
1. Advanced Subsonic Technology Programme
Period covered by the notification
The period covered is fiscal year 1998.
Policy objective and/or purpose
The Advanced Subsonic Technology Programme has the specific aim of generating, by 2001,
promising technologies for the possible future development by private enterprises of a new generation
of environmentally compatible and economic subsonic aircraft and a safe, highly productive global air
transportation system.
Background and authority
The Advanced Subsonic Technology Programme is administered by the National
Atmospheric and Space Administration’s (NASA) Office of Aeronautics and Space TransportationTechnology.  Legislative authority for the programme derives from the National Aeronautics and
Space Act of 1958, as amended, and the US Government’s annual budget and appropriations
legislation.
Form
Up to three-quarters of the appropriated funding for this programme is applied to grants,
contracts, or other cooperative-type agreements with private sector partners for the purpose of
achieving the programme’s stated goals.
To whom and how assistance is provided
Participating companies are selected through an open process and work jointly with NASA in
the research and technology (R&T) programme.  Due to the nature of the R&T activity, these
contracts, grants and other cooperative-type agreements have been and will continue to be awarded to
large civil aircraft and engine manufacturers, general aviation aircraft and engine manufacturers,
advanced aerospace material manufacturers, and other major subsystem developers for aircraft, engineand air traffic management systems.  In the long term, it is expected that this programme may benefit
a broader spectrum of manufacturers, operators and users throughout the aviation system. These
benefits may take the form of greater aviation system affordability, increased productivity, and
environmental sustainability.
Amount
The amount budgeted for fiscal year 1998 is $144.4 million.
Duration
Relevant contracts are currently planned through fiscal year 2003.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 6
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
2. The X-33 Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The X-33 Programme is intended to develop and demonstrate technologies and operations
that would yield significant reductions in the cost of  access to space.  It aims to integrate and expand
the achievements of related efforts to produce an experimental vehicle that would demonstrate the
feasibility of a cost-effective, operational reusable launch vehicle.  The X-33 test vehicle would
demonstrate key technology, operations and reliability requirements for next-generation launch
systems, including those required for a single stage-to-orbit launch system.  The X-33 Programme is
divided into three development phases.  In July 1996, the Programme entered its second phase, undera cooperative agreement between the US Government and industry teams.
Background and authority
The X-33 Programme is administered by NASA’s Office of Aeronautics and Space
Transportation Technology.  Legislative authority for the programme derives from the National
Aeronautics and Space Act of 1958, as amended, a nd the US Government’s annual budget and
appropriations legislation.
Form
Participation in the programme is achieved through the use of a cooperative agreement.
Submission of proposals was open to all categories of organizations, both domestic and foreign.  The
X-33 Programme is premised on cost-sharing, requiring the partners to the cooperative agreement to
contribute to the programme’s funding.
To whom and how assistance is provided
Participating companies are selected through an open process and work jointly with NASA in
the development programme.  In exchange for some of the work performed on the programme by the
non-NASA partner, NASA pays the partner on the basis of the terms negotiated in the cooperative
agreement.  However, these payments do not and are not intended to cover all of the costs associatedwith the programme that are incurred by the partner.  Such residual costs must be borne fully by the
partner itself.
Amount
The amount budgeted for this programme for fiscal year 1998 was $318.3 million.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 7
Duration
The X-33 Programme was initiated in fiscal year 1995.  In July of 1996, the programme
proceeded into its flight demonstration phase leading to flights in 1999.
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
3. The X-34 Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The X-34 Programme was restructured in the spring of 1996.  This restructuring eliminated
the original intention of the programme to support development of a commercially viable smalllauncher.  The programme is now limited to the construction of a flight demonstrator that will test a
number of new launch vehicle technologies including composite structures and advanced thermal
protection systems.  As noted in previous notifications, this restructuring may well render the X-34
Programme a non-notifiable measure.  However, the United States continues to provide information
about this programme in the interest of transparency.
Background and authority
The X-34 Programme is administered by NASA’s Office of Space Science.  Legislative
authority derives from the National Aeronautics and Space Act of 1958, as amended, and the US
Government’s annual budget an d appropriations legislation.
Form
The programme is implemented through the use of a contract.
To whom and how assistance is provided
The participating company, which was selected through an open contracting process,
produces the specified test vehicle under NASA supervision.
Amount
The amount budgeted for fiscal year 1998 was $26.7 million.
Duration
Funding for this programme began in fiscal year 1995, and the last year in which government
expenditures are anticipated is fiscal year 1999.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 8
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
4. High Speed Research Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The High Speed Research Programme has the specific aim of improving, by 2005, the
technology base for the possible future development of an economically viable and environmentallyfriendly high speed civil transport by private aerospace companies.
Background and authority
The High Speed Research Programme is administered by NASA’s Office of Aeronautics and
Space Transportation Technology.  Legislative author ity for the programme derives from the National
Aeronautics and Space Act of 1958, as amended, a nd the US Government’s annual budget and
appropriations legislation.
Form
Up to three-quarters of the appropriated funding for this programme is applied to grants,
contracts, or other cooperative-type agreements with private sector partners for the purpose of
achieving the programme's stated goals.
To whom and how assistance is provided
Participating companies are selected through an open process and work jointly with NASA in
the R&T programme.  Due to the nature and focus of the R&T activity, these contracts, grants and
other cooperative-type agreements have been and will continue to be awarded to large civil aircraft
and engine manufacturers, advanced aerospace material manufacturers, and other major subsystem
developers for aircraft, engine and air traffic management systems.  In the long term, it is expectedthat this programme may benefit a broader spectrum of manufacturers, operators and users throughout
the aviation system.  These benefits may take the form of greater aviation system affordability,
increased productivity, and environmental sustainability.
Amount
The amount budgeted for fiscal year 1998 was $245 million.
Duration
Relevant contracts are currently planned through fiscal year 2002.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 9
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
5. The Spacecraft Technology Development Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The Spacecraft Technology Development Programme is aimed at developing long term
advanced spacecraft technology that benefits both NASA programmes and the satellitecommunications industry.  Key technology areas incl ude phased array antennas, batteries, solar cells,
traveling wave tubes, solid state power amplifiers, satellite propulsion and satellite network
technology.
Background and authority
The Spacecraft Technology Development Progra mme is administered by NASA’s Office of
Space Science.  Legislative authority for the programme derives from the National Aeronautics and
Space Act of 1958, as amended, and the US Government’s annual budget and appropriations
legislation.
Form
The technology is developed at NASA laboratories, participating universities and
participating industrial facilities.
To whom and how assistance is provided
Assistance to industry is provided through cost-share contracts and technology know-how
transfer from NASA laboratories.  Assistance to universities is provided through grants.
Amount
The amount budgeted for fiscal year 1998 was $30 million.
Duration
Although this activity was notified as the Space Technology Development Programme for
ease of identification, the subject research and technology activities are actually sponsored under
continuing programmes.
Trade effects
In light of the scope and nature of the R&T activity being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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AGRICULTURE
Export Assistance Measures
1. The Export Enhancement Programme (EEP)
Period covered by the notification
The period covered is the fiscal year 1997 (October 1996 - September 1997).
Policy objective and/or purpose
In June 1991, the US Department of Agriculture (USDA) published programme criteria
governing the selection of proposed sales initiatives under the EEP.  All EEP initiatives are evaluatedbased on five criteria:
(1) Trade Policy Effect - the expected contri butions of the initiative in furthering the US
trade policy objective of countering competitors' subsidies and other unfair trade
practices by displacing such countries' subsidized exports in targeted countries;
(2) Export Effect - the potential to develop, expand, or maintain markets for US
agricultural commodities;
(3) Effect on Non-subsidizers - possible eff ects, if any, on non-subsidizing exporters of
agricultural products; and
(4) Subsidy Requirements - the expected bene fits compared with expected costs of the
initiative.
(5) Market Development - EEP can be used for market development purposes.
The overall programme level for EEP, as well as bonus awards under individual EEP
initiatives, will be maintained at the minimum levels  necessary to achieve the expected benefits of the
programme's export expansion objectives, as well as the anticipated long-term benefits from
multilateral agricultural trade reform.  Together, th ese criteria are considered in the selection of
initiatives targeting specific commodities and countries that will best meet the programme's tradepolicy and export expansion objectives.
Effective 1 July 1995, the terms of the Uruguay Round Agreement on Agriculture established
annual ceilings by commodity with respect to maximum quantity and budgetary expenditures
permitted for export subsidies.
Background and authority
The EEP has operated under various authorities since May 1985.  Terms and conditions
applicable to all export initiatives are contained in the US Code of Federal Regulations at 7 CFR1494.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Form
Cash bonuses paid to participating agricultural exporters.
To whom and how assistance is provided
The EEP works as follows:
(1) The General Sales Manager, acting as Vice President of the Commodity Credit
Corporation (CCC), issues a press rele ase (Programme Announcement) announcing
an EEP initiative for a specific country or countries or regions. The ProgrammeAnnouncement is followed by an invitation for offers from exporters to obtain a
specific dollar and cents bonus in connection with the sale of an eligible commodity
to the target countries.
(2) Interested exporters submit information to qualify as participants under the
programme.
(3) The exporter must make a commercial sale of the eligible commodity under either a
world-wide tender or a US-origin tender, or a negotiated sale with a buyer as a result
of a tender.
(4) The exporter then makes an offer to the CCC to establish the amount of the CCC
bonus in dollars and cents necessary to make the eligible commodity competitive
with the same commodity bein g offered for sale from other exporting countries under
a world-wide tender, and furnishes a performance certificate to the CCC.
(5) The General Sales Manager determines if the CCC bonus makes the exporter's
commercial sale of the eligible comm odity competitive with the same commodity
offered for export from other exporting countries and if the offer meets the
requirements of the programme.
(6) The General Sales Manager notifies successful exporters and sends a written
acceptance of the offer.
(7) The exporter exports the eligible commodity against the sales contract.(8) The exporter furnishes proof of export and requests payment of the CCC bonus.(9) The CCC issues payment to the exporter for the exact amount of the CCC bonus by
multiplying the CCC bonus specified in the agreement by the net quantity of the
commodity exported.
(10) The General Sales Manager agrees to a cancellation of the performance security, in
whole or in part, provided the exporter has furnished evidence that the exports arrived
in the designated country.
Amount
The CCC did not operate EEP in fiscal year 1997.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 12
Duration
EEP was re-authorized until year 2001 in th e Uruguay Round Agreement Act of 1994.  The
Federal Agricultural Improvement and Reform Act of 1996 (FAIR Act) further extends fundingthrough year 2002.
Trade effects
The CCC bonuses offered are intended to enable US exporters to compete at commercial
prices in selected foreign markets.  The effect of the programme is to enable exporters to offer prices
that are competitive with those being offered by ot her countries' exporters in these selected foreign
markets.
2. The Dairy Export Incentive Programme (DEIP)
Period covered by the notification
The period covered is the fiscal year 1997 (October 1996-September 1997).
Policy objective and/or purpose
In June 1991, USDA published programme criteria governing the selection of commodities
and countries under the DEIP.  These criteria take into account:
(1) Trade Policy Effect - the expected contribution of the initiative in furthering the US
trade policy objective of countering competitors' subsidies and other unfair trade
practices by displacing such countries' subsidized exports in targeted countries;
(2)  Export Effect - the potential to develop, expand, or maintain markets for US
agricultural commodities;
(3) Effect on Non-subsidizers - the possible effects on non-subsidizing exporters of
agricultural products; and
(4) Subsidy Requirements - the expected bene fits compared with the expected costs of
the initiative.
Effective 1 July 1995, the terms of the Uruguay Round Agreement on Agriculture established
annual ceilings by commodity with respect to maximum quantity and budgetary expenditures
permitted for export subsidies.  Section 148 of the FAIR Act authorizes the use of DEIP to any
destination in the world for the purpose of market development provided those shipments are not
otherwise restricted by US law.
Background and authority
Section 153 of the Food Security Act of 19 85, as amended, mandates that the CCC operate
the DEIP through 31 December 2002.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 13
To whom and how assistance is provided
Payments may be made in cash, CCC-owned commodities, or generic certificates on a bid
basis to entities that sell US dairy products for export.  Export sales under the programme must be inaddition to, and, to the extent practicable, not displa ce, commercial export sales of US dairy products.
Eligible dairy products, in bulk, are butter, butter oil, anhydrous milk fat, nonfat dry milk, whole milk
powder, cheddar cheese, mozzarella cheese, cream cheese, feta cheese, and Gouda cheese.
Amount
In fiscal year 1997, government expenditures on DEIP amounted to $121.5 million for
139,012 metric tons of dairy products.  The programme is operated on an ad hoc  basis, where varying
levels of bonuses may be offered for several different kinds of dairy products.
Duration
DEIP was re-authorized until year 2001 in the Uruguay Round Agreements Act of 1994.  The
1996 Act further extends funding through calendar year 2002.
Trade effects
In fiscal year 1997, DEIP bonuses were awarded to support the export of 3,650 metric tons of
cheese (cheddar, mozzarella and processed American cheese), 113,981 metric tons of nonfat dry milk,
4,690 metric tons of whole milk powder, and 18,003 metric tons of butterfat on a butter equivalent
basis.  (Statistics on production, consumption, imports and exports are contained in the Appendix.)
3. Mandated Export Sales of Dairy Stocks
Period covered by the notification
The period covered is the fiscal year 1997 (October 1996-September 1997).
Policy objective and/or purpose; Background and authority; Form; To whom and how assistance is
provided
Section 1163 of the Food Security Act of 1985 created a mandated minimum annual level of
export sales of CCC-owned dairy stocks.  The mandated minimum sales were eliminated by theUruguay Round Agreements Act of 1994; the Secret ary of Agriculture maintains discretionary
authority to sell CCC-owned dairy stocks into the export market.
Amount
There were no export sales of CCC owned dairy products during fiscal year 1997.
Duration
As indicated above, this programme is no longer mandatory.  However, the Secretary has the
discretionary authority to sell CCC-owne d dairy stocks into the export market.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 14
Agricultural Support Programmes
4. Agriculture Income Support and Marketing Assistance for the 1996 Crops of Wheat,
Feed Grains (Corn, Grain Sorghum, Barley, Oats, and Rye), Upland and Extra LongStaple (ELS) Cotton, Rice, and Oilseeds (S oybeans, Sunflower Seed, Flaxseed, Canola,
Rapeseed, Safflower, and Mustard Seed), and Price Support for the 1996 Crops of
Peanuts, Dairy Products, Sugar, and Tobacco Programmes
Period covered by notification
The period covered by the notification is generally the fiscal year 1996 (October 1995-
September 1996) for the 1996 programmes.
Policy objectives
• Stabilize, support, and protect  farm income and prices.
• Help ensure adequate supplies of quality food, feed and fiber.
• Assist in the orderly marketing of farm commodities.
Background and authority
These programmes were authorized by the Commodity Credit Corporation (CCC) Charter
Act, the Agriculture Adjustment Act of 1938, as amended, the Agricultural Act of 1949, as amended,
and the Federal Agriculture Improvement and Reform Act of 1996.  The programmes were financed
by the CCC and administered by the Farm Service Agency (FSA).
Form; To whom and how assistance was provided
(a) Income Support for Wheat, Feed Grains, Upland Cotton, and RiceThe 1996 Act replaced the production adjustment programmes (including planting
restrictions, acreage idling, target prices, and deficiency payments) that were in effect for the
1991-95 programme crops of wheat, feed grains, upland cotton, and rice with a fixed productionflexibility contract (PFC) payment programme for the 1996-2002 crops.
The production adjustment programme for the 1991-1995 crops of extra long staple (ELS)
cotton ceased with the 1995 crop.  No production adjustment and related income support programme
was authorized for the 1996 and subsequent crops of ELS cotton nor was such a programmeimplemented for the 1996 crop.
Total annual PFC payments were established and fixed by law at the national level for each of
the 7 years of the contract period (1996-2002).  The distribution of these fixed annual payments was
statutorily allocated among the contract commodities by a single set of percentages for the contractcommodities that applies to all 7 years, 1996-2002 (footnote b, table 1).  In addition, the fixed
payment levels by year were adjusted by adding repayments of unearned advance deficiency
payments from the 1995 crop that were repaid by producers to CCC in fiscal year 1996, and by
subtracting total remaining deficiency payments due producers for the 1994- and 1995-crop
programmes for wheat, feed grains, and upland cotton.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 15
Table 1. Statutory Amounts Allotted for Production Flexibility
Contract Payments for fiscal year 1996 (October 1995-
September 1996) a/ b/
1996
Amount
(Billion $) 5.570
a/ Excludes adjustments for deficiency payments for the 1994 and 1995 crops.
Amounts are those specified in section 113 of the Federal Agriculture
Improvement and Reform Act of 1996.
b/ Amounts (in per cent) made available for each contract commodity are as
follows: wheat (26.26); corn (46.22); grain sorghum (5.11); barley (2.16); oats
(0.15); upland cotton (11.63); and rice (8.47).
The 1996 payment rate per unit (e.g., bushel) was determined programmatically by dividing
total payments available for a contract commodity by the total payment “production,” the sum of all
payment production for that commodity on all contract farms.  In turn, each contract farm’s payment
production for each contract commodity is equal to 85 per cent of the product of its historical planted
and considered planted acreage for that contract commodity (based on the 1991-95 period) and its
respective historical payment yield for that contract commodity (based on historical payment yields
for that farm).
The payments by contract commodity for each contract farm are based on a farm’s share of
total payment production for each contract comm odity.  All payment acreage in the programme for
each contract commodity is based on the acreage levels entered into the programme by those who
contracted (during the 1996 one-time sign-up) with the CCC for the 7-year contract period.  With a
few exceptions (e.g., acreage with a contract-commodity acreage history that is taken out of theConservation Reserve Programme and subsequently placed under the PFC contract), the total payment
acreage for each commodity, both nationally and at the farm level, is fixed at the 1996 one-time sign-
up levels.
Generally, producers may plant any crop except for fruits and vegetables on their contract
acreage without loss of eligibility for payments.  In addition, contract commodities may be planted for
harvest on a farm’s non-contract acreage as well as the farm’s contract acreage.  Producers on contract
farms must comply with conservation compliance requirements as a condition of the contract.  There
is an annual PFC payment limitation of $40,000 per person.
(b) Commodity Loans for Wheat, Feed Grains, Upland and ELS Cotton, Rice, and
Oilseeds
Nonrecourse commodity loan pr ogrammes, with modifications, remain in effect for wheat,
feed grains, upland and extra long staple (ELS) cotton, rice and oilseeds (soybeans, sunflower seed,flaxseed, canola, rapeseed, safflower, and mustard seed).  Statutory authority for a price support loan
programme for rye ceased with the 1995 crop and such a programme was not implemented for the
1996 crop of rye.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 16
Nonrecourse loans for the contract commodities are available for producers who participate in
the production flexibility contract programme.  Nonrecourse loans are available for all producers of
oilseeds and ELS cotton.  The per-unit loan rate for each commodity was established by the Secretary
of Agriculture within the discretionary ranges of the law, but could not be higher than statutorily-defined levels.
Commodity loan rates for 1996 were below average market prices.  Producers who chose to
take out a commodity loan received the proceeds of the loan after the commodity was harvested, using
the commodity as collateral for the loan.  The loan period was nine months.  Producers could repay
the loan plus accrued interest anytime during the loan  period, but had to settle the loan at the end of
the loan period either by repaying or by forfeiting the commodity to the CCC.
Appendix A shows production, imports, exports,  relevant programme parameters, average
market prices received by farmers, commodity programme loan rates, and, as applicable, production
flexibility contract payment rates.
(c) Peanuts
The programme features include nonrecourse loans and purchase agreements and a supply
management programme.  A national poundage quota, an amount intended to fill domestic demand
for human consumption excluding seed, was set, and farm quota holders received a farm poundagequota which was a proportionate share of the national poundage quota.  For 1996, the national
poundage quota was set at 1,100,000 short tons.  Peanuts, grown and marketed in excess of the farm
poundage quota or by farmers without a quota (“additional peanuts”), could not be consumed
domestically for human food and had to be exported, crushed for oil, or put under loan with the CCC.
Loan rates for 1996-crop quota and additional peanuts were $610 per short ton ($0.305 per pound)and $132 per short ton ($0.066 per pound), respectively.  A marketing assessment of 1.15 per cent
was collected for the 1996 crop.
(d) Dairy ProductsThe CCC supported milk prices by buying butter, cheese, and non-fat dry milk from
manufacturers at announced prices which were calculated to allow processors to pay farmers theannounced price for milk.  The support price of milk was $10.35 per hundredweight for the October-
December 1995 quarter and lowered to $10.20 per hundredweight on 1 January 1996.  The 1996 Act
specified that the support price of milk annually decline from the 1996 level through 1999.  The 1996
Act terminates the existing support programme for milk on 31 December 1999, after which a recourse
loan programme for milk processors will be implemented.
(e) SugarSugar prices were supported through nonrecourse loans made to sugar processors who agreed
to pay at least the minimum level of support for the applicable sugar- producing region of the UnitedStates to any producer who delivered sugar beets or sugarcane for processing.  The 1996 national
average support price was 18 cents per pound for raw cane sugar.  The loan rate for refined beet sugar
from the 1996 crop was 22.9 cents per pound.
First processors of sugar paid marketing assessments to CCC at the rates of 0.2475 cents per
pound of raw cane sugar and 0.2654 cents per pound of beet sugar.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 17
(f) Wool and Mohair
By law, the wool and mohair payment programme was terminated on 31 December 1995.
(g) Honey
Statutory authority that provided honey producers with a price support loan programme for
the 1995 crop year was not renewed under the 1996 Act.  Thus, there was not a support programme
for the 1996 crop of honey.
(h) TobaccoTobacco producers were supported through a price support loan programme and a national
marketing quota for flue-cured and burley tobacco. For the 1996 flue-cured tobacco crop, the national
average loan level was $1.601 per pound and the national marketing quota was 973.8 million pounds.
For the 1996 burley crop, the national average loan rate was $1.737 per pound and the nationalmarketing quota was 704.5 million pounds.
Amount
Direct government payments for the 1996 programmes were $5,708.7 million–an amount
which included repayments of unearned deficiency payments from the 1995 and earlier crop years.
Net lending costs (including marketing assessment receipts) during fiscal year 1997 were
$85.4 million.1  Appendix A shows the 1996 US Government payments and fiscal year 1997 net
lending costs by commodity.
Duration
The policies described were in effect for the 1996 calendar year for dairy products and the
applicable 1996 crop years for the remaining commodities.
Trade effects
These programmes have not had a significant effect on trade.  For all of the commodities
except peanuts, market prices were above loan rates.  In the case of peanuts, the support price on
quota peanuts exceeded the world market price, thereby providing no incentive to export these
peanuts.
Other Agricultural Programmes
5. Expensing of Certain Capital Outlays Related to Agriculture
Period covered by the notification
The period covered is the fiscal year 1997.
                                                     
1 A majority of net lending activity for the 1996 crops occurred in fiscal year 1997.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Policy objective and/or purpose
To promote soil and water conservation.
Background and authority
Section 175 of the Internal Revenue Code (covering soil and water conservation expenses),
enacted as part of the Revenue Act of 1954, and section 180 (covering fertilizer expenses), enacted in
1960 as part of Public Law 86-779.
Form
Income tax concession.
To whom and how assistance is provided
Farmers, other than certain farm corporations and partnerships, are allowed to deduct certain
expenditures for fertilizer and other materials used to enrich or condition farmland, as well as for soil
and water conservation measures.  Expensing is allowed, even though these expenditures are for
inventories held beyond the end of the year, or for capital improvements that would otherwise be
capitalized.  The deduction for conservation expenses is limited annually to 25 per cent of thetaxpayer’s gross income from farming.
Amount
The revenue loss was $65 million in fiscal year 1997.
Duration
Indefinite.  Section 175 is a permanent provision in effect since 1954, while section 180 is a
permanent provision in effect since 1960.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.
6. Expensing of Multiperiod Livestock and Crop Production Costs
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To ease record-keeping for small farm businesses.
Background and authority
Section 263A of the Internal Revenue Code, enacted as part of the Tax Reform Act of 1986.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 19
Form
Income tax concession.
To whom and how assistance is provided
The production of livestock and crops with a production period of two years or less is
exempted from the uniform capitalization rules.  Farmers producing any goods for sale with a
production period of two years or less may elect not to capitalize costs.
Amount
The revenue loss was $80 million in the fiscal year 1997.
Duration
Indefinite; this has been a permanent provision since 1987.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.
7. Tax Treatment of Loans Forgiven Solvent Farmers As If Insolvent
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To address certain consequences of the farm credit crisis of the 1980s.
Background and authority
Internal Revenue Code sections 108 and 1017, enacted as part of the Tax Reform Act of
1986.
Form
Income tax concession.
To whom and how assistance is provided
Farmers are granted special tax treatment by being forgiven the tax liability on certain
forgiven debt.  Normally, the amount of loan forgiveness is accounted for as a gain (income) of the
debtor, who must either report the gain or reduce his recoverable basis in the property to which theloan relates.  If the debtor elects to reduce basis and the amount of forgiveness exceeds his basis on
the property, the excess forgiveness is taxable.  However, in the case of insolvent (bankrupt) debtors,
the amount of loan forgiveness never results in an income tax liability.  Farmers with forgiven debt
are considered insolvent for tax purposes, and thus  qualify for income tax forgiveness.  The reliefG/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 20
applies only if at least 50 per cent of the taxpayer’s gross receipts for the three tax years preceding the
tax year in which the discharge of indebtedness occurs is attributable to farming.
Amount
The revenue loss was $10 million in fiscal year 1997.
Duration
Indefinite; this has been a permanent provision since 1986.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.
8. Capital Gains Treatment of Certain Agricultural Income
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To ensure that when farmland is sold, any immature, unharvested crops growing on the land
are treated for tax purposes as part of the land and not as personal property ready for sale to
customers.
Background` and authority
Section 1231 of the Internal Revenue Code.
Form
Income tax concession.
To whom and how assistance is provided
Certain agricultural income which would normally be taxed as ordinary income, such as
receipts from the sale of unharvested crops sold together with farmland, can be treated as capital
gains.
Amount
The revenue loss was $505 million in fiscal year 1997.
Duration
Indefinite; this has been a permanent provision since at least 1954.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 21
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.
9. Farm Use Exemption from Deficit Reduction Component of Motor Fuel Excise Tax
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To generally exempt off-highway business uses, including farm uses, from application of the
Federal motor fuels excise tax which was enacted as part of Federal budget deficit efforts and is aimedtypically at the use of motor fuels for transportation purposes.
Background and authority
Section 6420 of the Internal Revenue Code.
Form
Exemption from otherwise applicable excise tax.
To whom and how assistance is provided
Taxpayers may claim a credit or refund of the deficit-reduction portion (4.3 cents per gallon)
of gasoline excise taxes paid on fuel used on a farm for farming purposes.  Diesel fuel is sold on a tax-
free basis to farmers.
Amount
The savings per gallon of gasoline amount to 4.3 cents; there are no available estimates of
annual revenue loss to the government.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 22
10. Exemption from Excise Tax for Tobacco Products Supplied to Tobacco Industry
Employees
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To permit producers of tobacco products to supply their workers with free cigarettes and other
tobacco products.
Background and authority
Section 5704(a) of the Internal Revenue Code.
Form
Exemption from otherwise applicable excise tax.
To whom and how assistance is provided
Tobacco product producers are permitted to furnish limited quantities of tobacco products for
use or consumption by employees without payment of tax.
Amount
The subsidy per unit amounts to the following: (i) for cigarettes, $12.00 per thousand; (ii) for
cigars, $1.125 to $30.00 per thousand (depending on size); (iii) for snuff, 36 cents per pound; (iv) for
chewing tobacco, 12 cents per pound; and (v) for pipe tobacco, 67.5 cents per pound.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.
AUTOMOTIVES/ENGINES/MOTORS
1. The Electric Hybrid Propulsion Programme
Period covered by the notification
The period covered is the fiscal year 1998.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Policy objective and/or purpose
The general objective and purpose of the Electric Hybrid Propulsion programme is (i) to
develop battery technologies that will make batteries and fuel cells which perform in a manner similarto that obtained in conventional vehicles; and (ii)  to develop a hybrid propulsion system that will
double current vehicle fuel economy.
Background and authority
The DOE’s Office of Energy Efficiency and Renewable Energy administers the Electric
Hybrid Propulsion programme.  Legislative authority for the programme derives from Titles VI andXX of the Energy Policy Act of 1992, the Non-Nu clear Energy Research and Development Act of
1974 and the Electric and Hybrid Vehicle Resear ch, Development and Demonstration Act of 1976.
Form
Assistance under this programme has taken the form of grants and cooperative agreements.
To whom and how assistance is provided
Participants in the programme amount to approximately 100 large- and small-sized firms,
including manufacturers of batteries, engines and vehicle systems and components.  Participation in
the programme is determined through competitive procurement processes.
Amount
The total amount budgeted in fiscal year 1998 was $58.2 million.
Duration
The Electric Hybrid Propulsion programme was launched in 1974.  While the programme is
not subject to any fixed completion date, its continuation is contingent upon ongoing annual
appropriations by the Congress.
Trade effects
In light of the scope and nature of the research and development (R&D) activities being
assisted, it is not possible to determine what, if any, trade effects may ever result from thisprogramme.
CERAMICS & LIGHT-WEIGHT MATERIALS
1. The Continuous Fibre Ceramic Composite Programme
Period covered by the notification
The period covered is the fiscal year 1998.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 24
Policy objective and/or purpose
The general purpose of this programme is to assist and promote the development of advanced
ceramic composite materials for industrial applications to obtain greater energy efficiency.
Background and authority
The Department of Energy’s (DOE) Office of  Energy Efficiency and Renewable Energy
administers the programme..  Legislative authority for this programme derives from Title XXII of the
Energy Policy Act of 1992.  The report of the Committee on Appropriations of the US House of
Representatives accompanying the Interior and Related Agencies Appropriations Act of 1990 (PublicLaw 101-121) requests the DOE to complete a comprehensive continuous fibre composite research
and development plan.
Form
Assistance under this programme is primarily provided through cooperative agreements.
To whom and how assistance is provided
Participation in the Continuous Fibre Ceramic Composite programme was determined
through competitive procurement, with various materials and equipment manufacturers taking part.
Amount
The total amount budgeted for fiscal year 1998 came to $8.4 million.
Duration
The programme was initiated in 1992, and is projected to be completed in 2002.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may result from this programme.
CHEMICALS & PETROCHEMICALS
1. The Hydrogen Research & Development Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The basic purpose of the Hydrogen Research and Development programme is to undertake
R&D into the use of hydrogen as a fuel and a feedstock, as well as to explore the development of new
or improved equipment for the transportation of hydrogen.  The Hydrogen Research and DevelopmentG/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 25
programme was established to encourage and support the development of practical and
cost-competitive hydrogen technologies and systems to meet large-scale energy market needs.  This
programme will develop and demonstrate the processes and technologies needed to produce, store,
transport and utilize hydrogen for all energy sectors.  The programme follows a technologydevelopment strategy focused on long-term applications in large-scale energy markets using
renewable hydrogen.  The programme also seeks to foster new, near-term markets using the existing
fossil infrastructure as the starting point.  The programme will accomplish this by pursuing with
industry carefully selected cost-shared demonstrations to illustrate and/or develop commercial
opportunities in the near- and mid-term and in large-scale markets.
Background and authority
The Hydrogen Research and Development programme is administered by DOE’s Office of
Energy Efficiency and Renewable Energy.  Legislative authority for the programme derives from the
Federal Non-Nuclear Energy Research and Devel opment Act of 1974, the Department of Energy
Organization Act (1977), the National Energy Conservation Policy Act (1978), the NationalSuperconductivity and Competitiveness Act of 1988, the Spark M. Matsunaga Hydrogen Research,
Development and Demonstration Act of 1990 , Title XXI of the Energy Policy Act of 1992 and the
Hydrogen Future Act of 1996.
Form
Assistance under this programme is provided via grants and cooperative agreements.
To whom and how assistance is provided
A variety of firms, including small businesses, and educational institutions have participated
in R&D activities under this programme.  Commercial partners have included firms within the
petroleum, glass, chemical, transportation, metals and utilities sectors.  Generally, commercial
enterprises participated in the programme through cooperative agreements and educational institutions
through the receipt of grants.
Amount
The amount budgeted for fiscal year 1998 was $16.03 million.
Duration
A small hydrogen programme has operated under DOE and other agency authority since
1975.  Following enactment of the Matsunaga Act of 1990, DOE reorganized and created the
Hydrogen Research and Development programme under its current format.  While the programme is
not subject to any fixed completion date, its continuation is contingent upon ongoing annual
appropriations by the Congress.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may result from this programme.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 26
ENERGY & FUELS
(ENERGY DEVELOPMENT, STORAGE AND TRANSPORTATION
& OTHER RELATED SECTORS)
1. The Superconductivity Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The Superconductivity Programme will work in partnership with private sector partners to
perform superconducting wire development and pre-commercial activities required to commercialize
superconducting electric power applications.
Background and authority
This programme is administered by DOE’s Office of Energy Efficiency and Renewable
Energy.  Legislative authority derives from Title XXI of the Energy Policy Act of 1992.
Form
Assistance under the programme is provided through grants, cooperative agreements,
cooperative research and development agreements (CRADAs)2 and other forms of collaboration
accomplished through consortium-based activities between government laboratories and privateindustry.
To whom and how assistance is provided
Participation in the programme is determined through various competitive procurement and
review processes, which are open to all eligible parties.
Amount
The amount budgeted for the Superconductivity Programme in fiscal year 1998 totalled
$32 million.
                                                     
2The term "CRADA" has a fairly specific meaning as a result of legislation and regulations developed
to implement a variety of US technology promotion and commercialization programmes.  Generally, however, it
is a negotiated, contractual agreement between a federal agency or agency laboratory and a private sectorpartner or partners (including universities and independent research institutions) in which the parties agree on
the designation of personnel, facilities, equipment and other resources to a collaborative R&D activity, as well
as to the disposition of any intellectual property which the R&D yields.  A CRADA is just one of several legalinstruments or mechanisms through which government agencies work in partnership with business andacademia in pursuit of shared or complementary R&D objectives.  Examples of other such instruments are
"cooperative agreements", contracts and grants
.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Duration
R&D activity under the authority of this programme was commenced as early as 1988.  While
the programme is not subject to any fixed completion date, its continuation is contingent uponongoing annual appropriations by the Congress.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
2. The Energy Storage Systems Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The Energy Storage Systems Programme is broadl y aimed at the development of new systems
for storing energy for various applications so as to  enhance reliability, renewability and productivity.
Background and authority
The programme is administered by DOE’s Office of Energy Efficiency and Renewable
Energy.  Its legislative authority derives from Title XXI of the Energy Policy Act of 1992.
Form
Assistance under the Energy Storage Systems programme is primarily provided through
grants and cooperative agreements.
To whom and how assistance is provided
Participation in the programme occurs through various types of cost-shared contracts and
cooperative agreements between the DOE and industry.
Amount
The amount budgeted for this programme in fiscal year 1998 was $4 million.
Duration
The Energy Storage Systems programme was authorized in 1992, with government research
performed as early as 1974 by the Atomic Energy Commission.  While the programme is not subject
to any fixed completion date, its continuation is contingent upon ongoing annual appropriations by the
Congress.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 28
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
3. The Hydropower Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The Hydropower Programme is aimed at improving the technical, societal and environmental
benefits of hydropower by conducting and coordinating research and development with industry,federal agencies and other entities.
Background and authority
The programme is administered by DOE’s Office of Energy Efficiency and Renewable
Energy.  Its legislative authority derives from Title XXI of the Energy Policy Act of 1992 and the
Non-Nuclear Energy Research and Development Act of 1974.
Form
Participation in under the programme is accomplished through contracts and other forms of
collaboration between government laboratories and industry.
To whom and how assistance is provided
Participation in the programme occurs through a competitive procurement process, which is
open to all eligible parties.
Amount
The amount budgeted for this programme in fiscal year 1998 was $750,000.
Duration
The Hydropower Programme was initiated in 1977.  While the programme is not subject to
any fixed completion date, its continuation is cont ingent upon ongoing annual appropriations by the
Congress.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may result from this programme.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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4. Expensing of Exploration and Development (E&D) Costs for Oil, Gas and Other Fuels
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To encourage the development of domestic oil, gas and coal production.
Background and authority
In the case of successful investments in domestic oil and gas wells, intangible drilling costs,
such as wages, the costs of using machinery for grading and drilling and the costs of unsalvageable
materials used in constructing wells may be expensed for tax purposes rather than amortized over the
productive life of the property.  Integrated oil companies may currently deduct only 70 per cent ofsuch costs and amortize the remaining 30 per cent over five years.  The same rule applies to the
exploration and development costs of surface stripping and the construction of shafts and tunnels for
other fuel minerals.  This expensing procedure is authorized under sections 263(c), 291, 616-617,
57(2) and 1254 of the Internal Revenue Code of 1986.  The expensing of intangible drilling costs was
originally established in a 1916 regulation promulgated by the Department of the Treasury with therationale that such costs were ordinary operating expenses.  Limitations on expensing for integrated
oil companies were applied in 1976 and later years.
Form
Income tax concession.
To whom and how assistance is provided
Fuel mineral producers are permitted accelerated deductions from taxable income.
Amount
The annual revenue loss from this concession is $200 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
5. Excess of Percentage Over Cost Depletion for Oil, Gas and Other Fuels
Period covered by the notification
The period covered is the fiscal year 1997.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Policy objective and/or purpose
Percentage depletion for oil and gas has been permitted since 1918 or before.  The US
Congress viewed oil and gas as a strategic mineral and wanted to stimulate the supply of oil and gas,compensate producers for the high risks of prospecting and relieve the tax burdens of small-scale
producers.
Background and authority
Independent ( i.e., non-integrated) fuel mineral producers and royalty owners are generally
allowed to take percentage depletion deductions rather than cost depletion on limited quantities ofoutput for tax purposes.  Under cost depletion, outlays are deducted over the productive life of the
property based on the fraction of the resource extracted.  Under percentage depletion, taxpayers
deduct a percentage of gross income from mineral production at rates of 15 per cent for oil, gas and
oil shale, and 10 per cent for coal.  The deduction is limited to 50 per cent of net income from the
property, except for oil and gas where the deduction can be 100 per cent of net property income.Additionally, the percentage depletion deduction for all oil and gas properties may not exceed 65 per
cent of the taxpayer’s overall income and is limited to 365,000 barrels per year per taxpayer.
Production from geothermal deposits is eligible for percentage depletion up to 65 per cent of net
income, but with no limit on output and no limitation with respect to qualified producers.  Unlike
depreciation or cost depletion, percentage depleti on deductions can exceed the cost of the investment.
Form
Income tax concession.
To whom and how assistance is provided
Independent fuel mineral producers and royalty owners are permitted deductions from taxable
income for percentage depletion.
Amount
A deduction from income is allowed for the greater of cost or percentage depletion.
Percentage depletion is 15 per cent of revenue for independent (smaller) oil and gas producers and
10 per cent for coal producers.  The annual revenue loss was $1.1 billion.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
6. Alternative Fuel Production Credit
Period covered by the notification
The period covered is the fiscal year 1997.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 31
Policy objective and/or purpose
The purpose of the credits is to provide incentives for the private sector to increase the
development of alternative domestic energy resources because of concern over oil import dependence
and national security.
Background and authority
A tax credit of $3.00 per barrel (in 1979 dollars) of oil-equivalent production is provided for
several forms of alternative fuels.  The credit begins to phase out if the annual average unregulatedwellhead price per barrel of domestic crude oil exceeds $23.50 in 1979 dollars.  This credit is
authorized under section 29 of the Internal Revenue Code, and was instituted as part of the Crude Oil
Windfall Profit Tax Act of 1980.
Form
Income tax concession.
To whom and how assistance is provided
Producers and royalty owners of qualifying production are permitted tax credits against
federal income tax.
Amount
The annual revenue loss was $700 million.
Duration
For most qualifying fuels, the production tax credit is available through 2002, provided that
the wells were drilled before 1993.  For gas produced from biomass, and synthetic fuels produced
from coal or lignite, the credit is available through 2007, provided that the facility was placed inservice before July 1998.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
7. Capital Gains Treatmen t of Royalties on Coal
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To encourage the development of the domestic coal industry.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
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Background and authority
Sales of certain coal under royalty contracts can be treated as capital gains for tax purposes.
The maximum income tax rate for individuals on ordinary income was 39.6 per cent.  The maximumrate for individuals on long-term capital gains is generally 20 per cent; it is 10 per cent for long-term
capital gains that would otherwise be taxed at a 15 per cent rate.  The capital gains tax treatment is
authorized under sections 1231 and 631 of the US Internal Revenue Code.  When the capital gains
rate is below the regular tax rate, the owner is not entitled to percentage depletion provided in section
613 of the Code.
Form
Income tax concession.
To whom and how assistance is provided
Some non-corporate owners of coal properties receive income tax concessions in the form of
a reduction in the rate of tax from 39.5 per cent to 20 per cent, or from 15 per cent to 10 per cent.
Amount
The annual revenue loss was less than $50 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
8. Enhanced Oil Recovery (EOR) Credit
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The EOR credit was enacted as part of the Omnibus Budget and Reconciliation Act of 1990
to increase the domestic supply of oil, to reduce the demand for and dependency on imported oil, andto enhance the energy security of the United States.
Background and authority
An EOR tax credit is provided equal to 15 per cent of the taxpayer’s costs for tertiary oil
recovery on projects in the United States.  Qualifying costs include tertiary injectant expenses,
intangible drilling and development costs on a qualified enhanced oil recovery project, and amounts
incurred for tangible depreciable property.  Thus, this credit encourages the use of tertiary methods in
situations where it would not be profitable otherwise.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 33
The tax credit is authorized under section 43 of the US Internal Revenue Code.  The EOR
credit may not exceed taxpayer’s net income tax in excess of 25 per cent of net regular tax liability
above $25,000 or the tentative minimum tax.
Form
Income tax concession.
To whom and how assistance is provided
Petroleum producers and royalty holders applying approved tertiary petroleum recovery
methods receive a credit against federal income tax.
Amount
The annual revenue loss was $100 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
9. New Energy Technology Credit
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The purpose is to reduce US consumption of oil and natural gas by encouraging the
commercialization of renewable energy technologies, to reduce dependence on imported oil and toenhance national security.
Background and authority
A tax credit of 10 per cent of the basis of each energy property placed in service during any
taxable year is available for investment in solar and geothermal energy facilities.  The tax credit is
authorized by sections 46 and 48 of the Internal Revenue Code.  Business tax credits were part of the
Energy Tax Act of 1978 and were altered in subsequent legislation.  The Energy Policy Act of 1992
made the credit permanent.
Form
Income tax concession.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 34
To whom and how assistance is provided
The credit reduces income taxes for non-utility taxpayers that invest in qualifying equipment
used to produce renewable forms of energy.
Amount
The revenue loss was less than $50 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
10. Alcohol Fuel Credit and Partial Exemption from Federal Excise Tax on Gasoline
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The credits and excise tax exemptions are intended to encourage the substitution of alcohol
fuels produced from renewable sources for gasoline and diesel fuel.
Background and authority
The provisions exempted “gasohol” (a motor fuel composed of at least 10 per cent alcohol),
including methanol and ethanol, which are not produced from petroleum, natural gas, coal or peat,
from 5.4 cents (6.0 cents for methanol) of the 18.4 cents per gallon Federal excise tax on gasoline.
Smaller exemptions are allowed for motor fuel with lower alcohol content.  There is a corresponding
income tax credit for alcohol used as a fuel in applications where the excise tax is not assessed.  This
credit, amounting to 54 cents per gallon for alcohol (60 cents for methanol) used as a motor fuel, is
intended to encourage substitution of alcohol for petroleum-based fuel.  In addition, small producers
of ethanol are eligible for a 10 cent per gallon income tax credit.  The credit is included in a
taxpayer’s income.
The alcohol fuel credits are authorized by sections 38 and 40 of the Internal Revenue Code,
while the excise tax exemptions are authorized by sections 4041, 4081 and 4091 of the Code.  The
alcohol fuels mixture credit and the pure alcohol fuels credit were enacted as part of the Crude Oil
Windfall Profit Tax Act of 1980, at the rate of 40 cents per gallon for alcohol that was 190 proof or
more, and 30 cents per gallon for alcohol between 150 and 190 proof.  The credits were increased in
1982 and 1984.  The Omnibus Reconciliation Act of 1990 reduced the credits to 54 cents and 40 centsfor ethanol and ethanol blends and introduced the 10 cent per gallon income tax credit for small
ethanol producers.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 35
Form
Income tax concession and reduced excise tax rates on fuels containing alcohol.
To whom and how assistance is provided
The credits reduce the federal income tax of qualifying producers and blenders.  The seller of
alcohol fuels containing 85 per cent alcohol derived from natural gas pays the applicable, lower motor
fuel excise tax rate.  The blender of ethanol-based fuels (and methanol not produced from petroleum,
natural gas, coal or peat) who mixes ethanol or another qualified alcohol with gasoline or diesel fuel
to produce gasohol or “diesohol” may purchase gasoline or diesel fuel from a seller at a terminal rackat excise tax-reduced rates or receive a refund if the blender later mixes fully taxed fuels with alcohol;
these mixtures must be between 5.7 and 10 per cent alcohol to enjoy the favourable excise tax
treatment.
Amount
The amount of the credit ranges from $0.40 - $0.54 per gallon for blenders and $0.10 per
gallon for small producers.  The excise tax exemption amounts to $0.07 per gallon for a fuel
containing 85 per cent alcohol derived from natural gas; $0.54 per gallon for the ethanol contained in
gasohol; and $0.60 per gallon for the qualified methanol contained in gasohol.  Revenue loss is $10million per year for the alcohol fuel credit.  The annual revenue loss for the excise tax exemption was
$615 million in 1995 and $670 million in 1996 with respect to the excise tax exemption.
Duration
The tax credits expire at the end of the year 2007; the reduced excise tax rate expires
30 September 2007.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
11. Credits for Electricity Production from Wind and Biomass
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The purpose of the credits is to encourage the development and utilization of electric
generating technologies that use specified renewable energy resources, rather than conventional fossil
fuels.
Background and authority
Taxpayers are allowed a 1.5 cent credit per kilowatt hour for electricity produced from
qualified wind energy or “closed-loop” biomass.  The electricity must be produced from a facility
owned by a taxpayer and it must be sold to an unrelated third party.  The credit is allowed for the firstG/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 36
ten years of production from a new facility.  The credit applies to electricity produced by facilities
placed in service after 1992 and before July 1, 1999 for biomass, and after 1993 and before July 1,
1999 for wind.  The provision was adopted as part of the Energy Policy Act of 1992 and authorized in
section 45 of the Internal Revenue Code.
Form
Income tax concession.
To whom and how assistance is provided
The production credits reduce income taxes for taxpayers producing electricity from certain
renewable sources.
Amount
The amount of the credit amounts to $0.015 per kilowatt hour, produced from qualified wind
or biomass.  The annual revenue loss was less than $100 million.
Duration
The tax credits phase out for new facilities during 1999.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
12. Exemption from the Deficit Reduction Component of Motor Fuel Excise Tax for
Helicopters Providing Transportation Services for the Development or Removal of Hard
Minerals, Oil or Gas
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To conform the rules for the deficit reduction tax on motor fuels to those established under
the Airport and Airway Trust Fund tax on aviation fuel.
Background and authority
The exemption was enacted as part of Public Laws 101-239 and 103-66, and implemented in
section 4261(e)(2) of the Internal Revenue Code.
Form
An exemption from an otherwise applicable deficit reduction excise tax on motor fuels.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 37
To whom and how assistance is provided
Otherwise taxable aviation fuel may be sold tax-free for use in such helicopters so long as they do not
use certain airports and are not subject to air traffic control during the period of exempt use.
Amount
4.3 cents per gallon.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
FISHERIES
1. Commercial Fishing Exemption from Deficit Reduction Rate Component of Excise Tax
on Motor Fuels
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To treat fisherman comparably to farmers in the provision of a partial exemption from the
motor fuel excise tax for fuel consumed in the course of business.
Background and authority
The authority for the exemption was enacted in Public Laws 101-239 and 103-66, which are
implemented in sections 4042(d)(1)(B) and 6421(e)(2)(B)(ii) of the Internal Revenue Code.
Form
Exemption from otherwise applicable deficit reduction excise tax rate on motor fuels.
To whom and how assistance is provided
Commercial fishermen can purchase untaxed diesel fuel or can receive a refund for any taxes
paid on gasoline used in commercial fishing boats.
Amount
4.3 cents per gallon.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 38
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from this provision.
LUMBER & TIMBER
1. Capital Gains Treatment of Certain Timber Income
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To assist the growth of domestic timber.
Background and authority
Certain timber sold under a royalty contract can  be treated as capital gains for income tax
purposes.  The maximum rate for individuals on long-term capital gains is generally 20 per cent; it is
10 per cent for long-term capital gains that would otherwise be taxed at a 15 per cent rate.  The capital
gains tax treatment is authorized under sections 1231 and 631 of the Internal Revenue Code.
Form
Income tax concession.
To whom and how assistance is provided
Some non-corporate owners of timber property receive income tax concessions in the form of
a reduction in the rate of tax from 39.6 per cent to 20 per cent, or from 15 per cent to 10 per cent.
Amount
The annual revenue loss was $50 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 39
2. Expensing of Multiperiod Timber Growing Costs
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The original ability to expense indirect costs of timber growing apparently stemmed from a
general view that these costs were maintenance costs, and thus deductible as ordinary costs of a trade
or business.  Following a series of revenue rulings and court cases over the years distinguishingbetween what expenses might be deductible and what expenses might properly be capitalized, the Tax
Reform Act of 1986 included uniform capitalization rules requiring indirect expenses to be capitalized
in most cases.  However, where the application was deemed to be unduly burdensome, such as for
timber, exceptions were provided.
Background and authority
Generally, costs must be capitalized when goods are produced for inventory used in one’s
own trade or business, or under contract to a third party.  Timber production, however, was
specifically exempted from these multiperiod cost ru les and permitted to subject such costs to current
expensing.  These provisions were authorized by sections 162 and 263A(c)(5) of the Internal Revenue
Code.
Form
Income tax concession.
To whom and how assistance is provided
Timber owners may expense, rather than capitalize, certain deductions from taxable income.
Amount
The annual revenue loss was $500 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
3. Investment Credit and Seven-Year Am ortization for Reforestation Expenses
Period covered by the notification
The period covered is the fiscal year 1997.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 40
Policy objective and/or purpose
To promote reforestation on private timberlands.
Background and authority
A special 10 per cent investment tax credit is allowed for up to $10,000 invested annually in
clearing land and planting trees for the ultimate production of timber.  The same amount of forestation
investment may also be amortized over a seven- year period.  Without this preference, the amount
would have to be capitalized and could be recovered (deducted) only when the trees were sold or
harvested 20 or more years later.  Moreover, the amount of forestation investment that is amortizableis not reduced by any of the investment credit that is allowed.  These provisions are authorized by
sections 48(b) and 194 of the Internal Revenue Code.  They were originally enacted in the
Recreational Boating Safety and Facilities Improvement Act of 1980.
Form
Income tax concession.
To whom and how assistance is provided
Applies to taxpayers on the amortizable basis of qualified timber property acquired during the
year and reforestation costs incurred during the year as allowances against Federal income taxes.
Amount
The annual revenue loss was $45 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
4. Exemption from the Deficit Reduction Component of Motor Fuel Excise Tax for
Helicopters in Logging Operations a nd Other Timber-Related Activities
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To conform the rules for the deficit reduction tax on motor fuels to those established under
the Airport and Airway Trust Fund tax on aviation fuel.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 41
Background and authority
The exemption was enacted as part of Public Laws 101-239 and 103-66, and implemented in
section 4261(e)(2) of the Internal Revenue Code.
Form
An exemption from an otherwise applicable deficit reduction excise tax on motor fuels.
To whom and how assistance is provided
Otherwise taxable aviation fuel may be sold tax-free for use in such helicopters so long as
they do not use certain airports and are not subject to air traffic control during the period of exempt
use.
Amount
4.3 cents per gallon.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
METALS, MINERALS AND EXTRACTION (NON-FUEL)
1. Expensing for Exploration and Development Costs for Non-Fuel Minerals
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To encourage the development of the domestic non-fuel mineral industry.
Background and authority
The provisions permit certain capital outlays associated with exploration and development of
non-fuel minerals to be expensed rather than depreciated over the life of the asset.  They are
authorized by sections 263(1)A, 291, 616-617, 56 and 1254 of the Internal Revenue Code.  The
expensing of mine development expenditures was enacted in 1951 to reduce ambiguity in the then-existing treatment of, and to encourage, mining.  The provision for mine exploration was added in
1966.  The Tax Equity and Fiscal Responsibility Act of 1982 limited expensing for corporations to
85 per cent; the remaining 15 per cent must be depreciated.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 42
Form
Income tax concession.
To whom and how assistance is provided
Non-fuel mineral producers and royalty owne rs are permitted, for Federal income tax
purposes, to expense certain capital outlays associated with the development of non-fuel minerals
rather than to amortize these outlays over the life of the mine.
Amount
The annual revenue loss was less than $50 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
2. Excess of Percentage Over Cost Depletion for Non-Fuel Minerals
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To encourage the development of the domestic non-fuel mineral industry.
Background and authority
These provisions permit most non-fuel mineral extractors to make use of percentage depletion
rather than cost depletion, with percentage depletion rates ranging from 22 per cent for sulphur to5 per cent for sand and gravel.  Percentage depletion is authorized by sections 611-613 and 291 of the
Internal Revenue Code.  Percentage depletion similar to its current form was provided in 1932 at
23 per cent for sulphur and 15 per cent for metal mines.  From 1932 to 1950, percentage depletion
was extended to most other minerals.  The Revenue Act of 1951 granted it to more minerals.  In 1954,
still more minerals were granted the allowance, and foreign mines were granted a lower rate.  In 1969,the top depletion rates were reduced.  The Tax Equity and Fiscal Responsibility Act of 1982 reduced
the allowance for corporations that mine iron ore by 15 per cent.  The Tax Reform Act of 1986 raised
the cutback in corporate allowances of iron ore from 15 to 20 per cent.
Form
Income tax concession.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 43
To whom and how assistance is provided
Non-fuel mineral extractors are permitted de ductions from taxable income for depletable
expenditures equal to the larger of percentage or cost depletion.
Amount
The annual revenue loss was $300 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
3. Capital Gains Treatment of Iron Ore
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To encourage the mining of domestic iron ore.
Background and authority
The provisions permit certain iron ore and timber sold under a royalty contract to be treated as
capital gains for federal income tax purposes.  The maximum income tax rate for individuals onordinary income is 39.6 per cent.  The maximum rate for individuals on long-term capital gains is
generally 20 per cent; it is 10 per cent for long-term capital gains that would otherwise be taxed at a
15 per cent rate.  The capital gains tax treatment is authorized under sections 1231 and 631 of the
Internal Revenue Code.  As with coal, percentage depletion is not allowed when the capital gains tax
rate is below the regular tax rate.
Form
Income tax concession.
To whom and how assistance is provided
Some non-corporate owners of iron ore mining properties receive income tax concessions in
the form of reduction in the rate of tax from 39.5 per cent to 20 per cent, or from 15 per cent to 10 per
cent.
Amount
The annual revenue loss was negligible (i.e ., considerably less than $50 million).G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 44
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.
4. Special Rules for Mining Reclamation Reserves
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
In allowing the current deduction of mine reclamation and similar expenses, the provisions
encourage reclamation and prevent adverse economic effects on mining firms that might result fromapplication of general tax rules regarding deduction of future costs.
Background and authority
The provisions permit taxpayers to establish reserves to cover certain costs of mine
reclamation and of closing solid waste disposal properties.  Net increases in reserves may be taken as
a deduction against taxable income.  The provisions are authorized by section 468 of the Internal
Revenue Code and were enacted in 1984.
Form
Income tax concession.To whom and how assistance is provided
Taxpayers engaged in mining and solid waste disposal properties receive deductions from
taxable income based on the accrual of liabilities rather than the realization of costs.
Amount
The annual revenue loss was less than $50 million.
Duration
Indefinite.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of this
provision.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 45
TIMEPIECES
1. The Insular Possessions Watch Programme
Period covered by the notification
The period covered are calendar years 1997 and 1998.
Policy objective and/or purpose
The insular watch programme is designed to encourage watch production in the US insular
possessions and thereby stimulate development of the insular economies.
Background and authority
The US Department of Commerce and the US De partment of the Interior jointly administer
the Insular Possessions Watch programme under Public Law 97-446, as amended by Public Law 103-
465.
Form
Duty exemptions and duty refunds in the form of negotiable production incentive certificates.
To whom and how assistance is provided
The assistance is provided to watch producers located in the US Virgin Islands, Guam,
American Samoa and the Northern Mariana Islands.  At present, there are producers only in the US
Virgin Islands.
The programme establishes an annual allocation for watches and watch movements
assembled in these areas to enter the United States duty-free.  The programme also provides
production incentive certificates which authorize a duty refund from Customs on (US  HTS non-
column 2) watch movements, watches and parts therefor which have entered the United States duty-
paid.  The subsidy amount is based on the duty foregone on the finished watches as well as the value
of the production certificates.  Since the watches and the watch movements produced under theprogramme already receive duty-free treatment, the certificate is negotiable and may be transferred to
another company having a record of duty-paid watch imports.  The value of the certificate is based on
the producer’s average creditable wages per unit shipped free of duty into the United States multiplied
by a factor of 90 per cent for the first 300,000 units and by declining percentages in additional
increments up to a maximum of 750,000 units.
Amount
Production Incentive Certificate (“PIC”)
Year Issued (1) Total Amount (2)
1998 $2,979,999G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 46
(1) The amount of each producer’s PIC is based on the 1997 creditable wages and the number of
watch and watch movement shipments free of duty into the United States.
(2) 1% is deducted from the total amount of the duty refund shown above to cover the
administrative costs of processing by Customs.
 
Duty Exemption
1997 approximately $0.8 million to $1.1 million. (3)
(3) The number of duty-free shipments of watches and watch movements into the United States
in 1997 amounted to 922,229 units.  The average unit invoice amount billed to customers was
used to approximate the average duty rate per unit.  This was used to calculate the
approximate duty exemption of $0.8 to 1.1 million.
Duration
Under differing programmes, general duty suspensions for insular products appear to date
back to US acquisition of the territories -- 1917, in the case of the US Virgin Islands.  The criteria
were made uniform in 1954 and a limit was placed on watches in 1967.  The production incentivecertificates were authorized in 1983 for a 12-year period and reauthorized for an additional 12-year
period in 1995.
Trade Effects
Producers benefiting from the subsidies account for about 1 per cent of US annual domestic
consumption and do not ship to non-US customers.
OTHER
1. Exemption from Off-Highway Use from the Deficit Reduction Rate Component of the
Motor Fuel Excise Tax
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
To conform treatment of off-highway fuel use under the deficit reduction tax to the treatment
of off-highway fuel use under the Highway Trust Fund tax on motor fuels.
Background and authority
This exemption was enacted as part of Public Laws 101-239 and 103-66, and was
implemented in section 6421(e)(2) of the Internal Revenue Code.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 47
Form
An exemption from the otherwise applicable deficit reduction excise tax rate on motor fuels.
To whom and how assistance is provided
The exemption is granted to off-highway business users of motor fuel, who can be refunded
for any taxes paid on such fuel.  (Note: Only some  of these off-highway uses involved the production
of a product.)
Amount
4.3 cents per gallon.
Duration
Indefinite.
Trade effects
It is not possible to estimate what trade effects, if any, may result from this provision.
Federal-Level Programmes
(Regional Assistance)
1. Empowerment Zones and Enterprise Communities
Period covered by the notification
The period covered is the fiscal year 1997.
Policy objective and/or purpose
The purpose of this assistance is to encourage revitalization of distressed areas.  Nominated
areas must meet certain population, distress, size and poverty rate criteria in order to be eligible,
ensuring that assistance is targeted to areas experiencing high economic distress.  The use of taxincentives reflects a desire to encourage the private sector, guided by market forces and supported in a
non-bureaucratic fashion through government assistance, to be a driving force behind the increased
economic activity.  Some restrictions on the types of business activities and investments were
imposed in order to limit potential abuses.
Background and authority
The Omnibus Budget Reconciliation Ac t of 1993 (OBRA) authorized a Federal
demonstration project in which nine empowerment zones and 95 enterprise communities would be
designated in a competitive application process.  Of the nine empowerment zones, six were to belocated in urban areas and three in rural areas.  State and local governments would jointly nominate
distressed areas and propose strategic plans aimed at economic and social revitalization.  By
30 June 1994 application deadline, over 500 communities had submitted applications.  OnG/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 48
21 December 1994, the Secretaries of Housing and Urban Development and of Agriculture designated
the empowerment zones and enterprise comm unities authorized by Congress in OBRA.
Businesses located in empowerment zones are eligible for the following Federal tax
incentives: (i) an employment and training credit for 20 per cent of the first $15,000 of wages paid to
employees who live and work in the empowerment zone; (ii) an additional $20,000 per year of
expensing, instead of depreciation, of capital investments by small businesses; and (iii) a new
category of tax-exempt private activity bonds.  Businesses located in enterprise communities are
eligible for the new category of tax-exempt bonds.
Form
Income tax concession.
To whom and how assistance is provided
The employment and training credit and an additional $20,000 per year of expensing are
provided when the recipient business completes its ta x return.  No registration is needed to qualify for
the tax incentives.  The new category of tax-exempt private activity bonds requires a local initiation
and state offering of the bonds.  The subsidy is reflected in the lower interest rate charged on the
bonds, because interest income on them is excluded from Federal taxable income.
The 20 per cent employment and training credit is provided to zone businesses for each
$15,000 of wages paid to a zone resident.  Substantially all of the employee’s services must be
provided in the zone to be eligible.  The $20,000 of additional expensing is targeted to assist small
businesses because the benefit of expensing begins to phase out when the level of investment exceeds$200,000.  To qualify for the expensing, businesses must also meet other criteria, such as having at
least 35 per cent of employees who reside in the zone.  Businesses located in enterprise communities
are also eligible for the new category of tax-exempt bonds.  Up to $3 million per business per zone in
bond funding and $20 million per business for all zones is available.
Amount
During the first five years of the programme, the tax incentives are estimated to yield up to
$1.6 billion in federal government revenue loss.
Duration
Tax incentives have been available since the zones and communities were designated on
21 December 1994.  Designation will remain in effect for up to 10 years.  The designation may be
revoked if the state or local government modifies the boundaries of the area or does not comply with
the agreed strategic plan.  The employment and training wage credit is 20 per cent of up to $15,000 of
qualified wages from 1994 to 2001.  For 2002 through 2004, the credit rate decreases by fivepercentage points each year.
Trade effects
It is not possible to estimate what, if any, trade effects may result from the use of these
provisions.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 49
Federal-Level Programmes
(General Export Programmes)
1. The Export Credit Programmes of the US Export-Import Bank
Period covered by the notification
The period covered is through the fiscal year 1998.
Policy objective and/or purpose; background and authority
The US Export-Import Bank of the United States (Ex-Im Bank) is authorized by the Export-
Import Bank Act of 1945 to provide credits, guarantees and insurance, including commercial and
political risks, to support exports of US goods and services.  The financial support is to be at rates and
on terms that are competitive with government-supported rates and terms available from othercountries whose exports compete with US exports.  All Ex-Im Bank programmes are in full
conformity with the OECD guidelines on export cr edit practices and, concomitantly, the Agreement
on Subsidies and Countervailing Measures.  Inasmuch as other official authorities offer official
financing in support of exports from their countries, US Ex-Im Bank has offered similar financing.
Form; amount
The US Federal Credit Reform Act of 1990 (Credit Reform) made fundamental changes in
the budgetary treatment of direct loans, loan guar antees and insurance.  Credit Reform, which became
effective in FY 1992, shifted the accounting basis for federally provided or guaranteed credit from the
amount of cash flowing into or out of the Treasury fo r a credit programme, to the estimated cost of the
loans, guarantees and insurance.  Credit Reform re quires an annual appropriation that is used to set
aside a loan-loss reserve to cover expected losses in  recognition of the cost to the US Government of
running an official export credit programme.
Under the accounting procedures required by Credit Reform, the cost of Ex-Im Bank
programmes is calculated as the difference between the amount committed and the present value ofthe expected cash inflows, each discounted by the interest rate on marketable Treasury securities of
like maturity.  This includes the cash flows specified in the contract financed by Ex-Im Bank as well
as "expected" deviations from contract terms including delinquencies, defaults, prepayments, and
other factors.
For direct loans, cash outflows include loan disbursements and cash inflows include
repayment of principal and interest net of defaults, fees, and other recoveries.  For loan guarantees and
insurance, cash outflows include payments to cover default claims and interest supplements, and cash
inflows include fees and recoveries.  The cost is  calculated from the cash flows using a model
developed by the US Office of Management and Budget.
The following tables show the US Government budget authority value for Ex-Im Bank direct
loan, loan guarantee and insurance programmes.  Due to the unique nature of US credit reform
calculations, the numbers presented in the tables are not comparable with short-term cash-flow data
presented by other government export credit agencies.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 50
TABLE I
Direct Loan Budget Authority
($ millions)
Direct Loan
Fiscal Year Levels          Budget Authority %
       1992    817.1  31.9  3.9%
       1993  1,748.0  96.3  5.5%       1994  3,016.4 387.4 12.8%
       1995  1,598.3  96.4  6.0%
       1996  1,236.3  98.3  8.0%
       1997  1,548.9  43.7  2.8%
       1998     102.5  16.5 16.1%
TABLE II
Loan Guarantees and Insurance Budget Authority
($ millions)
G'tee & Insurance
Fiscal Year Levels  Budget Authority %
    1992     11,521.0 570.6 5.0%
    1993     13,315.3 533.1 4.0%
    1994     11,870.0 536.8 4.5%
    1995     10,266.6 537.2 5.2%
    1996     10,281.4 771.7 7.5%    1997     10,609.9 767.1 7.2%
    1998     10,433.0 700.3 6.7%
Duration
Ex-Im Bank activities are subject to periodic renewal under US law.  Current Ex-Im Bank
activities extend through September 2001.
Trade effects
It is impossible to estimate the quantitative trade effects of Ex-Im Bank subsidies without
examining the export credit subsidies offered by other countries.  In general, Ex-Im Bank offers
subsidies to counter trade distorting subsidies offered by foreign governments.  Thus, the effect of Ex-
Im Bank subsidies is to neutralize foreign-government provided export credit subsidies so that market
forces are the main determinants of purchase decisions by foreign buyers.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 51Agricultural Support Programmes
APPENDIX A
1995 Programme Year:  Selected Programme Parameters, Average Market Prices,
Government Payments, and Net Lending Costs
Commodity Units Acreage reduction
requirement
%Price support rate
$ per unitAverage market
price
$ per unitDeficiency
payment rate1
$ per unitGovernment
payments2
$ millionFY 1996 Net
lending3
$ million
Corn Bushel 7.5 1.89 3.24 0.00/0.40 71.0 -412.3
Grain sorghum Bushel 0 1.80 3.19 0.00/0.39 25.5 -9.5
Barley Bushel 0 1.54 2.89 0.00/0.40 40.2 -3.7
Oats Bushel 0 0.97 1.68 0.00/0.10 2.9 -0.1
Wheat Bushel 0 2.58 4.55 0.00/0.70 108.7 26.6
Rice Hundredweight 5 6.50 9.15 3.22/4.21 471.3 -127.9
Upland cotton Pound 0 0.5192 0.7540 0.00/0.037 5.8 45.4
ELS cotton Pound 10 0.7965 1.2280 0.00/n.a. 0.0 0.7
Soybeans Bushel n.a. 4.92 6.77 n.a. n.a. -67.6
Minor oilseeds4Hundredweight n.a. 8.70 11.50 n.a. n.a. -
Rye Bushel n.a. 1.61 2.90 n.a. n.a. -0.1
Honey Pound n.a. 0.50 0.685 n.a. n.a. -10.5
Sugar (raw
cane/beet)Pound n.a. 18.0/22.9 22.76/25.26 n.a. n.a. -63.0
Milk Hundredweight n.a. 10.29 14.42 n.a. n.a. -138.9
Peanuts (quota/
additional)5Pound n.a. 0.339/0.066 0.293 n.a. n.a. 98.0
Tobacco (flue-cured/burley)Pound n.a. 1.601/1.737 1.790/1.854 n.a. n.a. -495.9
Wool/mohair Pound n.a. 2.210/4.657 1.04/1.84 0.54/1.409 55.9 5.0
Total 781.3 -1153.8
1The first deficiency payment rate is the actual payment rate and the second deficiency payment rate is the guaranteed rate unde r the 0/85-92 provisions for wheat and feed grains
and 50/85-92 provisions for upland cotton and rice.
2Incentive payment rate for wool and mohair.
3FY 1996 = 1 October 1995-30 September 1996.  Ne gative number denotes a receipt to the Government.  Loans made minus loan repaym ents minus marketing assessments.
Source:  History of Budgetary Expenditure of the CCC, FY 1990-1996 Act.
4Includes sunflowerseed, safflower, canola, rapeseed, mustard seed and flaxseed.  Average market price is for sunflowerseed.
5Average market price reflects total farm sales of peanuts.
n.a. means not applicable.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 52
APPENDIX B
United States
Statistics of Production, Consumption, Imports and Exports
Commodity/Year Production     Consumption Imports Exports
Wheat  (June-May) (-----million metric tons -----)
  1993/94  65.2  33.7   3.0  33.4
  1994/95  63.2  35.0   2.5  32.3  1995/96  59.4  31.0   1.8  33.8
  1996/97  62.2  35.6   2.5  27.3
  1997/98 (estimate)  68.8  34.3   2.4  28.2
Coarse Grains  (marketing years) (-----million metric tons -----)
  1993/94 186.4 185.9   4.0  40.3
  1994/95 284.9 207.9   3.4  62.4
  1995/96 209.4 180.1   2.8  63.0
  1996/97 267.6 206.4   2.9  51.5  1997/98 (estimate) 265.4 214.6   3.1  44.2
Rice  (Milled Basis)(August-July) (-----million metric tons -----)
  1993/94   5.2   3.3   0.2   2.5
  1994/95   6.6   3.3   0.2   3.3
  1995/96     5.6   3.4   0.2   2.7
  1996/97   5.5   3.2   0.3   2.5
  1997/98 (estimate)   5.8   3.5   0.3   2.7
Soybeans  (September-August) (-----million metric tons -----)
  1993/94  50.9  37.3   0.2  16.0
  1994/95  68.5  42.4   0.1  22.8
  1995/96  59.2  40.3   0.1  23.2
  1996/97  64.8  42.5   0.2  24.0
  1997/98 (estimate)  74.2  46.5   0.2  24.9
Sunflowerseed  (September-August) (-----million metric tons -----)
  1993/94   1.2   1.1 1/   0.1
  1994/95   2.2   1.9 1/   0.3  1995/96   1.8   1.5 1/   0.2
  1996/97   1.6   1.5 1/   0.1
  1997/98 (estimate)   1.7   1.7 1/   0.2G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 53
Commodity/Year    Production     Consumption Imports Exports
Flaxseed  (June-May)  (-----million metric tons -----)
  1993/94   0.1   0.2   0.1 1/
  1994/95   0.1   0.2   0.2 1/  1995/96   0.1   0.3   0.2 1/
  1996/97   1/   0.3   0.2 1/
  1997/98 (estimate)     0.1   0.3   0.2 1/
Rapeseed/Canola  (September-August) (-----million metric tons -----)
  1993/94   0.1   0.4   0.4 1/
  1994/95   0.2   0.4   0.3 0.1
  1995/96   0.3   0.4   0.3 0.1
  1996/97    0.2   0.4   0.3 0.1
  1997/98 (estimate)   0.4   0.6   0.3 0.1
Safflowerseed  (September-August) (-----million metric tons -----)
  1993/94   0.2   0.2     1/  0.1
  1994/95   0.2   0.2     1/     1/
  1995/96   0.2   0.2     1/     1/  1996/97   0.2   0.2     1/     1/
  1997/98 (estimate)   0.2   0.2     1/     1/
Mustardseed  (June-May) (-----million metric tons -----)
  1993/94     1/   0.1   0.1     1/
  1994/95     1/   0.2   0.1     1/
  1995/96     1/   0.2   0.1     1/
  1996/97     1/   0.2   0.1     1/
  1997/98 (estimate)  0.1   0.2   0.1     1/
Peanuts  (August-July) (-----1,000 metric tons-----)
  1993/94 1,539 1,420     1   251
  1994/95 1,927 1,500    33   398
  1995/96 1,570 1,421    68   374
  1996/97 1,661 1,405    57   324  1997/98 (estimate) 1,604 1,362    63   318
1/  Less than 50,000 tons.
NA  Not Available.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 54
Commodity/Year       Production               Consumption Imports      Exports
Dairy/Butter  (Calendar Year) (-----1,000 metric tons-----)
  1993  596 548 2  145
  1994  588 570 1     94  1995  573 538  2     04
  1996  533 518   1        09
  1997 (estimate)  522 500   4        23
Dairy/Cheese  (Calendar Year) (--- --1,000 metric tons-----)
  1993 2961  3090   145      19
  1994 3054  3193   151      25
  1995  3138  3274   153      28
  1996 3274 3360 152      32
  1997 (estimate) 3345 3451 145      35
Dairy/Nonfat Dry Milk  (Calendar Year) (--- --1,000 metric tons-----)
  1993 433   292     1   138
  1994 558   418     1   123
  1995 559   410     1   170  1996 482   460     2     31
  1997 (estimate) 550   414     2   125
Beet and Cane Sugar  (October-September) a/
  1993/94 7,656 9,333 1,768   457
  1994/95 7,927 9,337 1,834   520
  1995/96 7,370 9,554 2,772   385
  1996/97 7,205 9,742 2,774   211
  1997/98   (estimate) 7,825 9,850 2,174   185
a/ in 1,000 short tons, raw value equivalent, deliveriesHoney   (Calendar Year) (-----millions of pounds -----)
  1993 229.3 342.0 133.6   8.5
  1994 217.2 354.9 123.2   8.3  1995 210.0 342.0  88.6   9.3
  1996 192.0 331.0 132.0  15.2
  1997 198.4 337.3 154.3   9.5
Upland and ELS Cotton  (August-July) (-----million 480 lb. bales- ----)
  1993/94 16.13 10.42  0.006   6.86
  1994/95 19.66 11.20   0.020  9.40
  1995/96  17.90 10.65   0.408  7.68
  1996/97 18.94 11.13  0.403  6.87  1997/98 (estimate) 18.79 11.50   0.00  7.50G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 55
Commodity/Year       Production          Consumption       Imports      Exports
Tobacco  (unmanufactured, dry weight) (-----1,000 metric tons-----)
  1993/9   641    667   264   197
  1994/95   538   670    199 209  1995/96   625   714   326 222
  1996/97   668   710   307 222
  1997/98 (estimate)   615   700   315 225G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 56Attachment 1
Notification of State-Level Measures
State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Alabama Property Tax
AbatementTax exemption (state/county/ municipal
property tax)Manufacturers of aluminum, aluminum
products, or calcium cyanamideMax. 10 yrs.
Alabama Franchise Tax
ExemptionTax exemption Regional for companies locating or
expanding in an area where unemploymentrate is above national average.
Alabama  Industrial Fuels and
Raw MaterialsDepartment of Revenue Tax exemption (sales and use) For the following products: wrapping
materials and pallets used in  packaging and
shipping poultry and egg products.
Alabama  Industrial Fuels and
Raw MaterialsDepartment of Revenue Tax exemption (property) The following products that are held in
storage:  (1) cotton; (2) tobacco leaf;
(3) peanuts and pecans; (4) materials and
products stored for textile production.
Arizona Defense Restructuring
Assistance ProgramTax incentives (corporate and individual
income tax credit; and deduction of
depreciation or amortization cost)Any qualified contractor that employs at least
200 full-time employees, has one or more
manufacturing, or R&D contracts with theU.S. Department of Defense, totalling at least
$5 million and does not provide products or
services directly to military bases.
Arizona  Military Reuse Zone Private Activity Bonds
issued by local Industrial
Development AuthoritiesTax incentives Manufacturer, assembler, or fabricator of
aviation or aerospace products
Arizona Environmental
Technology AssistanceDepartments of Commerce
and Revenue (Sections41-1514.02; 42-5075, B, 5;
42-12008, 5; 43-1169)Tax incentives Sales tax incentives, favourable property tax
assessments and income tax credits forconstruction costs to any enterprise which
constructs an “environmental technology
facility”.
Arizona Enterprise Zones Sections 41-1521, et seq.;
42-12008, 4; 43-1161 of
Arizona state code.Administered by
Departments of Commerce
and Revenue.Tax incentives Income tax credits for net increases in
qualified business employees; favourable
property tax assessments for “smallmanufacturing businesses” including
minority- and women-owned businesses.
 Arkansas Enterprise Zones Tax incentives The following businesses located in targeted
areas: manufacturers (SIC 20 - 39); computer
firms (SIC 7375 and 7876); office sector
business; corporate head-quarters; truckingsector (SIC 4231)
Arkansas Aerospace Incentives Tax incentives (sales and use tax credits) Aerospace companies Min. investment of $5 million
may claim a sales/use tax on
purchase of materials.
Arkansas Aerospace Incentives Tax incentives (income tax credit) Aerospace companies $2,000 credit on income tax for
each job created when hiring at
least 50 new employees.
Arkansas Cotton Mills Tax exemption (property tax) Manufacturers of cotton and fibre goods 7 yrs.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 57State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Arkansas Industrial Fuels and
Raw MaterialsTax exemption (sales and use taxes) Sales of processed crude oil; sales of
electricity for the primary smelting of
aluminum by electrolytic reduction; sales of
electricity and natural gas to qualified steelmills or for manufacturing glass; and sales of
chemicals in the production of yeast
California Repair Underground
Storage Tank Loan
ProgramsCalifornia Trade and
Commerce AgencyLoans Small business owners who want to repair,
replace, remove or upgrade underground
storage tanks$ 4 million available for loans o f
up to $350,000 per borrower or
$50,000 per tank; loan can be
used to finance up to 90% of
project costs.20 yrs if secured
by real estate;
and 10 yrs if
secured by
equipment
California Enterprise Zones California Trade and
Commerce AgencyTax incentives, bonds, and other subsidy
programsCompanies located in targeted areas qualify
for one of the two enterprise zone programs:a) Waters program (must meet certain criteria
- from distressed area and/ or provide
community service)b) Nolan program (available to any type of
business)Since 1986
California Employees in
Economic IncentiveAreasCredit Businesses in an economic development
program area that hire employees.
California Hardwoods Industry
InitiativeTrade and Commerce
Agency and Department of
Forestry and Fire ProtectionLoans and technical assistance Firms located in nine targeted northern
California counties that are involved in
developing new uses and markets for
products made of California hardwoods.Since October
1996
California Local Agency Military
Base Recovery ActTrade and Commerce
AgencyTax credits and other assistance  Firms located in designated zones proximate
to former military bases.Below-market rental of base
property; sales and use tax crediton specified equipment and
machinery; selective wage
credits and net operating losscarryovers from 1 January 1991
to 31 December 1995.Since October
1993
Colorado Enterprise Zones Colorado Urban Rural
Enterprise Zone ActTax incentives Any business locating or expanding within
the 17 designated enterprise zonesSince 1986
Colorado Job Creation Tax CreditColorado revised statutes Credit against Colorado corporate income
taxBusinesses creating jobs and investing in
Colorado, especially new business facilities
located in counties with populations of fewerthan 50,000 and that hire new employees.$50 for each new employee and
$50 for each $100,000 of new
investment; these credits doublein counties with population of
less than 50,000.Expired 1996
Connecticut Naugatuck Valley
Revolving Loan FundConnecticut Development
AuthorityLoans Manufacturing businesses, located in the
Naugatuck Valley region and certain othertowns, that are unable to secure private
financing.NVRLF requires every $1 in
NVRLF money to be matchedwith $2 in private funds.  The
max. loan is $200,000 and the
below market rate is setperiodically by the NVRLF
Committee.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 58State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Connecticut Urban Jobs Program Connecticut Dept. of
Economic DevelopmentTax incentives (local property tax
abatement, and corporate business tax
reduction); grants; working capital loans;
reduced industrial mortgage guarantees andinterest rates for loansManufacturers located in targeted areas. As of June 30, 1988, $480
million in investment have been
receivedSince 1978
Connecticut Enterprise Zones Connecticut Dept. of
Economic DevelopmentTax incentives (local tax, corporate
business tax, state real estate conveyancetax, and sales tax on machinery
replacement parts); low-cost loansManufacturers located in targeted areas. Since 1982
Connecticut Machine Tool and
Metal Trade
ApprenticeshipCredit  Machine tool and metal trades.
Credit is provided to employers creating
additional apprenticeships.Credit is provided for training
during the first half of the
apprenticeship program in the
amount of $2.50 per hour, up tothe lesser of 50% of the wages
paid during the year for each
apprenticeship or $3,000.
Delaware Enterprise Zones Bonds Manufacturers, first-time farmers, and
pollution control facilities in targeted
investment communities.
Delaware  Targeted Areas Tax
IncentivesTax incentives (corporate income tax
credits and gross receipts reductions)Businesses located in targeted areas for
economic development.
Florida Qualified Defense
Contractor Tax Refund
ProgramFlorida Dept. of Commerce Tax refund Defense contractors which preserve and
promote high technology employment base.$5,000 per job created or saved.
Florida Enterprise Zones Florida Dept. of Commerce Tax incentives (incl. property tax,
occupational license fees, utility tax)Businesses in targeted investment
communities.Since 1980
a)  Corporate income tax and/or sales tax
creditsCredit is provided to employers creating
additional jobs.10% - 15% of the wages paid to
each new employeeCredit available
for up to one
year
b)  Corporate income tax credit Businesses with new, expanded, or rebuilt
facilities.Corporate income tax credit
equal to the amount of ad
valorem taxes paid on thepropertyCredit available
for a period of
up to 5 yrs.
c)  Sales tax refund Businesses who paid for building materials
used to rehabilitate real property.Sales tax refund can range from
$500 to $10,000 depending on
residency of the employees
d)  Sales tax refund Businesses who purchase new and used
business property.Refund on sales taxes range
from $100 to $10,000 depending
on residency of the employees.
e)  Utility tax (exemption from municipal
utility tax and state sales tax on utilities)Receive a 50% exemption from
the municipal utility tax and
totally exempted from the state
sales tax on utilitiesAvailable for up
to 5 yrs.
Georgia Appalachian Regional
Commission
Infrastructure FundsGeorgia Dept. of
Community AffairsFederally funded grants Cities and counties in the north GA area for
infrastructure improvements that will result in
the creation of permanent jobs. Project funds are usually
$200,000 or less.  GA has
received ca. $1.8 million each
yr.  ARC funds up to 50% ofproject costs.  No more than
80% of the funds may come
from federal sources.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 59State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Georgia Business Development
Revolving Loan Fund
ProgramGeorgia Dept. of
Community AffairsLoans Businesses in targeted investment
communities of the Appalachian Region (35
counties); mostly in the downtown areas of
those communities.Receive below market rate loans
on a matching basis.
$1 million pool of money
available.
Georgia Enterprise Zones Atlanta Economic
Development CorporationTax exemption (inventory) Businesses located in targeted areas
(3 zones).1983
Georgia Job Tax Credit Georgia Department of
Community AffairsTax incentive (tax credit) All counties in state are divided into one of
three tiers, according to four (economic)
factors. The tiers each provide a different
level of benefits, thereby providing regionaldifference. Based on the tier of an area,
businesses engaged in manufacturing,
warehousing and distribution, processing,tourism, and R&D receive tax credits
accordingly.Tier one (least developed):
$2,500 tax credit for each new
job created.
Tier two:  $1,500Tier three:  $500
 Georgia Investment Tax Credit Georgia Department of
RevenueTax incentive (credit against income tax
liability)Based on the same tiers as mentioned in the
job tax credit.Tier one:  5% - 8% credit if
company invests $1 million.Tier two:  3% - 5%
Tier three:  1% - 5%
Georgia Electricity Exemption Georgia Department of
RevenueTax exemption Electricity purchased and used in
manufacturing a product when the total costof the electricity comprises 50% or more of
all materials used in making the product.Beginning in 1995, the
exemption will be phased inover five years.  It allows
20-40-50-80-100 percent
exemption on the sales tax.Since 1995
Hawaii Paper and Pulp
ManufacturersTax exemption (real property tax) Property used in the manufacture of pulp and
paper from bagasse.
Hawaii Commercial Fishing
Vessels FuelsIncome tax credit Operators of commercial fishing vessels
Hawaii Enterprise Zones Dept. of Taxation Tax exemption (General Excise Tax) and
tax incentives (credits)Businesses located in targeted areas.  7-yr exemption from general
excise taxes on gross proceeds,
an 80% first-yr income tax
abatement, and income taxcredit equal to 80%
unemployment taxes paid during
the first year.
Hawaii Loans to independent
sugar growers Section 155-15 of Hawaii
state code; administered by
Hawaii Department ofAgriculture.Loans Growers of raw sugar, excluding (except for
members of processing cooperatives)
producers who process their own sugarcane,and provided that the grower’s production of
raw sugar does not exceed 4.500 tons/year.Loans at an interest rate not to
exceed 2 percent/year for which
no collateral is required, to assistgrowers with supplemental loans
to cover deficits in certain
periods.Repealed 1995
Illinois Coal Demonstration
ProgramIllinois Dept. of Energy &
Natural ResourcesGrant The state shares with the private sector the
technological and financial risks inherent in
proving the feasibility of new clean coal
technologies.State’s contribution to a project
is limited to 20% of the total
project cost.
Illinois Development Finance
Authority Direct Loan
FundIllinois Development
Finance AuthorityIntend to create jobs in areas of high
unemployment.  Businesses can obtain
supplemental financing of up to $250,000 for
projects which create or retain existing jobs.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 60State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Illinois Rail Freight Program Illinois Dept. of
TransportationLoans and grants Communities and businesses which improve
or construct rail facilities87 projects have been
undertaken at a cost of $45.9
million since its inception
Illinois Enterprise Zones Illinois Dept. of Commerce
and Community AffairsTax incentives (state income tax) Manufacturers located in targeted investment
communities (90 zones).Not to exceed
20 yrs.
a)  State income tax investment credit Individuals, corporations, trusts, estates and
partnershipsCredit may be
carried forwardfor up to 5 yrs.
b) Jobs tax credit Businesses $500 credit on income taxes for
each job created for
disadvantaged workers.  A min.of 5 employees must be hired.Credit may be
carried forward
for up to 5 yrs.
c)  State income tax incentive  Businesses conducting a major portion of
their operations business in a zone.Annual state income tax
dividend deduction for the
amount of dividends paid
d) State sales tax exemption Businesses purchasing tangible personal
property to be used or consumed in the
manufacturing or assembly process or in theoperation of a pollution control facility.
Business must make a $5 million investment,
create 200 full-time jobs or an investment of$40 million for the retention of 2,000
full-time jobs.A 6.25% state sales tax
exemption
e) State and local utility tax and sales tax
exemptionsBusinesses contingent on job creation or job
retention.
f) State and local construction materials taxexemptionFor materials purchased from a retailer in the
same jurisdiction.6.25% tax exemption
g) Real estate tax abatements (local) on real
propertyRestricted to the tax on improvements added
to real estate.
Indiana Enterprise Zones Indiana Department of
CommerceTax incentives; low-interest loans; tax
increment financing; etc.Businesses located in targeted areas. 5% tax credit on interest from
loans for property improvement;
10% tax credit on employer tax
on employee wages; propertytax credits; employee tax
deduction
Indiana Economic
Revitalization Areas Property tax abatement To all taxpayers making improvements to real
property located in designated urbandevelopment areas.
Indiana Industrial Machinery
and EquipmentSales and use taxes exemptions Motor vehicles, trailers, and aircraft
Iowa Enterprise Zones Section 15E.196 of Iowa
state codeTax incentives Eligible businesses locating in certified
enterprise zones
Iowa Quality Jobs Enterprise
Zone Program Section 15A.9 of Iowa state
codeTax incentives Eligible businesses locating in designated
Quality Jobs Enterprise Zones.  (Note:
eligibility deadlines under this law expired in1994, so program is currently inactive.)G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Inception
Kansas  Enterprise Zones Tax incentives All commercial enterprises (except retail) and
counties in Kansas are eligible for basic
enterprise zone status, but non-metropolitan
counties are eligible for enhanced incentivesif they have completed strategic planning.Since 1982
a) Income tax credits Mining, manufacturing, interstate
transportation, R&D, and certain wholesaletrade.The credit differs depending on
the location of the facility andthe type of facility ($1,500 to
$2,500 for each new employee
hired; $1,000 for each $100,000
of qualified capital investment;
however, cannot exceed 50% ofthe taxpayers total liability)
b) Sales tax  The sales and installation of machinery and
equipment purchased for a qualified business
facility.
c) Exemption from state and local sales tax Sales of property purchased in conjunction
with the construction, reconstruction,
enlargement or remodelling of a business.
Kansas Industrial Machinery
and EquipmentTax exemption (sales tax) Aircraft, aircraft parts, and aircraft repair;
motor vehicles, and railroad rolling stock.
Kansas  High Performance
Incentive ProgramTax credits and other forms of assistance Businesses categorized with Standard
Industrial Classification (SIC) categories
20-49, or 60-89, with enterprises fallingwithin SIC40-49 and 60-89 needing to show
that at least 51% of sales were to Kansas
manufacturers and/or out-of-state commercialor government customers.Sales tax incentive; 10%
investment tax credit on capital
investment exceeding $50,000;workforce training tax credit of
up to $50,000/year; and priority
consideration for other stateassistance programs.
Kentucky Enterprise Zones Enterprise Zone Authority Tax incentives and regulatory relief Businesses located in targeted investment
communities (10 zones).Since 1983, 2,280 new or
expanded businesses have
located in zones.
a) Exemption from sales and use taxes Building materials used in remodelling, or
new construction, and new and used
equipment and machinery purchased
b) Exemption from motor vehicle usage
taxesVehicles purchased and used; for
non-commercial vehicles exemption is
limited to the first $20,000 of the retail price.
 c) Tax credit New employees hired who have been
unemployed for at least 90 days.Credit against the tax levied
equal to 10% of wages paid toeach new employee (up to
$1,500 per employee) Unused credit
may be carriedforward for up
to 5 yrs.
d) Reduce ad valorem tax Business property (may not apply to all
zones)Can reduce tax to 0.1% upon
each $100 of value.
Kentucky Industrial Machinery
and EquipmentTax incentives (state income tax credit) New or expanding manufacturing plants in
counties with unemployment rates in excess
of the state average.Credits of up to 100% of debt
service costs on land, buildings,
and equipment.
Kentucky Industrial Fuels and
Raw MaterialsTax exemption (sales and use taxes) Coal used to manufacture electricity; energy
used in manufacturing, mining, processing, or
refining if cost of fuel is greater than 3% of
the production cost.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Page 62State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Kentucky  Other Incentives Kentucky Revenue Cabinet Tax exemption (sales and use taxes, and
local property tax)For fuel alcohol production facilities, and
facilities burning coal by fluidized bed
combustion.
Louisiana  Enterprise Zones Office of Commerce and
IndustryBusinesses located in targeted areas.
a) Sales and use taxes refunds Purchase of materials used in the building or
in machinery and equipment.Refund of the state’s portion of
the sales/use tax imposed on thepurchase.
b) Credit towards state income or corporate
franchise tax liabilityHire new permanent employees. $2,500 tax credit earned for each
new permanent employee.  An
additional $2,500 for each activerecipient of state welfare
assistance that is hired for at
least 2 yrs.
c) Tax credit Manufacturers of aircraft or certain aerospace
vehicles. $5,000 tax credit
Louisiana Biomedical Research
and Development ParkTax exemption (state corporation income
and franchise taxes)Medical and health care-related businesses
located in the New Orleans Regional MedicalCenter.Exemption shall not exceed 30%
of the corporate income,franchise and states sales/use
taxes during the preceding fiscal
year.
Maine Mining Property Tax exemption (property tax) Mines of gold, silver, or base metals For 10 yrs. from the time of
opening.
Maine Industrial Fuels and
Raw MaterialsMaine Dept. of Finance and
AdministrationTax exemption (property tax) Forest products, including logs, pulpwood,
wood chips, and lumber.
Maryland  Enterprise Incentive
Deposit FundDepartment of Business and
Economic DevelopmentLoans Businesses located in a county that has a
population under 200,000 and an
unemployment rate of at least 130% of the
state unemployment rate during the mostrecent four consecutive quarters.Interest rate of fixed 3% below
the lender’s customary rate for
similar loans.  Linked deposits
are limited to $500,000.Since 1989
Maryland Seafood and
Aquaculture Loan FundDepartment of Business and
Economic Development;
Maryland IndustrialDevelopment AuthoritySecured loans Businesses engaged in aquaculture or seafood
processing.
Loan program wants to encourage innovation,expansion, and modernization.Loans can range from $20,000
to $800,000 per project.Since 1990
Maryland Bioprocessing Fund Department of Business and
Economic DevelopmentEquity capital incentive awards Companies planning to establish a
bioprocessing operation, or contract for the
use of the Maryland Bioprocessing Center.Awards can range from $50,000
to $200,000 per project.Since 1993
Maryland Enterprise Zones Department of Business and
Economic DevelopmentIncome and property tax credits Businesses located in targeted areas.  There
are 31 state-designated zones, while firms
locating in the federally-designatedEmpowerment Zone in the city of Baltimore
are also included.One-to-3 year income tax credits
for wages paid to new
employees in the zone.  A $500credit against corporate income
tax for each new employee
($3,000 credit for eachdisadvantaged employee).
A 10-yr. credit against local
property taxes for improvementto property.  For the first 5 yrs,
credit is 80% of the taxes due on
the improvement and for everyfollowing yr. 10% less.Since 1982; all
zones are
designated for10 yrs.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Page 63State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Massachusetts Venture Capital Fund Community Development
Finance CorporationLoans and, in some cases, equity financing Firms in low-income communities which
have community development corporations,
to enable them to expand or retain
employment for local residents.$100,000 to $300,000 per
project, up to 1/3 of total
financing
Massachusetts Urban Initiative Fund Community Development
Finance CorporationLoans Minority-owned businesses with less than
$500,000 in annual sales in target urban
minority communities.Loans up to $200,000
 Massachusetts Industrial Machinery
and EquipmentTax exemptions (sales and use taxes) Tools, dies, moulds, and patterns used to
manufacture cast metal products.
Michigan Enterprise Zones Dept. of Commerce Businesses located in targeted areas. (One
zone)Incentives are
limited to10 yrs.
a) Tax exemption (property tax) Instead of property tax, the
business pays a specific tax
equal to 40% of the usual advalorem property taxes.
b) Tax exemption (business tax) Business that is new to the zone or a business
that at least doubles the value of its plant andequipment.
c) Tax exemptions (sales and use taxes) Business purchases
Michigan Renaissance Zones Michigan Jobs Commission Selective time-limited exemptions from
most state and local taxesBusinesses and residents located within
specified geographic areas within 11
communities located in economicallydistressed areasTax free status
began 1 January
1997.  Zonedesignation
varies from 10
to 15 years,depending on
location, with
tax relief phasedout in 25%
increments over
last 3 years ofdesignation.
Michigan Technology Park
Development ActTax abatement (property tax) New facilities locating in technology parks
(e.g., R&D, high-technology industrialactivities, business activity related to
development or improvement of existing
products or creation of new products).The abatement is equal to a 50%
reduction in property taxes andmay be granted for periods of 1
to 12 yrs.Since 1984
Michigan Industrial Machinery
and EquipmentTax exemption (sales and use taxes)  Manufacturing, telephone and telegraph, and
commercial vessels.
Michigan Industrial Machinery
and EquipmentTax exemption (local property tax) Special tools for manufacturing, wood
harvesting equipment, and farm implements.
Michigan  Industrial Fuels and
Raw MaterialsTax exemption (local property tax) Solid or liquid sugar held or owned by
processors, and metallic mineral ores
Minnesota Challenge Grant
ProgramRural Development Board Loans New and expanding businesses located in
designated regional areas.Since 1989, more than 300 loans
have been provided and have
totaled more than $15 million.Since 1989
Minnesota Urban Challenge Grant
ProgramMinnesota Dept. of Trade
and Economic DevelopmentGrants New and expanding minority and
women-owned enterprises located in targeted
areas.Loans will be more than $5,000
and less than $150,000.
Up to $12 million available.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Page 64State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Minnesota Enterprise Zones Minnesota Dept. Of Trade
and Economic DevelopmentBusinesses located in targeted areas:
(1) competitive enterprise zones and
(2) border city enterprise zones.Since 1982, $42 million in tax
credits have been approved.Since 1982.
a) Property tax credit1. Competitive Enterprise Zones
New business or additional property taxes
incurred through expansion.
 b) Income tax credit Construction or expansion of new facilities. Credit for a portion of the cost
of debt financing used in
construction or expansion.
c) Income tax credit For each new employee hired. Up to $3,000 annually.
d) Exemption from sales tax Purchasing construction materials or
equipmentTax is fully paid and reimbursed
as an income tax credit.
a) Employer’s income tax credit2. Border City Enterprise Zones
For each existing employee. Credit of $1,500 per year.
b) State-paid property tax credit On an existing commercial or industrial
facility.
Mississippi Job Creation Tax Credit Tax incentives (credit on corporate income
tax)Based on the ranking of an area (depending
on unemployment and per capita income
figures), businesses that create jobs.Less developed: $2,000 annually
for each new full-time employee
Moderately developed: $1,000
per employee.
Industrial Machineryand EquipmentTax exemption (sales tax) Manufacturers which locate in a less
developed county receive sales tax exemption
on construction materials.
Mississippi Salt and Salt Leases Mississippi Dept. of
Economic and Community
DevelopmentTax exemption (property tax) All underground salt or salt that is processed
or producing properties.
Missouri Planned Industrial
Expansion AuthoritiesMissouri Dept. of Economic
DevelopmentTax abatement (on ad valorem taxes) The city must identify an area as blighted,
unsanitary, or as an undeveloped industrialarea.Companies that finance their
projects with P.I.E. issued bondsreceive a 25-yr abatement on ad
valorem taxes.
Missouri Land Clearance for
RedevelopmentAuthoritiesMissouri Dept. of Economic
DevelopmentBonds Redevelopment authority that develops
structures for commercial/industrial purposesin a designated blighted or unsanitary area.Bonds shall be sold at not less
than 95% of par at public sale.
Missouri Enterprise Zones Missouri Dept. of Economic
DevelopmentTax incentives Businesses located in designated areas (57
zones).
a) Investment tax credit 10% credit of the first $10,000
investment, 5% of the next
$90,000, and 2% of the
remaining.
b) Tax credit Up to a $1,200 credit for each
new employee hired.
c) State income taxation exemption Up to one-half of the MO
taxable income earned by thefacility
d) Tax abatement Property used for manufacturing, mining,
warehousing or wholesale distributing.A min. 50% abatement for at
least 10 yrs on improvements to
real property usedG/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Page 65State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Missouri Industrial Fuels and
Raw MaterialsTax exemption (sales and use taxes) Materials used to produce steel, electricity
consumed in the manufacturing process,
provided the cost of the electricity exceeds
10% of total production costs.
Montana  Coal Tax Loan
ProgramMontana State Board of
InvestmentLoans For the acquisition of land, building,
equipment, and working capital.Since inception, 387 loans for
$125 million were approvedSince 1984
Montana Other Incentives Tax incentives (corporate income tax) Expenditures for organic fertilizer produced
and used.
Montana Other Incentives Montana Dept. of Revenue Tax exemption (property tax) Small mining operations.
Nebraska Enterprise Zones Department of Revenue Tax credits Businesses located in targeted areas. (i) $4500 for each new
employee and $3000 per $75000
of investment provided at least50% of new employees are zone
residents;
(ii) $4500 for each newemployee who is a zone
resident, $1500 for non-zone
residents and $1000 per $75000of investment;
(iii) $1500 per employee and
$1000 per $75000 ofinvestment.Since 1993
Nebraska Tire Clean-up Department of
Environmental QualityGrants Businesses who have accepted scrap tires. Varying percentage of cost for
different clean-up programsSince 1994
 Nebraska Ethanol Tax Credit Department of Revenue Tax credits Producers of ethanol meeting various criteria. $0.20 per gallon Since 1996
Nebraska Employment and
Investment Growth ActDepartment of Revenue Tax credits Specific types of businesses which make
major investments in employees and property,
with some limitations.Varying percentage based on
minimum required investment
levels.Since 1987
Nebraska Negotiable Electrical
Incentive Rates for
Large User Expansion
and LocationsMunicipalities, public
power districts and
irrigation districts Negotiated electricity rates for five-year
periodsEligible businesses making a certain level of
investment and employment and having a
certain electrical demand.Varies, based on negotiation
with individual firms.Since 1995
Nebraska Nebraska
Redevelopment Act
(LB830)Department of Revenue Grants, loans, other financing Primary employers creating 500 jobs and
investing $50 million within a five-year
period in qualified property located in a
blighted or substandard area.
Nebraska  Nebraska Quality Jobs
ActDepartment of Revenue Allow up to 5% withholding of employee’s
state income taxes by the recipient firmEligible companies making a certain level of
investment and employmentAllow retention by the company
of state income taxes from
wages paid to new employees
not to exceed 5% to be used bythe company for an employee
benefit programSince 1995
Nevada Partial Exemption from
Business TaxNevada Commission on
Economic DevelopmentTax exemption Business located in counties of 35,000 or less
in population and who will have 25 new
full-time employees and a capital investment
of $250,000 or more.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Inception
New Jersey Direct State Loans New Jersey Economic
Development AuthorityLoans Preference is given to enterprises located in
economically targeted areas or representing
targeted business sectors.  Moreover,
job-intensive projects located in citiesreceiving state Urban Aid receive highest
priority. In 1993, $6.9 million loans
granted.
Mortgage financing is provided
at below-market rates of interest.Loan approval is a competitive
process with a required min. 1:1
public/private dollar match.
New Jersey Urban Centers Small
Loan ProgramNew Jersey Economic
Development AuthorityLoans Program is designed to strengthen downtown
commercial areas in cities receiving state
Urban Aid or other economically distressed
communities.A loan may range from $5,000
to $50,000 for a max term of 10
yrs at an interest rate of 1%
below the federal discount rate
with a floor of 4% and ceiling of10%.
New Jersey Urban Development
CorporationNew Jersey Economic
Development AuthorityLoans, loan guarantees, and equity
investmentProjects located in a qualified municipality,
i.e., which has at some time been eligible for
Urban Aid or Depressed Rural Centers Aid.
New Jersey Enterprise Zones New Jersey Dept. of
Commerce and Economic
DevelopmentTax incentives (credits) Businesses located in targeted areas (20
zones).$1,500 or $500 for each new
hire.
New Jersey Urban Development
ProjectTax incentive (tax credit) A business located within a qualified Urban
Development Project.$1,500 tax credit for certain new
hires.
New Jersey Five-Year Tax
AbatementNew Jersey Dept. of
Commerce and Economic
DevelopmentTax abatement (property tax) Municipalities are eligible to offer (property)
tax abatement on commercial and industrial
properties in areas in need of rehabilitation.
New York JDA Direct Loan
ProgramNew York Job
Development AuthorityLoans Priority given to projects that contribute to
the revitalization of distressed areas.Low-interest loans. Since 1962
New York Rural Development
Loan FundNew York Job
Development AuthorityLoans New and emerging businesses in distressed
rural communities, and communities with
1980 populations of 25,000 or less, forenvironmentally sound development projects.Provide up to 20% of the total
project costs.Since 1982
New York Long-Term Economic
Development FundNew York Job
Development AuthorityLoans To areas suffering long-term economic
deterioration and decline or sudden andsevere job losses.Loan amounts are in the range
of $50,000 to $150,000.
New York Expansion, Retention,
and Attraction
Assistance ProgramNew York State Urban
Development CorporationLoans Loans are available to industrial firms that
create or preserve substantial jobs, expand or
retain businesses, relocate to NY, andenhance physically substandard and
insanitary areas.Loans will not exceed 33% of
total project cost, and min. loan
amount is $100,000.
New York Energy Products Center New York State Energy
R&D AuthorityMarketing assistance and financial
assistanceBusinesses involved with a technology,
product, or service that generates newsupplies of energy more efficiently and
cleanly.Up to $500,000 of project cost
may be funded, with 50%co-funding.
New York Enterprise Zones New York State Dept. of
Economic DevelopmentBusinesses located in targeted areas (19
zones). 800 businesses have qualified
for zone benefits.Since 1986
a) Tax incentive (wage tax) 50% refundable wage tax credit
for up to five yrs. for every new
full-time employee (between$750 and $1,500).G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Inception
b) Tax incentive (investment tax credit) Onetime credit of 8% to 10% for
any investment costs, and a 30%
investment credit for production
corporations.
c) Tax exemption (sales tax) For tangible personal property used in
constructing, expanding, or rehabilitating
industrial/commercial property.
d) Tax incentive (personal/corporate
income taxes)For the purchase of share in a zone capital
corporation, direct equity investments, or
contributions for community developmentprojects. 25% of the investment; up to a
lifetime total of $300,000 in
credits.
e) Tax exemption (real property tax) On improvements to zone businesses. 100% up to 7 yrs.; 75% in year
eight, 50% in year 9, and 25% in
year 10.
f) Tax exemption (local sales tax) For tangible personal property used in
construction, improvement, or rehabilitation
of industrial or certain commercial property.
New York Property Tax
AbatementTax abatement (real property taxes) Industrial or commercial construction or
reconstruction in designated areas of NY
City.
New York Industrial Fuels and
Raw MaterialsNew York State Dept. of
Economic DevelopmentTax exemptions (sales and use taxes) Components used/consumed in
manufacturing, mining, and R&D, as well asfuels and utilities used or consumed directly
in such activities (manufacturing fuels and
utilities are taxable in NYC). Regionalpreference for locating outside of NYC.
N. Carolina Biotechnology Center N. Carolina Biotechnology
CenterGrants, loans, and awards For novel biotechnology-related R&D
projects.In 1991 to 1992, the Center
awarded 67 grants and loans
totalling more than 4.5 million.
N. Carolina Industrial Building
Renovation FundN. Carolina Dept. of
CommerceLoans Businesses located in the 50 most
economically distressed counties.For every job created $2,400; up
to $250,000 for repair of
industrial facility.Interest rates are below market
interest rates.
Since 1987, $14 millionapproved.Since 1987
N. Carolina Job Creation Tax Credit Tax credits Manufacturing firms that create full-time jobs
in designated economically distressed
counties. Tax credit of $2,800 per job
created.
N. Carolina Industrial Machinery
and EquipmentTax exemption (state sales and use taxes) Commercial fishing.
N. Carolina Industrial Fuels and
Raw MaterialsTax incentives (sales and use taxes) Freezer machinery Reduced rate of 1% for sales
and use taxation.
N. Dakota Coal Conversion
FacilitiesTax incentives (property tax) Coal conversion facilities.
Ohio Urban Jobs and
Enterprise Zone
Program Ohio Dept. of DevelopmentTax incentives (corporate income tax) Businesses located in targeted areas. Up to $1,000 for every new
employee; day care expense
credit of up to $300 peremployee.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Inception
Ohio Enterprise Zones Tax exemption (real and personal property
tax)Businesses located in designated areas. Tax exemptions can last up to
10 yrs.
Ohio Energy and Fuel
Conservation MeasuresTax exemption (corporate franchise tax) Coal conversion facilities Any income generated for up to
30 yrs.
Oklahoma Enterprise Zones Ohio Dept. of Commerce Tax incentives Businesses located in targeted areas Double the amount of
investment tax credits allowed
for investments in depreciableproperty; double the amount of
tax credits for new employees.Since 1983
Oklahoma Industrial Machinery
and EquipmentTax exemption (sales and use taxes) Machinery and equipment used in
manufacturing nonintoxicating beverages.
Oklahoma  Industrial Machinery
and EquipmentTax exemption (local property tax) Machinery and equipment used to produce
oil, gas and minerals.
Oklahoma Energy and Fuel
Conservation MeasuresTax exemption (sales and use taxes) Ethyl alcohol in motor fuel.
Oregon Port Districts Economic Development
Dept. Bonds - IDBs Businesses located in targeted areas (23 port
districts).Tax-exempt industrial
development bonds; can be used
for up to 100% of the estimated
cost of the project; issued for upto 30 yrs.; in 1990, issued 5
bonds for $20.25 million; since
the inception, issued 134 bondsfor $399 million.
Oregon Industrial Development
Bonds/Locally IssuedPortland Development
CommissionBonds - IDBs Portland is the only city currently meeting the
size limitation of more than 300,000 in
population.See IDBs above.
Oregon Business Development
FundEconomic Development
Dept.Loans Specified businesses located in rural or
economically depressed areas are given
preferential treatment.Max. of 40% OBDF
participation; max. loan size is
$250,000, and no more than20% of the Fund’s assets can be
invested in any one county;
through April 1992, 192 loansapproved totalling $16.2 million.Loan term
cannot exceed
20 yrs. or theuseful life of the
project.
Oregon Entrepreneurial
Development Loan
Fund Economic Development
Dept.Loans Businesses located in severely affected
communities, as defined by EDD.Loan amount limited to $25,000;
the term of a loan is limited to
five yrs; the rate of interest isfixed over the term of the loan at
two percent over the commercial
bank prime rate.
Oregon Business Retention
ServiceEconomic Development
Dept.Technical assistance and grants (for
feasibility studies)Preference given to firms in forestry and
fishing.For feasibility study, the
company must provide 25% of
the cost of service.  The grant
cannot exceed $30,000.  From1988 to 1991, assistance has
been provided to 45 firms.
Oregon Industrial Fuels and
Raw Materials Dept. of Forestry Tax incentive (credit against corporate and
personal income taxes)Reforestation of underproducing lands.
Taxpayers must own or lease 5 or more acres
of commercial forest land, and must invest at
least $500.Credit can amount to 30% of the
costs of reforesting.  Credit may
be carried forward up to 3 yrs.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
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Inception
Oregon Enterprise Zones Oregon Economic
Development Dept.Tax exemption (property tax) Businesses located in targeted areas (24
zones)3 yrs tax exemption. Through 1991,
121 companies
received $373.1
million.
Pennsylvania Industrial Communities
Site ProgramPennsylvania Dept. of
CommerceGrants Manufacturing, industrial and R&D
enterprises that bring industrial land into
productive uses.  Projects located in “blightedindustrial land” are eligible.Max. grant is $1.5 million.  In
1992, 13 grants totalling $7.3
million were approved.
Pennsylvania Enterprise Zones Pennsylvania Dept. of
Community AffairsBusinesses located in targeted areas (48
zones).
a)  Financial assistance As of 1992, over $200 million o f
state funding.
b)  Tax incentive (credit) 25% tax credit, or $250,000,
whichever is less.
Pennsylvania Industrial Development
AuthorityPennsylvania Dept. of
CommerceLoans Manufacturers, industrial firms, R&D
enterprises located in enterprise zones and
certain other limited areas.PIDA provides up to 70% of the
financing for eligible projects.
Interest rates range from 2% to
5%.  In 1993-94, 137 loanstotalling $91 million approved.
Pennsylvania Machinery and
Equipment Loan FundPennsylvania Dept. of
CommerceLoans Companies must be engaged in
manufacturing, industrial and mining
businesses.The interest rates range from 2%
to 5%.  The interest rates are
based upon the unemploymentrate. Since 1989
Pennsylvania Storage Tank Loan
FundPennsylvania Dept. of
CommerceLoans Small storage tank facility owners or
operators identified by the Dept. of
Environmental Resource as potentially liablefor release of a regulated substance.Participation shall not exceed
$50,000 or 75% of total project
cost, whichever is less.  Interestrates are 2% and a term of up to
10 yrs.  Since 1992, 32 loans
totalling $740,000 wereapproved. Since 1992
Pennsylvania Sunny Day Fund Governor’s Response Team Loans Large manufacturing, industrial or R&D
businesses.Interest rates vary from 3% to
6% depending on area and aterm of up to 15 yrs.
Rhode Island Enterprise Zones Tax incentives Businesses located in the targeted areas (5
zones)
a) Tax credit (corporate and personal
income taxes)25% of workforce is made up of enterprise
zone workers.Max. credit of $10,000 or 50%
credit of enterprise zone worker.
b) Tax credit (interest income credit) Lender Lender may be eligible for a tax
credit of 10% of the interest paid
to the lender.  Max. $10,000 peryear.
c) Cash donation credit Businesses that provide cash donations to a
municipality for public supported
improvement projects.Tax credit of 20% of the
donation provided; max.
$10,000 per year.
d) Rehabilitation interest credit Lender financing construction, rehabilitation
of commercial property.Tax credit for up to 100% of the
interest paid to the lender.
Value of the loan must be at
least 25 % of the basis of theproperty (max. $20,000).G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 70State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
e) Resident business owner tax credit Business owners who also reside in the
targeted area.Allowed deduction of up to
$50,000 per year during the first
3 years, and $25,000 in years 4
and 5.
South Dakota Industrial Machinery
and EquipmentTax exemption (use tax) Drilling rigs
South Dakota Industrial Fuels and
Raw MaterialsTax exemption (use tax) Coal and wood products used for
manufacturing and industrial purposes.
Tennessee Jobs Tax Credit Tax credit Businesses located in economically distressed
areas.$3,000 applied against the
amount of increase in the
corporation’s franchise taxliability caused by its expansion.
Texas Capital Fund Real
Estate Development
ProgramTexas Dept. of Commerce Grants Non-entitlement cities and counties which
generally are those with less than 50,000 and
200,000 in population, respectively,  toacquire, construct or rehabilitate real estate to
support new businesses to invest in the area.
Texas  Capital Fund Small
Business Incubator
ProgramTexas Dept. of Commerce Grants To establish a new small business incubator
or expand an existing small business
incubator located in non-entitlement cities
and counties which generally are those withless than 50,000 and 200,000 in population,
respectively.
Texas Capital Fund Loan
ProgramTexas Dept. of Commerce Loans New business development and expansions in
non-entitlement cities and counties whichgenerally are those with less than 50,000 and
200,000 in population, respectively..Interest rates will be fixed at the
Wall Street Journal prime,unless the need for a subsidized
rate can be documented through
financial analysis.
Texas Capital Fund Small
and/or Minority
Businesses Loan
ProgramTexas Dept. of Commerce Loans Small and/or minority businesses located in
non-entitlement cities and counties which
generally are those with less than 50,000 and
200,000 in population, respectively..Interest rates are fixed at Wall
Street Journal prime, unless the
need for a subsidized rate can be
documented through financialanalysis.
Texas Rural Economic
Development FundTexas Dept. of Commerce Loan guarantee Businesses located in designated rural areas
Texas Enterprise Zones Texas Dept. of Commerce Incentives are determined by the
municipality.Businesses located in designated areas Zones can exist
for up to 7 yrs.
Utah Enterprise Zones Utah Dept. of Community
and Economic DevelopmentTax incentive Businesses located in targeted areas who
create new jobs or invest in new plants and
equipment.Credits must be
claimed within 3
yrs.
Utah a) Income tax credit or a corporate
franchise tax creditFor each new employee $1,250 credit on income tax for
each job created.
Utah b) Investment tax credit or corporate
franchise taxInvestment in new plants and equipment. 10% of the first $10,000 in
investment, 5% of the next$90,000, and 2% of the
remaining investment.
Vermont Economic
Development AuthorityVermont Economic
Development AuthorityLoans Businesses located in economically less
prosperous areas.
Vermont  Job Creation Tax
CreditTax incentives (credit against corporate or
individual taxes)Employers within the state’s three job
development zones.G/SCM/N/3/USA/S uppl.1, G/SCM/N/ 16/USA/Suppl.1,
G/SCM/N/25/USA/Supp l.1, G/SCM/N/38/USA
Page 71State Program Title Authority for subsidy Form of Subsidy To Whom Amount Duration &
Inception
Virginia Solar Photovoltaic
Manufacturing GrantsVermont Dept. of Economic
DevelopmentGrants Manufacturer who sells solar photovoltaic
panels manufactured in the state.Grants of 75 cents per watt of
the rated capacity of panels sold
are available for a five year
period.  The max. grantavailable is $4.5 million.Since 1993,
until 1999.
Virginia Enterprise Zones Vermont Dept. of Housing
and CommunityDevelopmentTax incentives (state income tax credits;
use tax exemption)Businesses located in targeted areas (25
zones)Credit of 80% of their income
tax the 1st year, 60% the 2nd,40% the 3rd, and 20% the 4th
and 5th.Since 1982
Washington Fuel R&D Tax exemption (sales and use taxes) Motor vehicle fuel used by manufacturers in
aircraft for R&D.
Washington Industrial Machinery
and EquipmentTax exemption (sales and use taxes) Aircraft, rolling stock, and watercraft; motor
vehicles and trailers used by nonresidents
Washington Industrial Machinery
and EquipmentTax exemption (property tax) Motor vehicles, aircraft, aircraft parts, vessels
under construction in excess of 1,000 tonburden, state-taxable vessels, ships and
vessels in interstate and foreign commerce.
Washington Industrial Fuels and
Raw MaterialsTax exemption (property tax) Ore of metal shipped into state; timber;
hardboard, particle board, and finished
plywood; electrolytically refined metals.
Wisconsin  Enterprise Zones Wisconsin Dept. of
DevelopmentBusinesses located in targeted areas (14
zones).A total of $21.155 million in the
form of state tax credits isavailableSince 1988
a) Refundable job credit For each new employee of certain targeted
groups.40% of the first $6,000 in
qualified wages paid for the 1st
and 2nd yrs of employment.
b) Sales tax credit For sales taxes on building materials and
equipment used.
 c) Non-refundable location credit For costs of acquiring, constructing,
rehabilitating, remodelling, or repairing realpropertyA non-refundable 2.5% location
credit
d) Non-refundable investment credit On depreciable tangible personal property A non-refundable 2.5%
investment credit
e) Non-refundable additional research
creditOn increased expenditures A non-refundable 5% additional
research credit
f) Resident tax credit For every new employee. 10% of the first $6,000 of the
first wages to each employee.
Wisconsin Industrial Fuels and
Raw MaterialsTax exemption (property tax) Natural cheese aging in storage.
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