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 $4.25 million in a pilot program in three 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 RICHARD R. MacNABB June 3, 1983 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. |