U.S. tax-cut package includes credit for industrial R&D

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Nov. 18, 2004 – Congress adjourned, temporarily, last month with at least one tax initiative in place to benefit the nanotech industry and other sectors. But it left other key issues on the floor until next session or to finish in a lame-duck session this month.

Congress passed an 18-month extension of the research and development tax credit at the end of September as part of a package of middle-class tax cuts. Lawmakers had allowed the tax credit to expire on June 30. President George W. Bush signed the tax-cut package into law on Oct. 4, saying, “This legislation will have good effects throughout the economy.”

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Technology companies and other supporters of the tax credit, however, once again failed in their bid to make the R&D tax credit permanent. They argue that short-term extensions do not provide companies with the certainty they need to take on long-term research projects.

Connie Correll Partoyan, a government affairs counselor for Preston Gates Ellis in Washington, D.C. and  lobbyist for the NanoBusiness Alliance, said she would prefer that Congress make the research and development tax credit permanent. Such a move would provide businesses with the certainty they need to invest in long-term research, she said. But “given the choice of nothing or something, people would prefer something.”

One item Congress did not finish before leaving was passage of the fiscal year 2005 spending bill that funds the Commerce Department and such agencies as the National Institute of Standards and Technology (NIST). The legislation, which also funds the State and Justice departments, is a must-pass item that could get dumped into a massive “omnibus” spending measure with other appropriations bills.

The Senate’s version of the bill would provide $203 million, $23.8 million more than fiscal year 2004, in funding for the Commerce Department’s Advanced Technology Program  (ATP), which provides money for high-risk research projects that companies might not otherwise pursue because they are unlikely to produce a short-term return.

The Bush administration has proposed eliminating the program in its fiscal year 2005 budget and the House complied by providing no funding for ATP in its version of the spending bill.

“The most interesting questions from my perspective are the continuing problem for funding of the ATP and core funding for nanotech R&D,” said Richard Smith, president of the Nanotechnology Network, a nonprofit organization that promotes nanotech development and commercialization.

Smith said that despite the passage in 2003 of a law that authorizes significant funding for nanotech research, there is not enough money going to development and commercialization, a gap that has been filled in part by ATP.

“Capital formation for university-based startups is problematic,” Smith said. “That’s where a high percentage of nanoscience is taking place, but funding isn’t sufficiently available for commercialization.”

Meanwhile, the Senate Appropriations Committee’s report on the bill highlighted a handful of nanotech projects, including a proposed $1 million for NIST for a nanoelectronics initiative targeting semiconductor technologies and $2 million for an initiative to develop infrastructure measurements and standards for the nanotechnology industry.

While Congress will pass the commerce-spending bill in some form, a patent reform measure appears unlikely to move this year. The bill, H.R. 1561, would allow the U.S. Patent and Trademark Office to keep all fees it collects from trademark and patent applicants to fund and improve its operations. The bill passed the House and was approved by the Senate Judiciary Committee in April but has since stalled.

“If (the government) didn’t divert its fees, the PTO would be able to do a better job,” said Charles “Chad” Wieland, a former patent examiner who now heads the nanotech practice at the Burns, Doane, Swecker & Mathis law firm in Virginia.

The Senate also failed to act before it left on the nomination of Arden Bement to become the new director of the National Science Foundation. Bement is a familiar face. He has been serving as acting NSF director since February and was nominated in mid-September to take over the job permanently. Before moving to NSF, Bement was director of NIST.

“Dr. Bement’s interest in nanoscience originates from his own research in high temperature semiconductors and quantum-confining devices,” said Mike Roco, an NSF senior adviser and chairman of the National Science and Technology Council’s subcommittee on nanoscale science, engineering and technology. ” He has followed (the National Nanotechnology Initiative) since its inception and was pushing the frontiers of nanotechnology to be developed at NIST laboratories and elsewhere.”

Roco said Bement would be a strong advocate for nanotechnology at NSF. “Nanotechnology will continue to grow from the current focus on single phenomena and nanoscale components to systemic behavior, multifunctionality, and transformational new approaches,” Roco said.

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