[Congressional Record Volume 145, Number 78 (Thursday, May 27, 1999)]
[Senate]
[Pages S6295-S6296]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself, Mr. Baucus, Mrs. Feinstein, Mr. Kyl, 
        Mr. Robb, and Mr. Bingaman):
  S. 1150. A bill to amend the Internal Revenue Code of 1986 to more 
accurately codify the depreciable life of semiconductor manufacturing 
equipment; to the Committee on Finance.


           the semiconductor equipment investment act of 1999

  Mr. HATCH. Mr. President, I rise today to introduce the Semiconductor 
Investment Act of 1999. I am joined by Senators Baucus, Feinstein, Kyl, 
Robb, and Bingamin. This bill is designed to help the American 
semiconductor industry compete globally by shortening the depreciable 
life of semiconductor manufacturing equipment from 5 years to 3.
  The U.S. semiconductor industry employs more than 275,000 Americans,

[[Page S6296]]

sells over $67 billion of products annually, and currently controls 55 
percent of the $122 billion world market. Its products form the 
foundation of practically every electronic device used today. Growth in 
this industry translates directly into new employment opportunities for 
American workers and to economic growth for the nation as a whole.
  The American semiconductor industry is a success story because it has 
invested heavily in the most productive, cutting-edge technology 
available, and currently spends 14% of its revenues on research and 
development and 19% on capital investment. Unfortunately, Mr. 
President, our semiconductor industry is threatened.
  While the equipment used to manufacture semiconductors has a useful 
life of only about 3 years, current tax depreciation rules require that 
cost of the equipment be written off over a full 5 years. The 
Semiconductor Investment Act would correct this flaw, Mr. President, by 
allowing equipment used in the manufacture of semiconductors to be 
depreciated over a more appropriate 3-year period. Given the massive 
level of investment in the semiconductor industry, accurate 
depreciation is critical to industry success.
  The key reason for this 3-year depreciation period is that the 
equipment used to make semiconductors grows technologically obsolete 
more quickly than other manufacturing equipment. Research indicates 
that semiconductor manufacturing equipment almost completely loses its 
ability to produce sellable products after less than 3 years. Today's 
5-year period simply doesn't reflect reality. A quicker write-off 
period would help semiconductor manufacturers finance the large 
investment in equipment they need for the next generation of products.
  The National Advisory Committee on Semiconductors reinforced this 
conclusion. Congress founded the committee in 1988, and it consisted of 
Presidential appointees from both the public and private sectors. In 
1992, the committee recommended a 3-year schedule would increase the 
industry's annual capital investment rate by a full 11 percent.
  By comparison, Japan, Taiwan, and Korea employ much more generous 
depreciation schedules for similar equipment, and all three nations 
provide stiff competition for America's semiconductor manufacturers. 
For example, under Japanese law, a company can depreciate up to 88 
percent of its semiconductor equipment cost in the first year, while 
United States law permits a mere 20-percent depreciation over the same 
period. When multinational semiconductor firms are deciding where to 
invest, a depreciation gap this large can be decisive.
  This legislation will help ensure that America's semiconductor 
industry retains its hard-earned preeminence, a preeminence that yields 
abundant opportunities for high-wage, high-skill employment. Mr. 
President, my home State of Utah, provides an outstanding example of 
the industry's job-creating capacity. Thousands of Utahns earn their 
living in the State's flourishing semiconductor industry. Firms such as 
Micron Technology, National Semiconductor, Intel, and Varian have 
reinforced Utah's strong position in high-technology industries. With 
the fair tax treatment this bill brings, all Utahns can look forward to 
a more secure and prosperous future.
  Mr. President, the Semiconductor Investment Act of 1999 will help 
level the playing field between U.S. and foreign semiconductor 
manufacturers, and provides fair tax treatment to an industry that is 
one of the Nation's greatest success stories of recent years. I hope 
that my fellow Senators will join me in supporting this legislation. 
Mr. President, I ask unanimous consent that the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1150

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Semiconductor Equipment 
     Investment Act of 1999''.

     SEC. 2. 3-YEAR DEPRECIABLE LIFE FOR SEMICONDUCTOR 
                   MANUFACTURING EQUIPMENT.

       (a) In General.--Subparagraph (A) of section 168(e)(3) of 
     the Internal Revenue Code of 1986 (relating to classification 
     of property) is amended by striking ``and'' at the end of 
     clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(iv) any semiconductor manufacturing equipment.''
       (b) Conforming Amendments.--
       (1) Subparagraph (B) of section 168(e)(3) of such Code is 
     amended--
       (A) by striking clause (ii),
       (B) by redesignating clauses (iii) through (vi) as clauses 
     (ii) through (v), respectively, and
       (C) by striking ``clause (vi)(I)'' in the last sentence and 
     inserting ``clause (v)(I)''.
       (2) Subparagraph (B) of section 168(g)(3) of such Code is 
     amended by striking the items relating to subparagraph 
     (B)(ii) and subparagraph (B)(iii) and inserting the 
     following:

      ``(A)(iv)......................................................3 
      ``(B)(ii)..................................................9.5''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to equipment placed in service after the date of 
     the enactment of this Act.
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