I

103D CONGRESS

1ST SESSION H. R. 2453

To amend the Internal Revenue Code of 1986 to provide tax incentives

to encourage the conversion of the defense industry to commercial endeavors, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 17, 1993

Mr. MACHTLEY 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 provide

tax incentives to encourage the conversion of the defense

industry to commercial endeavors, 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. TAX CREDIT FOR HIRING LONG-TERM UNEM4 PLOYED DEFENSE AND SHIPBUILDING IN5 DUSTRY WORKERS.

6 (a) ALLOWANCE OF CREDIT.—Paragraph (1) of sec7 tion 51(d) of the Internal Revenue Code of 1986 (defining

8 members of targeted groups) is amended by striking ‘‘or’’
2

•HR 2453 IH

1 at the end of subparagraph (I), by striking the period at

2 the end of subparagraph (J) and inserting ‘‘, or’’, and by

3 adding at the end the following new subparagraph:

4 ‘‘(K) a long-term unemployed defense or ship5 building industry worker.’’

6 (b) LONG-TERM UNEMPLOYED DEFENSE OR SHIP7 BUILDING INDUSTRY WORKER.—Section 51(d) of such

8 Code is amended by adding at the end thereof the follow9 ing new paragraph:

10 ‘‘(17) LONG-TERM UNEMPLOYED DEFENSE OR

11 SHIPBUILDING INDUSTRY WORKER.—

12 ‘‘(A) IN GENERAL.—The term ‘long-term

13 unemployed defense or shipbuilding industry

14 worker’ means an individual certified by the

15 designated local agency as having been em16 ployed in the defense or shipbuilding industry

17 and—

18 ‘‘(i) who has been receiving unemploy19 ment compensation at all times during the

20 6-month period ending with the last day of

21 the month preceding the hiring date, or

22 ‘‘(ii) who—

23 ‘‘(I) was receiving unemployment

24 compensation but exhausted all rights

25 to such compensation, and
3

•HR 2453 IH

1 ‘‘(II) has remained unemployed

2 during the period beginning on the

3 date such rights were exhausted and

4 ending on the day before the hiring

5 date.

6 ‘‘(B) EMPLOYMENT IN DEFENSE OR SHIP7 BUILDING INDUSTRY.—For purposes of sub8 paragraph (A), an individual shall be treated as

9 employed—

10 ‘‘(i) in the defense industry if such in11 dividual’s services were performed pursu12 ant to any defense contract (as defined in

13 section 48(c)(4)), and

14 ‘‘(ii) in the shipbuilding industry if

15 such individual’s services were performed

16 pursuant to any contract for the construc17 tion or reconstruction of any ship or any

18 subcontract in connection with such con19 struction or reconstruction.

20 ‘‘(C) UNEMPLOYMENT COMPENSATION.—

21 For purposes of this paragraph, the term ‘un22 employment compensation’ has the meaning

23 given such term by section 85(b).’’

24 (c) CERTAIN INDIVIDUALS NOT ELIGIBLE.—Section

25 51(i) of such Code (relating to certain individuals ineli-
4

•HR 2453 IH

1 gible) is amended by adding at the end the following new

2 paragraph:

3 ‘‘(4) SPECIAL RULES FOR LONG-TERM UNEM4 PLOYED DEFENSE AND SHIPBUILDING INDUSTRY

5 WORKERS.—No wages shall be taken into account

6 under subsection (a) with respect to any long-term

7 unemployed defense or shipbuilding industry worker

8 (as defined in subsection (d)(17)) unless—

9 ‘‘(A) notwithstanding paragraph (3), the

10 individual is employed by the employer at least

11 120 days, and

12 ‘‘(B) the employer certifies on the return

13 of tax for the taxable year for which credit is

14 claimed that—

15 ‘‘(i) the individual was hired after the

16 employer took reasonable actions to specifi17 cally recruit long-term unemployed defense

18 or shipbuilding industry workers, and

19 ‘‘(ii) the individual was not hired to

20 replace an employee who was involuntarily

21 separated from employment by the em22 ployer without cause.’’

23 (d) CREDIT FOR HIRING LONG-TERM UNEMPLOYED

24 DEFENSE OR SHIPBUILDING INDUSTRY WORKERS MADE

25 PERMANENT.—Paragraph (4) of section 51(c) of such
5

•HR 2453 IH

1 Code is amended by adding at the end thereof the follow2 ing new sentence: ‘‘The preceding sentence shall not apply

3 to wages paid or incurred to any long-term unemployed

4 defense or shipbuilding industry worker (as defined in sub5 section (d)(17)).’’

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to individuals hired on and after

8 the date of the enactment of this Act.

9 SEC. 2. TECHNOLOGY TRANSFER TAX CREDIT.

10 (a) ALLOWANCE OF CREDIT.—Section 46 of the In11 ternal Revenue Code of 1986 (relating to amount of in12 vestment credit) is amended by striking ‘‘and’’ at the end

13 of paragraph (2), by striking the period at the end of para14 graph (3) and inserting ‘‘, and’’, and by adding at the

15 end thereof the following new paragraph:

16 ‘‘(4) in the case of an eligible taxpayer (as de17 fined in section 48(c)), the nondefense production

18 and manufacturing equipment credit.’’

19 (b) AMOUNT OF CREDIT.—Section 48 of such Code

20 is amended by adding at the end thereof the following new

21 subsection:

22 ‘‘(c) NONDEFENSE PRODUCTION AND MANUFACTUR23 ING EQUIPMENT CREDIT.—

24 ‘‘(1) IN GENERAL.—For purposes of section 46,

25 in the case of an eligible taxpayer, the nondefense
6

•HR 2453 IH

1 production and manufacturing equipment credit for

2 any taxable year is an amount equal to 10 percent

3 of the qualified investment for such taxable year.

4 ‘‘(2) QUALIFIED INVESTMENT.—

5 ‘‘(A) IN GENERAL.—For purposes of para6 graph (1), the qualified investment for any tax7 able year is the aggregate of—

8 ‘‘(i) the applicable percentage of the

9 basis of each new qualified nondefense pro10 duction and manufacturing equipment

11 property placed in service by the taxpayer

12 during such taxable year, plus

13 ‘‘(ii) the applicable percentage of the

14 cost of each used qualified nondefense pro15 duction and manufacturing equipment

16 property placed in service by the taxpayer

17 during such taxable year.

18 ‘‘(B) APPLICABLE PERCENTAGE.—For

19 purposes of subparagraph (A), the applicable

20 percentage for any property shall be determined

21 under paragraphs (2) and (7) of section 46(c)

22 (as in effect on the day before the date of the

23 enactment of the Revenue Reconciliation Act of

24 1990).
7

•HR 2453 IH

1 ‘‘(C) CERTAIN RULES MADE APPLICA2 BLE.—The provisions of subsections (b) and (c)

3 of section 48 (as in effect on the day before the

4 date of the enactment of the Revenue Reconcili5 ation Act of 1990) shall apply for purposes of

6 this paragraph.

7 ‘‘(3) QUALIFIED NONDEFENSE PRODUCTION

8 AND MANUFACTURING EQUIPMENT PROPERTY.—For

9 purposes of this subsection, the term ‘qualified

10 nondefense production and manufacturing equip11 ment property’ means any property—

12 ‘‘(A) which is used as an integral part of

13 the manufacture or production of nondefense

14 tangible personal property,

15 ‘‘(B) which is tangible property to which

16 section 168 applies, and

17 ‘‘(C) which is section 1245 property (as

18 defined in section 1245(a)(3)).

19 ‘‘(4) ELIGIBLE TAXPAYER.—

20 ‘‘(A) IN GENERAL.—A taxpayer is an eligi21 ble taxpayer for purposes of this subsection if

22 more than 50 percent of the gross revenues of

23 such taxpayer for the taxable year are attrib24 utable to defense contracts.
8

•HR 2453 IH

1 ‘‘(B) DEFENSE CONTRACT.—For purposes

2 of this paragraph, the term ‘defense contract’

3 means any contract or subcontract entered into

4 between the taxpayer and a defense agency to

5 provide material or defense related operations.

6 ‘‘(C) DEFENSE AGENCY.—For purposes of

7 this paragraph, the term ‘defense agency’

8 means the Department of Defense, the nuclear

9 weapons division of the Department of Energy,

10 the National Aeronautics and Space Adminis11 tration, the Coast Guard, and any other agency

12 of the Government to the extent such agency

13 conducts military or other defense related

14 operations.

15 ‘‘(5) COORDINATION WITH OTHER CREDITS.—

16 This subsection shall not apply to any property to

17 which the energy credit or rehabilitation credit

18 would apply unless the taxpayer elects to waive the

19 application of such credit to such property.

20 ‘‘(6) CERTAIN PROGRESS EXPENDITURE RULES

21 MADE APPLICABLE.—Rules similar to rules of sub22 section (c)(4) and (d) of section 46 (as in effect on

23 the day before the date of the enactment of the Rev24 enue Reconciliation Act of 1990) shall apply for pur25 poses of this subsection.’’
9

•HR 2453 IH

1 (c) TECHNICAL AMENDMENTS.—

2 (1) Clause (ii) of section 49(a)(1)(C) of such

3 Code is amended by inserting ‘‘or qualified

4 nondefense production and manufacturing equip5 ment property’’ after ‘‘energy property’’.

6 (2) Subparagraph (E) of section 50(a)(2) of

7 such Code is amended by inserting ‘‘or 48(c)(4)’’ be8 fore the period at the end thereof.

9 (3) Paragraph (5) of section 50(a) of such Code

10 is amended by adding at the end thereof the follow11 ing new subparagraph.

12 ‘‘(D) SPECIAL RULES FOR CERTAIN PROP13 ERTY.—In the case of any qualified nondefense

14 production and manufacturing equipment prop15 erty which is 3-year property (within the mean16 ing of section 168(e))—

17 ‘‘(i) the percentage set forth in clause

18 (ii) of the table contained in paragraph

19 (1)(B) shall be 66 percent,

20 ‘‘(ii) the percentage set forth in clause

21 (iii) of such table shall be 33 percent, and

22 ‘‘(iii) clauses (iv) and (v) of such table

23 shall not apply.’’

24 (4)(A) The section heading for section 48 of

25 such Code is amended to read as follows:
10

•HR 2453 IH

1 ‘‘SEC. 48. OTHER CREDITS.’’

2 (B) The table of sections for subpart E of part

3 IV of subchapter A of chapter 1 is amended by

4 striking the item relating to section 48 and inserting

5 the following:

‘‘Sec. 48. Other credits.’’

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

7 this section shall apply to periods after December 31,

8 1992, under rules similar to the rules of section 48(m)

9 of the Internal Revenue Code of 1986 (as in effect on the

10 day before the date of the enactment of the Revenue Rec11 onciliation Act of 1990).

Æ