4.

Proposed Section 44F(e)(8) excludes small business

corporations and service organizations from

eligibility for the basic research provisions.

Considering the fact that the objective of this

portion of the proposed legislation is to generate funding to expand research capabilites and facilities

IV.

S.11.95

High Technology Research and Educational Development
Act of 1983

This bill is, for the most part, identical to S.1194 in

providing for expansion of contributions of scientific

equipment and the basic research provisions of the R&D

Credit.

The comments contained in Section III above are also appli

cable to s.1195.

This bill, however, is different in a

few respects which merit

specific mention.

A.

Section 174A( b )(1) includes secondary schools offering

in order to provide incentive to satisfy the need for

in that it will help to satisfy a desperate need for

trained technicians in the high technology industry.

B.

Section 174A(C)(1)(D) specifies that in the case of

property other than computer software the property

is at least 50% assembled by the taxpayer.

The question here is to what basis is the 50% applied;

cost, value, physical content, etc.

This same comment is applicable to Section 174A(C)(2)(D).

c.

It appears that there is an

error in the structure of

proposed Section 174A in that there is no Section 174A(d)

rather the structure goes from (c) to (e).

Accordingly, Sections 174A (e), (f), (g) should be

е

D.

Section 174A( f)(2) specifies that a deduction will not

be allowed in connection with transfers of qualified

computer equipment property or qualified scientific

property where such transfers exceed, on

a product by

product basis, 20% of the number of units of such

product sold by the taxpayer in the ordinary course of

its business in that taxable year.

The provision as written would apply to transfers of trade

of business property as defined in Section 1231(b),

which it should not since this type of property is

normally not sold in the normal course of business, at

(e) of Section 44F contained in Section 3 of the bill,

this cross reference should be to subsection (e)(1).

2. Proposed section 44F(e)(3)(A) includes a broader

definition of "qualified organizations" than

S.1194 in that it includes area vocational educa

tional schools (as defined in Public Law 94-482).

From a policy point of view, is it clear that such

DEERE & COMPANY

JOHN DEERE ROAD, MOLINE, ILLINOIS 61265 U.S.A.

Statement of

BERNARD L. HARDIEK
Director of Taxes

Bernard L. Hardiek
Director of Taxes
Deere & Company
27 May 1983

I am Bernard L. Hardiek, Director of Taxes, Deere & Company, Moline, Illinois. Deere or John Deere, as we are perhaps better known -- manufactures, distributes and finances a broad line of farm and construction equipment. We are the largest manufacturer of farm equipment in the world employing some 48,000 people worldwide. Last year, the 3,500 independent dealers marketing Deere equipment registered total sales in excess of $4.6 billion.

We at Deere & Company commend the Senate Finance Committee for the interest shown in the important area of taxation of research and development expenditures. Senators Wallop and Danforth and the cosponsors of their bills have demonstrated an understanding, concern and willingness to work that is especially appreciated. Deere & Company supports S. 654 and s. 738 because the time has come for R&D to be encouraged rather than discouraged by the tax laws of this country. Research and development will lead to increased productivity and will help to achieve noninflationary increases in personal income.

When most people think of research and development, the name John Deere may not immediately come to mind. However, in recent years we have ranked consistently within the top 25 companies in the United States in terms of total R&D expenditures. In 1982, Deere & Company employed over 3,500 people engaged in research and spent $242 million on research and development. Stated another way, Deere spent almost $1 million each working day on R&D. Over 90% of the cost of our R&D was incurred in the United States. We also think it is significant that our Company's investment in research and development has averaged over four cents of each sales dollar in recent years.