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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5121 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 5121

To assist in the economic conversion and diversification of industries 
   and small businesses in the defense industrial base of the United 
    States that are adversely affected by significant reductions in 
                     spending for national defense.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 28, 1994

Mr. Klink introduced the following bill; which was referred jointly to 
the Committees on Energy and Commerce, Armed Services, Ways and Means, 
                          and Foreign Affairs

_______________________________________________________________________

                                 A BILL

 
To assist in the economic conversion and diversification of industries 
   and small businesses in the defense industrial base of the United 
    States that are adversely affected by significant reductions in 
                     spending for national defense.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Defense Industrial Conversion Act of 
1994''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds the following:
            (1) In recent years, the United States has reduced its 
        defense spending.
            (2) The reduction in United States defense spending is 
        likely to continue in the foreseeable future.
            (3) Reductions in United States defense spending have 
        resulted and will continue to result in lay-offs and downsizing 
        in industries and small businesses that are economically 
        dependent on defense-related procurement.
    (b) Purpose.--The purpose of this Act is to assist the economic 
conversion, adjustment, and diversification of industries, small 
businesses, communities, and workers economically dependent on defense 
spending through the dissemination of information, the availability of 
tax credits, and creation of a Defense Industrial Conversion Fund.

SEC. 3. OFFICE OF ECONOMIC CONVERSION INFORMATION.

    (a) Establishment.--There is established within the Department of 
Commerce the Office of Economic Conversion Information (in this section 
referred to as the ``Office'').
    (b) Purpose.--It is the purpose of the Office--
            (1) to serve as a central information clearinghouse on 
        matters relating to economic adjustment and defense conversion 
        programs and activities of the Federal and State governments, 
        including political subdivisions of the States; and
            (2) to help potential and actual applicants for economic 
        adjustment and defense conversion assistance under Federal, 
        State and local laws in locating and applying for such 
        assistance, including financial and technical assistance.
    (c) Director and Staff.--The Office shall be headed by a Director. 
The Secretary of Commerce shall appoint and fix the compensation of the 
Director. The Director may appoint such personnel as may be necessary 
to enable the Office to perform its duties.
    (d) Information Databases.--
            (1) Uses.--The Office shall develop information databases 
        for use by Federal departments and agencies, State and local 
        governmental agencies, public and private entities, and 
        individuals to assist such agencies, entities, and individuals 
        in the process of identifying and applying for assistance and 
        resources under economic adjustment and defense conversion 
        programs and activities of the Federal, State, and local 
        governments.
            (2) Federal agencies and programs.--The databases 
        established pursuant to paragraph (1) shall include a 
        comprehensive compilation of all relevant information 
        concerning available economic adjustment and defense 
        conversion-related programs of the Federal Government. The 
        compilation shall identify the administering department, 
        office, or agency, which administers such programs, and key 
        contact people; and descriptions of the application process, 
        eligibility requirements and criteria, selection, and follow up 
        procedures. Such compilation shall also include data as to the 
        expenditure of funds under such programs, projects supported by 
        such programs, and the types and amounts of funding available 
        for assistance under such programs.
            (3) Range of programs.--The range of programs covered by 
        the database shall include the following:
                    (A) Worker adjustment assistance for private sector 
                employees and Federal civilian and military personnel.
                    (B) Community adjustment assistance (planning and 
                implementation), including the so-called ``bricks and 
                mortar'' programs, such as infrastructure rebuilding, 
                and airport improvement.
                    (C) Technology development and deployment programs 
                administered through the Advanced Research Projects 
                Agency, Department of Defense, coordinated Technology 
                Reinvestment Project.
                    (D) Other relevant technology research and 
                development programs administered by the Department of 
                Commerce, National Aeronautics and Space 
                Administration, Department of Energy, the Environmental 
                Protection Agency, Department of Transportation, and 
                the National Institutes of Health and other technology 
                agencies.
                    (E) Small business assistance (financial, 
                technical, marketing).
                    (F) Defense facility environmental restoration.
                    (G) Available tax credits and incentives, relevant 
                regulatory information (environmental, occupational 
                health and safety, and intellectual property rights) 
                affecting application procedures and the implementation 
                of federally supported projects involving economic 
                adjustment and defense conversion.
            (4) Available assistance.--In developing such database, the 
        Office shall survey all Federal departments and agencies in 
        order to identify all relevant assistance and resources that 
        may be available to assist defense-dependent communities, 
        businesses, and workers in their adjustment and conversion 
        efforts, especially the Department of Defense, the Department 
        of Commerce, the Department of Labor, the Small Business 
        Administration, the Department of Housing and Urban 
        Development, the Department of Health and Human Services, the 
        Department of Education, the Department of Transportation, the 
        National Science Foundation, the National Aeronautics and Space 
        Administration, and the Environmental Protection Agency.
            (5) Database of major state and local programs.--The Office 
        shall establish a database containing State and local 
        governmental economic adjustment and defense conversion 
        assistance programs. Such database shall include a current 
        listing of appropriate offices, officers, and contact personnel 
        connected with, or involved in, such programs.
            (6) Defense cutback early warning database.--The Office, 
        working with the Secretary of Defense, shall establish and keep 
        current a database containing a listing of available defense 
        contracts, and information listing military bases and 
        installations expected to be closed, cut back, or realigned, or 
        which are in the process of being closed, cut back, or 
        realigned, including a current listing of States, communities, 
        industries, firms, and employment likely to be most adversely 
        affected as a result thereof.
            (7) Database of conversion efforts and successes.--The 
        Office shall establish a database of listings and descriptions 
        of defense conversion efforts, their successes and failures, as 
        well as a current listing of ongoing conversion and assistance 
        efforts by communities, contractors, and small- and mid-sized 
        businesses, and labor organizations.
            (8) Reference lists and bibliographies.--The Office shall 
        establish a database which shall include a listing of published 
        works (books, reports, articles, videos, and tapes) related to 
        all facets of defense economic adjustment and defense 
        conversion. Such listing shall further include manuals relating 
        to economic adjustment and defense conversion developed by the 
        National Governors Association, the National League of Cities, 
        public interest groups, labor unions, business associations, 
        and similar organizations, and a listing of contact 
        organizations and people for obtaining such references. The 
        Office shall also maintain in electronic form the full texts of 
        selected references and make such references available to the 
        public through online services.
            (9) Alternative product bank for industries and firms.--The 
        Office shall establish a databank of potentially 
        commercializable technologies and products matched to the 
        capabilities of defense-dependent industries and firms. Such 
        databank shall include a short overview of market potential and 
        shall identify potential programs in Federal, State and local 
        governments that may be available to support technology 
        development, deployment, and commercialization in these 
        specific areas.
    (e) Multiple Points of Public Access to Databases.--
            (1) Easy access.--The Office shall establish several 
        mechanisms to assure easy access by the public and others to 
        such databases, and to assure that the databases be as 
        accessible, user-friendly, culturally neutral, and affordable 
        as possible. In addition, the Office shall conduct an extensive 
        outreach to States and communities, especially in the most 
        defense-dependent regions of the Nation, and to a wide range of 
        constituencies, including State and local government officials, 
        chambers of commerce, industrial organizations, labor unions, 
        and community organizations, to publicize the existence of 
        databanks and other assistance and services provided by this 
        Act, and how to acquire such assistance and services, and 
        access such databanks.
            (2) 1-800-toll free number.--The Office shall establish a 
        toll free 1-800 number to provide a first point of entry into 
        the Office information database system. An individual calling 
        such number shall receive information on how to use the Office 
        databases, how to receive printed materials, and how to contact 
        appropriate people in other governmental agencies for 
        information about specific programs, and answer other requests 
        regarding services of the Office.
            (3) Online electronic access through network.--Databases 
        established by the Office shall be easily accessible through 
        existing computer networks and publicly available computer 
        database access facilities, such as at repository libraries and 
        by direct call-in via modem, and shall be menu-driven and 
        highly user-friendly.
            (4) Printed manuals and orientation materials.--The Office 
        shall develop and make available to the public and others a 
        printed manual, and other printed material, reviewing the major 
        Federal agencies and programs engaged in economic adjustment, 
        defense conversion, and technology investments. It shall also 
        serve as a guide to using the databases and services of the 
        Office, list State and local contacts and resources, and 
        include a bibliography of major reference materials.
            (5) Orientation workshops.--The Office shall offer periodic 
        workshops (1-2 weeks long) available to selected 
        representatives from defense-dependent communities, businesses, 
        and occupational groups, to orient and train them in using the 
        Office and the services of the Office.
            (6) Information specialists.--The Office shall maintain on-
        call economic adjustment and conversion information specialists 
        to address special problems requiring person-to-person 
        assistance, as needed.
    (f) Program Evaluation.--
            (1) Review.--The Office shall conduct a regular review of 
        the various agencies and programs in the Federal system 
        involving economic adjustment and defense conversion. Such 
        review shall evaluate the procedures of these agencies and 
        programs, and the success of their activities. Such reviews 
        shall be based on periodic surveys of both Federal officials 
        and recipients of economic adjustment and defense conversion 
        assistance. The Office shall identify problems with the 
        programs and barriers to entry in such programs, for inclusion 
        in the databases established pursuant to this section. Such 
        review shall include recommendations for improving such 
        programs.
            (2) Community roundtables.--The Office shall conduct, on an 
        annual basis, consultative meetings and briefings with defense-
        impacted constituencies drawn from local and State governments, 
        business, labor, community and public interest organizations 
        and academic institutions. Such meetings and briefings shall be 
        held in all major defense-dependent regions of the United 
        States, both to introduce its programs and receive comments and 
        recommendations concerning its services and how to expand and 
        improve them.

SEC. 4. DEFENSE CONVERSION TAX CREDIT.

    (a) General Rule.--Section 46 of the Internal Revenue Code of 1986 
(relating to amount of investment credit) is amended--
            (1) by striking ``and'' at the end of paragraph (2),
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``, and'', and
            (3) by adding at the end thereof the following new 
        paragraph:
            ``(4) the defense conversion credit.''
    (b) Defense Conversion Credit.--Section 48 of such Code is amended 
by adding at the end thereof the following new subsection:
    ``(c) Defense Conversion Credit.--
            ``(1) In general.--For purposes of section 46, the defense 
        conversion credit for any taxable year is the sum of--
                    ``(A) the defense conversion employment credit for 
                the taxable year, and
                    ``(B) the defense conversion investment credit for 
                the taxable year.
            ``(2) Defense conversion employment credit.--
                    ``(A) In general.--The defense conversion 
                employment credit for any taxable year is 10 percent of 
                the qualified wages paid or incurred by a qualified 
                employer during such year.
                    ``(B) Qualified wages.--For purposes of this 
                subsection--
                            ``(i) In general.--The term `qualified 
                        wages' means the wages (as defined in clause 
                        (ii)) paid or incurred by the qualified 
                        employer during the taxable year to, and 
                        amounts paid or incurred by the qualified 
                        employer to third parties for retraining 
                        expenses with respect to, qualified conversion 
                        employees during the period commencing on 
                        January 1, 1995, and ending on December 31, 
                        1999 (`the qualified period').
                            ``(ii) Wages defined.--Except as provided 
                        in subparagraph (C)(ii), the term `wages' has 
                        the meaning given to such term by subsection 
                        (b) of section 3306 (determined without regard 
                        to any dollar limitation contained in such 
                        section), but the amount of wages during any 
                        taxable year which may be taken into account 
                        with respect to any individual shall not exceed 
                        25 percent of the wages (determined without 
                        regard to this subsection) paid to such 
                        individual during such taxable year or portion 
                        thereof included within the qualified period.
                            ``(iii) Retraining expenses.--The term 
                        `retraining expenses' includes all amounts paid 
                        or incurred with respect to educational or 
                        training programs in which a qualified 
                        conversion employee participates to learn or 
                        improve skills necessary or useful to such 
                        employee's employment in the qualified 
                        employer's nondefense-related business.
                    ``(C) Qualified conversion employees.--
                            ``(i) In general.--For purposes of this 
                        subsection, the term `qualified conversion 
                        employees' means an employee of a qualified 
                        employer who had been employed by the qualified 
                        employer or another employer in a defense-
                        related business and who is employed by the 
                        qualified employer in a nondefense-related 
                        business during the taxable year.
                            ``(ii) Proration in case of dual 
                        employment.--If a qualified conversion employee 
                        is employed by the qualified employer in both a 
                        defense-related business and a nondefense-
                        related business during the taxable year, only 
                        the portion of the employee's wages properly 
                        allocable to employment in the nondefense-
                        related business shall be treated as `wages' 
                        for purposes of subparagraph (B)(ii).
                    ``(D) Qualified employer.--For purposes of this 
                paragraph, a qualified employer is an employer which is 
                engaged in a qualified business (as defined in 
                paragraph (3)(D)).
            ``(3) Defense conversion investment credit.--
                    ``(A) In general.--The defense conversion 
                investment credit for any taxable year is the 
                applicable percentage of the qualified conversion 
                investment by a qualified business during the taxable 
                year.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph--
                            ``(i) In general.--The applicable 
                        percentage shall be 5 percent for all taxable 
                        years ending after December 31, 1994, and on or 
                        before December 31, 1999.
                            ``(ii) Incremental employment incentive 
                        percentage.--The applicable percentage shall be 
                        8 percent for any taxable year ending after 
                        December 31, 1994, and on or before December 
                        31, 1999, if in such year the number of 
                        employees of the qualified business increases 4 
                        percent or more over the average number of 
                        employees of the qualified business during the 
                        3 preceding years (the `qualifying increase').
                            ``(iii) Recapture in case of decreased 
                        employment.--If a qualified business claims the 
                        benefit of the incremental employment incentive 
                        percentage under clause (ii), and its average 
                        employment during any of the 3 years following 
                        the year in which the benefit of the increased 
                        percentage was claimed falls below the 
                        qualifying increase level (a `disqualifying 
                        decrease'), the qualified business shall 
                        increase its tax liability for the year during 
                        which the disqualifying decrease occurred by 
                        the difference between the credit to which it 
                        would have been entitled under clause (i) and 
                        the credit claimed under clause (ii).
                    ``(C) Qualified conversion investment.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        conversion investment' means the costs paid or 
                        incurred by a qualified business during the 
                        taxable year for the purpose of acquiring, 
                        constructing, creating, or developing any 
                        tangible or intangible assets, in connection 
                        with the conduct of the qualified business' 
                        nondefense-related business, except that such 
                        term shall not include direct production costs 
                        of any property held by the qualified business 
                        for sale to customers in the ordinary course of 
                        its trade or business.
                            ``(ii) Intangible assets.--The term 
                        `intangible assets' includes all `intangible 
                        property' as defined in section 936(h)(3)(B) 
                        (other than literary, musical or artistic 
                        compositions) and specifically includes 
                        processes and products, models, and prototypes.
                    ``(D) Qualified business.--For purposes of this 
                subsection and pursuant to regulations to be prescribed 
                by the Secretary--
                            ``(i) In general.--The term `qualified 
                        business' means any corporation, partnership, 
                        or sole proprietorship or separate unit thereof 
                        in existence on January 1, 1995, which derived 
                        a substantial portion of its gross receipts or 
                        incurred a substantial portion of its gross 
                        costs during the 5 years preceding January 1, 
                        1995, from 1 or more defense-related 
                        businesses, and which derives a significant 
                        portion of its gross receipts from (or incurs a 
                        significant amount of costs in acquiring or 
                        developing) 1 or more nondefense-related 
                        businesses during the taxable year.
                            ``(ii) Defense-related business.--A 
                        `defense-related business' is an activity in 
                        connection with the development or production 
                        (pursuant to a contract or subcontract) of any 
                        property designed, modified, or equipped for 
                        military purposes (including NASA).
                            ``(iii) Nondefense-related business.--A 
                        `nondefense-related business' is any activity 
                        in connection with the development or 
                        production of any property not designed, 
                        modified, or equipped for military purposes 
                        which uses a significant portion of assets and 
                        employees which had been employed in a defense-
                        related business.''
    (c) Accelerated Depreciation of Excess Defense Conversion 
Property.--
            (1) Subsection (b)(3) of section 168 of such Code is 
        amended by adding at the end thereof the following new 
        subparagraph:
                    ``(F) Property described in subsection 
                (e)(3)(B)(vii).''
            (2) Subsection (e)(3)(B) of section 168 of such Code is 
        amended by striking ``and'' at the end of clause (v), by 
        striking the period at the end of clause (vi) and inserting ``, 
        and'', and by adding at the end thereof the following new 
        clause:
                            ``(vii) any qualifying excess defense 
                        conversion property.''
            (3) Subsection (i) of section 168 of such Code is amended 
        by adding at the end thereof the following new paragraph:
            ``(14) Qualifying excess defense conversion property.--
                    ``(A) The term `qualifying excess defense 
                conversion property' means, with respect to property 
                owned or leased by the taxpayer and otherwise subject 
                to depreciation under this section and which is `excess 
                defense conversion property' (as defined in 
                subparagraph (B)), the basis of property (or the 
                portion thereof) constituting excess defense conversion 
                property owned by the taxpayer or the total discounted 
                cost of lease obligations during the remaining term of 
                the lease applicable to excess conversion property 
                leased by the taxpayer.
                    ``(B) The term `excess defense conversion property' 
                means property that--
                            ``(i) has been used by the taxpayer in a 
                        defense-related business (as defined in section 
                        48(c)(3)(D)); and
                            ``(ii) is not being used in the taxable 
                        year, and is not reasonably expected to be used 
                        in the foreseeable future, in a defense-related 
                        business.
                    ``(C) Any deductions claimed by a taxpayer with 
                respect to property reported on its return as 
                qualifying excess defense conversion property and which 
                is later determined as not constituting excess defense 
                conversion property shall be recaptured at the rate of 
                150 percent of the deductions so claimed.
                    ``(D) For purposes of this section, the amount of 
                the property's basis constituting qualifying excess 
                defense conversion property shall be considered to be 
                placed in service on the first day of the taxable year 
                in which the property is determined to constitute 
                qualifying excess defense conversion property.''
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1995.

SEC. 5. FUNDING OF DEFENSE CONVERSION ACTIVITIES USING FUNDS RECOUPED 
              FROM DEFENSE EXPENDITURES OUTSIDE THE UNITED STATES.

    (a) Agreements to Recoup Defense Costs.--The President should 
endeavor to enter into an agreement with each European member nation of 
the North Atlantic Treaty Organization in which members of the Armed 
Forces of the United States are stationed and with Japan and the 
Republic of Korea to provide for the payment by such nation of at least 
one-half of the cost of maintaining the Armed Forces of the United 
States in such nation, including the cost of compensating members of 
the Armed Forces stationed in such nation. Payments under such an 
agreement may be made in the form of money or real or personal 
property.
    (b) Authority to Accept Payments.--The Secretary of Defense may 
accept any payment of money or real or personal property made pursuant 
to any agreement described in subsection (a).
    (c) Use of Funds.--Money accepted by the Secretary of Defense under 
subsection (b), and proceeds from the sale of any property so accepted 
by the Secretary of Defense, shall be used by the Secretary to provide 
additional funds for defense conversion, reinvestment, and transition 
assistance programs (as defined in section 1102(c) of the National 
Defense Authorization Act for Fiscal Year 1995) of the Department of 
Defense.
                                 <all>
HR 5121 IH----2
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