I
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 de-
fense.
Be it enacted by the Senate and House of Representa-
tives 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 re-
duced its defense spending.
(2) The reduction in United States defense
spending is likely to continue in the foreseeable fu-
ture.
(3) Reductions in United States defense spend-
ing have resulted and will continue to result in lay-
offs and downsizing in industries and small busi-
nesses 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 cred-
its, 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 Con-
version Information (in this section referred to as the ‘‘Of-
fice’’).
(b) PURPOSE.—It is the purpose of the Office—
(1) to serve as a central information clearing-
house on matters relating to economic adjustment
and defense conversion programs and activities of
the Federal and State governments, including politi-
cal subdivisions of the States; and
(2) to help potential and actual applicants for
economic adjustment and defense conversion assist-
ance 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 Di-
rector 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 informa-
tion 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 proc-
ess of identifying and applying for assistance and re-
sources under economic adjustment and defense con-
version 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 rel-
evant information concerning available economic ad-
justment and defense conversion-related programs of
the Federal Government. The compilation shall iden-
tify 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 in-
clude data as to the expenditure of funds under such
programs, projects supported by such programs, and
the types and amounts of funding available for as-
sistance under such programs.
(3) RANGE OF PROGRAMS.—The range of pro-
grams covered by the database shall include the fol-
lowing:
(A) Worker adjustment assistance for pri-
vate 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 im-
provement.
(C) Technology development and deploy-
ment programs administered through the Ad-
vanced Research Projects Agency, Department
of Defense, coordinated Technology Reinvest-
ment Project.
(D) Other relevant technology research
and development programs administered by the
Department of Commerce, National Aero-
nautics and Space Administration, Department
of Energy, the Environmental Protection Agen-
cy, Department of Transportation, and the Na-
tional Institutes of Health and other technology
agencies.
(E) Small business assistance (financial,
technical, marketing).
(F) Defense facility environmental restora-
tion.
(G) Available tax credits and incentives,
relevant regulatory information (environmental,
occupational health and safety, and intellectual
property rights) affecting application proce-
dures and the implementation of federally sup-
ported projects involving economic adjustment
and defense conversion.
(4) AVAILABLE
ASSISTANCE.—In developing
such database, the Office shall survey all Federal de-
partments and agencies in order to identify all rel-
evant assistance and resources that may be available
to assist defense-dependent communities, businesses,
and workers in their adjustment and conversion ef-
forts, especially the Department of Defense, the De-
partment of Commerce, the Department of Labor,
the Small Business Administration, the Department
of Housing and Urban Development, the Depart-
ment of Health and Human Services, the Depart-
ment of Education, the Department of Transpor-
tation, the National Science Foundation, the Na-
tional 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 pro-
grams. 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 re-
aligned, or which are in the process of being closed,
cut back, or realigned, including a current listing of
States, communities, industries, firms, and employ-
ment 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 ef-
forts, their successes and failures, as well as a cur-
rent listing of ongoing conversion and assistance ef-
forts 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 in-
clude a listing of published works (books, reports,
articles, videos, and tapes) related to all facets of de-
fense economic adjustment and defense conversion.
Such listing shall further include manuals relating to
economic adjustment and defense conversion devel-
oped by the National Governors Association, the Na-
tional League of Cities, public interest groups, labor
unions, business associations, and similar organiza-
tions, and a listing of contact organizations and peo-
ple for obtaining such references. The Office shall
also maintain in electronic form the full texts of se-
lected references and make such references available
to the public through online services.
(9) ALTERNATIVE PRODUCT BANK FOR INDUS-
TRIES
AND
FIRMS.—The Office shall establish a
databank of potentially commercializable tech-
nologies 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, deploy-
ment, 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 ad-
dition, 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 commu-
nity organizations, to publicize the existence of
databanks and other assistance and services pro-
vided by this Act, and how to acquire such assist-
ance 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-driv-
en and highly user-friendly.
(4) PRINTED MANUALS AND ORIENTATION MA-
TERIALS.—The Office shall develop and make avail-
able to the public and others a printed manual, and
other printed material, reviewing the major Federal
agencies and programs engaged in economic adjust-
ment, defense conversion, and technology invest-
ments. 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 bibliog-
raphy of major reference materials.
(5) ORIENTATION
WORKSHOPS.—The Office
shall offer periodic workshops (1–2 weeks long)
available to selected representatives from defense-de-
pendent 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 con-
version information specialists to address special
problems requiring person-to-person assistance, as
needed.
(f) PROGRAM EVALUATION.—
(1) REVIEW.—The Office shall conduct a regu-
lar 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 prob-
lems with the programs and barriers to entry in
such programs, for inclusion in the databases estab-
lished pursuant to this section. Such review shall in-
clude recommendations for improving such pro-
grams.
(2) COMMUNITY
ROUNDTABLES.—The Office
shall conduct, on an annual basis, consultative meet-
ings and briefings with defense-impacted constitu-
encies drawn from local and State governments,
business, labor, community and public interest orga-
nizations and academic institutions. Such meetings
and briefings shall be held in all major defense-de-
pendent regions of the United States, both to intro-
duce its programs and receive comments and rec-
ommendations concerning its services and how to ex-
pand 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 para-
graph (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 conver-
sion employment credit for any taxable year is
10 percent of the qualified wages paid or in-
curred by a qualified employer during such
year.
‘‘(B) QUALIFIED WAGES.—For purposes of
this subsection—
‘‘(i) IN GENERAL.—The term ‘quali-
fied wages’ means the wages (as defined in
clause (ii)) paid or incurred by the quali-
fied employer during the taxable year to,
and amounts paid or incurred by the quali-
fied employer to third parties for retrain-
ing expenses with respect to, qualified con-
version employees during the period com-
mencing on January 1, 1995, and ending
on December 31, 1999 (‘the qualified pe-
riod’).
‘‘(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 (de-
termined without regard to any dollar limi-
tation contained in such section), but the
amount of wages during any taxable year
which may be taken into account with re-
spect to any individual shall not exceed 25
percent of the wages (determined without
regard to this subsection) paid to such in-
dividual during such taxable year or por-
tion 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 partici-
pates to learn or improve skills necessary
or useful to such employee’s employment in
the qualified employer’s nondefense-related
business.
‘‘(C) QUALIFIED
CONVERSION
EMPLOY-
EES.—
‘‘(i) IN
GENERAL.—For purposes of
this subsection, the term ‘qualified conver-
sion employees’ means an employee of a
qualified employer who had been employed
by the qualified employer or another em-
ployer 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 em-
ployer 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 em-
ployment in the nondefense-related busi-
ness shall be treated as ‘wages’ for pur-
poses of subparagraph (B)(ii).
‘‘(D) QUALIFIED
EMPLOYER.—For pur-
poses 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 conver-
sion investment credit for any taxable year is
the applicable percentage of the qualified con-
version investment by a qualified business dur-
ing the taxable year.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph—
‘‘(i) IN
GENERAL.—The applicable
percentage shall be 5 percent for all tax-
able years ending after December 31,
1994, and on or before December 31,
1999.
‘‘(ii) INCREMENTAL EMPLOYMENT IN-
CENTIVE
PERCENTAGE.—The applicable
recaptured at the rate of 150 percent of the de-
ductions 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