I

107TH CONGRESS

1ST SESSION H. R. 2177

To amend the Internal Revenue Code of 1986 to encourage the timely development of a more cost effective United States commercial space transportation industry, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 14, 2001

Mr. CALVERT (for himself, Mr. ORTIZ, Mr. LUCAS of Oklahoma, Mr. FOLEY,

Mr. BARTLETT of Maryland, Mr. BACA, Mr. MCKEON, Mr. LEWIS of

California, Mr. SENSENBRENNER, Mr. SKEEN, Mr. WELDON of Florida,

Mr. REHBERG, Mr. SANDLIN, Mr. REYES, and Mrs. CAPPS) introduced

the following bill; which was referred to the Committee on Ways and

Means

A BILL

To amend the Internal Revenue Code of 1986 to encourage

the timely development of a more cost effective United

States commercial space transportation industry, and for

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Invest in Space Now Act of 2001’’.

6 (b) TABLE OF CONTENTS.—
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Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Purposes.

Sec. 4. Definitions.

Sec. 5. Credit for purchase of space transportation vehicle provider stock.

Sec. 6. United States commercial space transportation vehicle authorization.

1 SEC. 2. FINDINGS.

2 The Congress hereby finds that:

3 (1) The United States commercial space trans4 portation industry is an essential part of the na5 tional economy.

6 (2) Opportunities for United States commercial

7 providers are growing as international markets ex8 pand.

9 (3) The development of the United States com10 mercial space transportation industry is consistent

11 with the national security needs and foreign policy

12 interests of the United States.

13 (4) United States trading partners have been

14 able to lower their commercial space transportation

15 prices aggressively either through direct cash pay16 ments for commercially targeted product develop17 ment or with indirect benefits derived from non18 market economy status.

19 (5) Because United States incentives for space

20 transportation development have historically focused

21 on civil and military rather than commercial use,

22 United States space transportation costs have re-
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1 mained comparatively high, and United States space

2 transportation technology has not been commercially

3 focused.

4 (6) As a result, the United States share of the

5 world commercial market for space transportation

6 has decreased from nearly 100 percent 20 years ago

7 to approximately 47 percent in 1998.

8 (7) In order to avoid undue reliance on foreign

9 space transportation services, the United States

10 must strive to have sufficient domestic capacity as

11 well as the highest quality and the lowest cost per

12 service provided.

13 (8) A successful high quality, lower cost United

14 States commercial space transportation industry

15 should also lead to substantial United States tax16 payer savings through collateral lower United States

17 Government costs for its space access requirements.

18 (9) Opening the commercial opportunities of

19 space to the American aerospace industry must be a

20 high priority of the United States Government as we

21 begin the 21st century.

22 (10) Opening space and maintaining United

23 States leadership in the world market does not re24 quire massive Government intrusion, but enough

25 Government support on an incremental and timely
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1 basis to enable the more cost effective United States

2 private sector to build lower cost space transpor3 tation vehicles.

4 (11) Private sector companies across the United

5 States are already attempting to develop a variety of

6 lower cost space transportation vehicles, but lack of

7 sufficient private financing, particularly in the early

8 stages of development, has proven to be a major ob9 stacle, an obstacle our trading partners have re10 moved by providing direct access to government

11 funding.

12 (12) Given the strengths and creativity of pri13 vate industry in the United States, a more effective

14 alternative to the approach of our trading partners

15 is for the United States Government to provide lim16 ited incentives industry wide to assist qualifying

17 United States private sector companies obtain other18 wise unavailable private equity financing for the crit19 ical development stages of a project, while at the

20 same time keeping Government involvement at a

21 minimum.

22 SEC. 3. PURPOSES.

23 The purposes of this Act are—

24 (1) to ensure availability of otherwise unavail25 able private sector equity financing for United
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1 States private sector development of commercial

2 space transportation vehicles which will have trans3 portation costs significantly below current levels; and

4 (2) as a result—

5 (A) to avoid undue reliance on foreign

6 space transportation services;

7 (B) to reduce substantially United States

8 Government space transportation expenditures;

9 (C) to increase the international competi10 tiveness of the United States space industry;

11 (D) to encourage the growth of space-re12 lated commerce in the United States and inter13 nationally; and

14 (E) to open the space frontier to the

15 American people.

16 SEC. 4. DEFINITIONS.

17 In this Act:

18 (1) SECRETARY.—The term ‘‘Secretary’’ means

19 the Secretary of Transportation.

20 (2) SPACE LAUNCH SITE.—The term ‘‘space

21 launch site’’ means a location from which a launch

22 or landing takes place and includes all facilities lo23 cated on, or components of, a launch or landing site,

24 whether real or personal property, which are nec25 essary to conduct a launch, whether on land, sea,
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1 in the Earth’s atmosphere, or beyond the Earth’s

2 atmosphere.

3 (3) SPACE TRANSPORTATION VEHICLE.—The

4 term ‘‘space transportation vehicle’’ includes all

5 types of vehicles, whether now in existence, devel6 oped in the future, or currently under design, devel7 opment, construction, reconstruction, or recondi8 tioning, which are constructed in the United States

9 by a United States commercial provider and owned

10 by the commercial provider, for the purpose of oper11 ating in, or transporting a payload to, from, or with12 in, outer space, or in suborbital trajectory.

13 (4) STATE.—The term ‘‘State’’ means any

14 State in the United States, the District of Columbia,

15 the Commonwealth of Puerto Rico, the Virgin Is16 lands, Guam, American Samoa, the Commonwealth

17 of the Northern Mariana Islands, and any other

18 commonwealth, territory, or possession of the United

19 States.

20 (5) UNITED STATES COMMERCIAL PROVIDER.—

21 The term ‘‘United States commercial provider’’

22 means a commercial provider organized under the

23 laws of the United States or of a State as a corpora24 tion or a Limited Liability Company (LLC).
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1 (6) UNITED STATES COMMERCIAL SPACE

2 TRANSPORTATION VEHICLE PROVIDER.—The term

3 ‘‘United States commercial space transportation ve4 hicle provider’’ means a United States commercial

5 provider engaged in designing, developing, and pro6 ducing commercial space transportation vehicles.

7 (7) UNITED STATES COMMERCIAL SPACE

8 TRANSPORTATION VEHICLE INDUSTRY.—The term

9 ‘‘United States commercial space transportation ve10 hicle industry’’ means the collection of United States

11 commercial space transportation vehicle providers.

12 (8) SPACE TRANSPORTATION COSTS SIGNIFI13 CANTLY BELOW CURRENT LEVELS.—The term

14 ‘‘space transportation costs significantly below cur15 rent levels’’ means at the time of application, for

16 that market segment for which, or in which, the

17 space transportation vehicle is designed, developed,

18 produced, maintained, or operated, the cost of pro19 ducing, maintaining, and operating the vehicle is 50

20 percent of the then space transportation costs in

21 that market segment as estimated by the Secretary.

22 If no market exists for the transportation proposed

23 at the time of application, the 50 percent require24 ment of the preceding sentence shall be treated as
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1 being met if the vehicle has a reasonable possibility

2 of creating the market proposed.

3 SEC. 5. CREDIT FOR PURCHASE OF SPACE TRANSPOR4 TATION VEHICLE PROVIDER STOCK.

5 (a) IN GENERAL.—Part IV of subchapter A of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 credits against tax) is amended by adding at the end the

8 following new subpart:

9 ‘‘Subpart H—Space Transportation Credit

10 ‘‘SEC. 54. CREDIT FOR PURCHASE OF SPACE TRANSPOR11 TATION VEHICLE PROVIDER STOCK.

12 ‘‘(a) ALLOWANCE OF CREDIT.—

13 ‘‘(1) IN GENERAL.—There shall be allowed as a

14 credit against the tax imposed by this chapter for

15 the taxable year an amount equal to the applicable

16 percentage of the aggregate amount paid by the tax17 payer during the taxable year for the purchase of

18 qualified space transportation vehicle provider stock.

19 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

20 of paragraph (1), the applicable percentage is the

21 percentage determined in accordance with the fol22 lowing table:

‘‘For taxable years beginning The applicable

in calendar year— percentage is—

2002, 2003, and 2004 .................................................. 50

2005 ............................................................................. 40

2006............................................................................. 35

2007 ............................................................................. 30
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2008 and 2009 ............................................................. 20

2010 and thereafter ..................................................... 0.

1 ‘‘(b) MAXIMUM CREDIT.—

2 ‘‘(1) LIMITATION FOR EACH PROVIDER.—

3 ‘‘(A) LARGE CAPITALIZATION PRO4 VIDERS.—The credit allowed under this section

5 with respect to the stock of each large capital6 ization space transportation vehicle provider

7 purchased during a calendar year shall not

8 exceed—

9 ‘‘(i) $50,000,000 for 2002,

10 ‘‘(ii) $100,000,000 for 2003,

11 ‘‘(iii) $125,000,000 for 2004,

12 ‘‘(iv) $175,000,000 for 2005,

13 ‘‘(v) $200,000,000 for 2006,

14 ‘‘(vi) $50,000,000 for 2007, and

15 ‘‘(vii) $0 for 2008 and 2009.

16 ‘‘(B) SMALL CAPITALIZATION PRO17 VIDERS.—The credit allowed under this section

18 with respect to the stock of each small capital19 ization space transportation vehicle provider

20 purchased during a calendar year shall not

21 exceed—

22 ‘‘(i) $35,000,000 for 2002,

23 ‘‘(ii) $40,000,000 for 2003,

24 ‘‘(iii) $45,000,000 for 2004,
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1 ‘‘(iv) $50,000,000 for each of 2005

2 and 2006,

3 ‘‘(v) $40,000,000 for 2007, and

4 ‘‘(vi) $35,000,000 for each of 2008

5 and 2009.

6 ‘‘(2) AGGREGATE LIMIT.—The aggregate credit

7 allowed under this section with respect to the stock

8 of all space transportation vehicle providers pur9 chased during a calendar year shall not exceed—

10 ‘‘(A) $395,000,000 for 2002,

11 ‘‘(B) $580,000,000 for 2003,

12 ‘‘(C) $690,000,000 for 2004,

13 ‘‘(D) $875,000,000 for 2005,

14 ‘‘(E) $950,000,000 for 2006,

15 ‘‘(F) $430,000,000 for 2007,

16 ‘‘(G) $245,000,000 for 2008, and

17 ‘‘(H) $245,000,000 for 2009.

18 ‘‘(c) QUALIFIED SPACE TRANSPORTATION VEHICLE

19 PROVIDER STOCK.—For purposes of this section—

20 ‘‘(1) IN GENERAL.—The term ‘qualified space

21 transportation vehicle provider stock’ means any

22 common stock in a C corporation or any membership

23 unit in a State-registered limited liability company

24 (LLC) if—
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1 ‘‘(A) as of the date of issuance, such cor2 poration is a qualified space transportation ve3 hicle provider,

4 ‘‘(B) such stock is acquired by the tax5 payer at its original issue (directly or through

6 an underwriter) in exchange for money or other

7 property (not including stock), and

8 ‘‘(C) the proceeds of such issue are used

9 by such issuer during the 36-month period be10 ginning on the date of issuance in substantial

11 compliance with the issuer’s projected usage

12 submitted to the Secretary of Transportation

13 under section 6 of the Invest in Space Now Act

14 of 2001 with its application for authorization.

15 ‘‘(2) QUALIFIED SPACE TRANSPORTATION VEHI16 CLE PROVIDER.—The term ‘qualified space transpor17 tation vehicle provider’ means any United States

18 commercial space transportation vehicle provider (as

19 defined in section 4 of the Invest in Space Now Act

20 of 2001) for which an authorization is in effect

21 under section 6 of such Act.

22 ‘‘(3) CAPITALIZATION STATUS OF QUALIFIED

23 PROVIDERS.—For purposes of applying the limits

24 under subsection (b)—
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1 ‘‘(A) DESIGNATION.—The Secretary shall,

2 using the guidelines developed under subpara3 graph (B), designate each qualified space trans4 portation vehicle provider as a large capitaliza5 tion space transportation vehicle provider or a

6 small capitalization space transportation vehicle

7 provider.

8 ‘‘(B) GUIDELINES.—The Secretary of

9 Transportation shall, not later than 6 months

10 after the date of the enactment of the Invest in

11 Space Now Act of 2001, publish guidelines

12 under which qualified space transportation vehi13 cle providers are classified into large capitaliza14 tion providers and small capitalization pro15 viders. The guidelines shall be based on factors

16 particular to the space transportation industry,

17 including—

18 ‘‘(i) the capital requirements nec19 essary to support the type of provider the

20 taxpayer is or is trying to become,

21 ‘‘(ii) the payload size of space trans22 portation vehicles developed or used by the

23 taxpayer,

24 ‘‘(iii) the markets in which the tax25 payer is participating, and
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1 ‘‘(iv) whether human spaceflight is in2 cluded.

3 ‘‘(d) RECAPTURE OF CREDIT.—If—

4 ‘‘(1) the taxpayer fails to hold qualified space

5 transportation vehicle provider stock for the 3-year

6 period beginning on the date such stock was pur7 chased by the taxpayer, or

8 ‘‘(2) during such 3-year period, the issuer of

9 such stock ceases to meet the requirements of sec10 tion 6 of the Invest in Space Now Act of 2001,

11 then notwithstanding any other provision of this subtitle,

12 the tax imposed by this chapter on the taxpayer for the

13 taxable year beginning in the calendar year in which such

14 cessation occurred shall be increased by the amount of

15 credit allowed under subsection (a) to the taxpayer with

16 respect to such stock.

17 ‘‘(e) SPECIAL RULES.—For purposes of this

18 section—

19 ‘‘(1) CERTAIN PURCHASES BY CORPORATION OF

20 ITS OWN STOCK.—Rules similar to the rules of sec21 tion 1202(c)(3) shall apply.

22 ‘‘(2) RELATED PERSONS.—

23 ‘‘(A) IN GENERAL.—Except as provided in

24 subparagraph (B), for purposes of subsection
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1 (b) the taxpayer and any person related to the

2 taxpayer shall be treated as one person.

3 ‘‘(B) EXCEPTION.—A taxpayer may elect

4 to treat not more than one other person who is

5 related to such taxpayer as unrelated for pur6 poses of this section. A person treated as unre7 lated to the taxpayer under the previous sen8 tence shall not be the same capitalization status

9 (determined under subsection (c)(3) as the tax10 payer.

11 ‘‘(C) RELATED PERSONS.—For purposes

12 of this paragraph, a person is a related person

13 to another person if—

14 ‘‘(i) the relationship between such per15 sons would result in a disallowance of

16 losses under section 267 or 707(b), or

17 ‘‘(ii) such persons are members of the

18 same controlled group of corporations (as

19 defined in section 1563(a), except that

20 ‘more than 50 percent’ shall be substituted

21 for ‘at least 80 percent’ each place it ap22 pears therein).

23 ‘‘(f) BASIS ADJUSTMENTS.—For purposes of this

24 subtitle, if a credit is allowed under this section for the

25 purchase of any stock—
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1 ‘‘(1) the increase in the basis of such stock

2 which would (but for this subsection) result from

3 such purchase shall be reduced by the amount of the

4 credit so allowed, and

5 ‘‘(2) the basis of such stock shall be increased

6 by the amount of the increase under subsection (d).

7 ‘‘(g) APPLICATION WITH OTHER CREDITS.—The

8 credit allowed under subsection (a) for any taxable year

9 shall not exceed the excess of—

10 ‘‘(1) the sum of the regular tax liability (as de11 fined in section 26(b)) plus the tax imposed by sec12 tion 55, over

13 ‘‘(2) the sum of the credits allowable under this

14 part (other than subpart C thereof, relating to re15 fundable credits).’’

16 (b) CONFORMING AMENDMENT.—Subsection (a) of

17 section 1016 of such Code is amended by striking ‘‘and’’

18 at the end of paragraph (26), by striking the period at

19 the end of paragraph (27) and inserting ‘‘; and’’, and by

20 adding at the end the following new paragraph:

21 ‘‘(28) to the extent provided in section 54(f), in

22 the case of amounts with respect to which a credit

23 has been allowed under section 54 or a recapture

24 imposed under section 54(d).’’.
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1 (c) CLERICAL AMENDMENT.—The table of subparts

2 for part IV is amended by adding at the end the following

3 new item:

‘‘Subpart H. Space transportation credit.’’.

4 (d) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to amounts paid after December

6 31, 2000.

7 SEC. 6. UNITED STATES COMMERCIAL SPACE TRANSPOR8 TATION VEHICLE AUTHORIZATION.

9 (a) UNITED STATES COMMERCIAL SPACE TRANS10 PORTATION VEHICLE INDUSTRY AUTHORIZATION PRO11 GRAM.—

12 (1) ESTABLISHMENT OF PROGRAM.—There

13 shall be a United States Commercial Space Trans14 portation Vehicle Industry Authorization Program to

15 provide authorization for tax credit qualification

16 under section 54 of the Internal Revenue Code of

17 1986 to multiple United States commercial space

18 transportation vehicle providers developing vehicles

19 with space transportation costs significantly below

20 current levels.

21 (2) ADMINISTRATION OF PROGRAM.—The pro22 gram shall be carried out by the Secretary of Trans23 portation under a streamlined application process

24 pursuant to the terms of this section and any regu25 lations that may be promulgated hereunder, in con-
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1 sultation with other United States Government offi2 cials, and private sector representatives, as nec3 essary, to ensure fair, effective, and timely program

4 administration and streamlined authorization.

5 (3) SCOPE OF PROGRAM.—

6 (A) TEMPORARY GOVERNMENT SUP7 PORT.—The United States Commercial Space

8 Transportation Vehicle Industry Authorization

9 Program is intended to provide eligibility for

10 tax credits under section 54 of the Internal

11 Revenue Code of 1986 to investors to support

12 financing of qualified commercial space trans13 portation vehicle development ventures during

14 their startup phases.

15 (B) EXCLUSION OF SPACE LAUNCH

16 SITES.—The program does not provide author17 ization pertaining to the construction, recon18 struction, or reconditioning of space launch

19 sites.

20 (C) EXCLUSION OF NONRELATED ACTIVI21 TIES.—The program does not provide author22 ization for any corporation unless its business

23 plan provides that the main core mission of the

24 corporation is the construction, reconstruction,

25 reconditioning, sale, or distribution of any prod-
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1 uct which is integral to the design, develop2 ment, construction, reconstruction, or recondi3 tioning of a space transportation vehicle as de4 scribed in subsection (b).

5 (4) NONDISCLOSURE OF CONFIDENTIAL MATE6 RIALS.—Materials that are submitted by a United

7 States commercial space transportation vehicle pro8 vider to the Secretary in connection with an applica9 tion submitted under the United States Commercial

10 Space Transportation Vehicle Authorization Pro11 gram and deemed by the commercial provider to be

12 confidential, and that contain trade secrets or pro13 prietary commercial, financial, or technical informa14 tion of a kind not customarily disclosed to the pub15 lic, shall not be disclosed by the Secretary to persons

16 other than Government officers or employees not17 withstanding any other provision of law.

18 (5) CONSULTATION.—The Secretary shall con19 sult to the extent deemed necessary for effective im20 plementation of this Act with appropriate Federal

21 agencies and congressional and space transportation

22 industry representatives.

23 (6) PROGRAM MANAGEMENT.—The Secretary

24 shall manage the authorization program consistent

25 with the purposes of this Act.
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1 (b) AUTHORIZATION OF VEHICLE PROVIDERS.—

2 (1) AUTHORIZATION BASED ON REASONABLE

3 POSSIBILITY OF SUCCESS.—

4 (A) IN GENERAL.—The Secretary shall au5 thorize vehicle providers who demonstrate by

6 the submission of technical and financial infor7 mation that they have a reasonable possibility

8 of developing, operating, and maintaining a

9 space transportation vehicle or vehicles with

10 space transportation costs significantly below

11 current levels.

12 (B) RESPONSE BY SECRETARY.— Author13 ization by the Secretary is deemed granted un14 less within 120 days of application submission

15 the Secretary determines that the provider has

16 no reasonable possibility of significantly low17 ering space transportation costs.

18 (2) POSSIBLE COMMERCIAL VIABILITY AND

19 CAPITAL REQUIREMENT TO QUALIFY STOCK FOR

20 CREDIT.—To demonstrate possible commercial via21 bility the United States commercial space transpor22 tation vehicle provider must raise $10,000,000 of eq23 uity investment during the year of application in

24 order to qualify its stock investors for credit under

25 this Act. Equity raised in order to meet commercial
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1 viability tests is eligible for credit once authorization

2 has been completed. The United States commercial

3 space transportation vehicle provider may qualify ad4 ditional stock for investor credit up to the maximum,

5 as provided, in section 54(b) of the Internal Revenue

6 Code of 1986, as added by section 5 of this Act.

7 (3) ANNUAL VERIFICATION OF SUBSTANTIAL

8 COMPLIANCE.—

9 (A) IN GENERAL.—Once authorized, a ve10 hicle provider must submit to the Secretary

11 each year a certified audit opinion letter

12 verifying its use of funds in substantial compli13 ance with its application.

14 (B) CONSEQUENCE OF FAILURES.—

15 (i) Failure to submit a certified audit

16 opinion letter verifying substantial compli17 ance with its application will result in de18 authorization of the vehicle provider.

19 (ii) Failure to use funds received after

20 authorization for the development of a

21 space transportation vehicle or vehicles

22 with the goal to reduce space transpor23 tation costs significantly below current lev24 els will result in deauthorization. Failure
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1 to achieve success will not result in de2 authorization.

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