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The growth of our economy and in particular our industry is

directly tied to the quality of the entire U.S. system of

education and the labor force it produces.

Public Education (K-12) in the U.S. is, on the average,

demonstrably non-competitive with that in Japan, Germany and

the USSR in mathematics and the sciences.

The revolution of

the computer has caught our educators at secondary schools

unprepared. We are now entering a catch-up period. The loss of gifted youngsters to science and engineering careers

because they do not receive an adequate math, science and

computer literacy education is one manifestation of the problem. But even more important is the current and future level of "technological literacy" in the workforce as a

whole, when the tools of work increasingly call for mental

skills.

Industry is woking to combat these deficiencies.

For example,

IBM has the following programs underway:

1.

$50 million (over a three-year period) in CAD/CAM

equipment and curriculum development grants in engineer

ing schools to motivate and train engineers for careers

in high productivity, through the use of automated

manufacturing.

2.

Over 400 cooperative research projects between university

and IBM laboratories in close to 100 U.S. institutions
totalling a multiyear commitment of about $60 million.

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totalling $4.25 million in a pilot program in three

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7.

Other grants to educational institutions for faculty

development and curriculum improvement totalling about

$2.1 million in 1982 and increasing sharply in the

future.

While these activities are substantial, it is important to

remember that total industrial support for academic R&D in

the U.S. is less than 7% of the total.

Similarly, total

industrial philanthropy to higher education in the U.s. is

less than 3% of university operating costs.

Thus, while industry support for research and human resources

has very important direction-setting influence on academic

institutions, it is not a substitute for substantial private

and governmental support, on which universities must depend.

IBM supports in concept s. 1194 and s. 1195 which are significant

efforts to address this critical need.

They include additional

incentives to industry to provide certain scientific and

computing equipment to our schools and in other research

activities. A beginning occurred in 1981 with enactment of

Internal Revenue Code Subsection 170(e)(4) but there is a

need to clarify remaining uncertainties of that legislation

and expand the incentives as reflected in s. 1194 and s. 1195.

PRESIDENT CHARLES W. STEWART

MACHINERY and ALLIED PRODUCTS INSTITUTE

1200 EIGHTEENTH STREET, N.W. WASHINGTON, D.C. 20036 202-331-8430

VICE PRESIDENT AND TREASURER THOMAS F. RUSSELL

Chairman Federal Mogul Corporation, Detroit, Michigan

VICE PRESIDENTS JOSEPH A. BOYD ....

Chairman Harris Corporation, Melbourne, Florida DAVID T. KIMBALL

President General Signal Corporation, Stamford, Connecticut

SENIOR VICE PRESIDENT

CHARLES I. DERR
VICE PRESIDENT AND CHIEF ECONOMIST

RICHARD R. MacNABB

June 3, 1983

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Dear Senator Packwood and

Members of the Subcommittee:

"Miscellaneous Tax Bills": Public Hearings of May 27, 1983, Concerning Proposed Legislation on Tax Aspects of Research and Experimentation and Charitable

Contributions (s. 738, 1194, and 1195) /1

.... President

Introduction

.... Chairman

The Machinery and Allied Products Institute (MAPI) is

pleased to have this opportunity to present its views to the

Subcommittee on Taxation and Debt Management concerning three

of four bills currently under consideration that would (1)

extend certain federal income tax provisions pertaining to

EXECUTIVE COMMITTEE WILLIAM F. ANDREWS ... Chrm, and Pres. Scovill Inc., Waterbury, Connecticut JAMES F. BERÉ

Chairman Borg-Warner Corporation, Chicago, Illinois WENDELL F. BUECHE

......... President Allis-Chalmers Corporation, Milwaukee, Wisconsin A. WILLIAM CALDER Joy Manufacturing Company, Pittsburgh, Pennsylvania E. PAUL CASEY

President Ex-Cello Corporation, Troy, Michigan ROBERT CIZIK

President Cooper Industries, Inc., Houston, Texas W. PAUL COOPER

Chairman Acme-Cleveland Corporation, Cleveland, Ohio J. E. CUNNINGHAM

Chairman McDermott Incorporated, New Orleans, Louisiana CLARK DAUGHERTY Duracell International Inc., Vero Beach, Florida THOMAS I. DOLAN

..... President A. 0. Smith Corporation, Milwaukee, Wisconsin EVANS W. ERIKSON

Chairman Sundstrand Corporation, Rockford, Illinois EDMUND B. FITZGERALD

........ President Northern Telecom Limited, Ontario, Canada T. MITCHELL FORD .... Chrm, and Pres. Emhart Corporation, Hartford, Connecticut JAMES A. D. GEIER

Chairman Cincinnati Milacre Inc., Cincinnati, Ohio K. ROBERT HAHN

Exec. Vice Pres. Lear Siagler, Inc., Santa Monica, California THOMAS A. HOLMES .......... Chairman Ingersoll-Rand Company, Woodcliff lake, New Jersey LEON C. HOLT, JR. ........ Vice Chairman Air Products and Chemicals, Inc., Allentown, Penn. JOHN V. JAMES

Chairman Dresser Industries, Inc., Dallas, Texas ROBERT V. KRIKORIAN ......... Chairman Rexnord Inc., Milwauke., Wisconsin ROBERT H. MALOTT

Chairman FMC Corporation, Chicago, Illinois QUENTIN C. McKENNA ..... President Kennametal inc., Latrobe, Pennsylvania DONALD R. MELVILLE

President Norton Company. Worcester, Massachusetts GERALD B. MITCHELL

Chairman Dana

Corporation, Toledo, Ohio JOHN C. MORLEY

......... President Reliance Electric Company, Cleveland, Ohio ALFRED G. MUGFORD .... Exec. Vice Pres. White Consolidated Industries, Inc., Cleveland, Ohio ELBERT H. NEESE

Chrm. and Pres. Baloit Corporation, Beloit, Wisconsin WALTER F. RAAB ..

.......... Chairman AMP Incorporated, Harrisburg, Pennsylvania HENRY D. SHARPE, JR.......... Chairman Brown & Sharpe Mfg. Co., N. Kingstown, Rhode Island CRAIG R. SMITH

Chairman Industrial Group, Bendix Corporation, Cleveland, Ohio RICHARD B. STONER ....... Vice Chairman Cummins Engine Company, Inc., Columbus, Indiana JAMES R. STOVER

President Eaton Corporation, Cleveland, Ohio WILLIAM G. vonBERG .......... Chairman Sybron Corporation, Rochester, New York R. J. WEAN, JR........... Chrm. and Pres. Wean United, c., Pittsburgh, Pennsylvania JOHN A. YOUNG

President Howlont-Packard Company, Palo Alto, California

research and experimentation (R&E) beyond their statutory

expiration dates; and (2) introduce liberalized tax treatment

for certain charitable contributions. We refer to s. 738 of

Senator Danforth and others to make permanent the credit for

1/ We understand that the hearing on S. 654 of Senator

Wallop and others, to require the deduction against U.S.-source income of all U.S.-conducted R&E under Section 862(b) has been postponed. MAPI expects to present views on S. 654 when the public hearing is rescheduled. As to s. 1147, we have no position at this time.

MACHINERY & ALLIED PRODUCTS INSTITUTE AND ITS AFFILIATED ORGANIZATION, COUNCIL FOR

M

(CTA

(THE FACILITIES OF PRODUCTION, DISTRIBUTION, TRANSPORTATION, COMMUNICATION AND COMMERCE) IN ADVANCING THE TECHNOLOGY AND FURTHERING THE ECONOMIC PROGRESS OF THE UNITED STATES

increasing research activity; and s. 1194 of Senator Danforth and S.

1195 of Senators Bentsen and Chafee to increase the charitable deduction

for certain gifts of computers and scientific equipment, to expand the

tax credit for research activities, and to extend the exclusion from

income for certain amounts received by students.

Our statement is submitted pursuant to Senate Finance Com

mittee Press Release No. 83-139 by which interested parties have been

invited to express their thoughts concerning bills under review by the

Subcommittee in the hearing of May 27, 1983.

We ask that our statement

be included in full text in the printed record of the hearing.

As the Subcommittee may know, MAPI is the national organiza

tion of producers of capital goods and allied products. In that capa

city, the Institute represents industries manufacturing and marketing

the facilities of production, distribution, transportation, communica

tion, and commerce.

More specifically, MAPI's membership includes

corporations in a number of the most research-intensive industries in

the United States, such as, machinery, including office, computing, and

accounting machines; electrical equipment; professional and scientific

instruments; motor vehicles and related equipment; aircraft and mis

siles; and, to some extent, chemicals and allied products./1 The Insti

tute's member companies produce highly engineered--often state-of-the

art--goods that are sold worldwide, and technological advancement is

1/

According to an April-June 1982 survey by the National Science Foundation (NSF), company-funded--i.e., excluding governmentfunded sums--R&D for these industries is expected to reach $40 billion in 1983, Science Resources Studies Highlights, NSF 82324, September 9, 1982.

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