[Congressional Record Volume 147, Number 83 (Thursday, June 14, 2001)]
[Senate]
[Page S6329]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. TORRICELLI:
  S. 1049. A bill to provide for an election to exchange research-
related tax benefits for a refundable tax credit, for the recapture of 
refunds in certain circumstances, and for other purposes; to the 
Committee on Finance.
  Mr. TORRICELLI. Mr. President, I rise today to introduce a vital 
piece of legislation that will encourage the growth of some of the most 
innovative companies in the world. I refer to the small biotechnology 
firms throughout the country which on a daily basis perform 
breakthrough research that enhances our daily lives.
  Indeed, biotechnology research over the years has benefitted greatly 
from successful initiatives such as the R&D tax credit. The R&D credit 
is of particular importance to my State of New Jersey because there are 
over 100 companies who spend $20 billion a year in R&D. In fact, over 
50 percent of all the prescription drug research in the world is 
conducted in my State.
  Going hand in hand with the R&D tax credit are the contributions of 
the biotechnology industry. My colleagues are well aware of the 
importance of this segment of industry and the beneficial role 
biotechnology plays in improving our quality of life and protecting the 
environment. In fact, the Senate unanimously approved a resolution 
acknowledging the benefits of biotech research earlier this Congress.
  The Senate has recognized these benefits that are seen in the drugs 
and vaccines developed over the last 20 years, which have already 
enabled over 270 million people throughout the world live healthier and 
longer lives. Today, a breast cancer, leukemia or diabetes patient has 
a fighting chance to survive their illness through treatments developed 
by biotech research.
  The record number of biotech drug approvals by the FDA over the past 
five years demonstrates the potential of this industry to develop new 
therapies which may someday lead to cures and vaccines for debilitating 
diseases such as heart disease, Alzheimer's, AIDS and cancer.
  While the R&D credit has been responsible for enabling much of this 
breakthrough research, the irony is that many small firms who are 
performing the most advanced, cutting edge research and 
experimentation, who desperately need the R&D credit are unable to 
utilize it because they have failed to turn a profit. These small 
companies often dedicate all of their resources to one or two major 
initiatives to conduct long term R&D projects benefitting our medical, 
agricultural and industrial sectors.
  In many instances, these projects are time consuming, expend much 
capital, and unfortunately are unsuccessful or unmarketable. 
Consequently, the long term unprofitability of these companies make 
them unable to take advantage of tax breaks and incentives such as the 
R&D credit. Therefore, many small firms are forced to abandon their 
research, sell their innovations to larger companies or simply go out 
of business.
  I firmly believe that these industry failures are our failures 
because the firm that ends its research today, may have been the 
company that provides the cure for Parkinson's or Lou Gherig's disease 
tomorrow.
  In order to address this situation, it is time for Congress to adopt 
a straightforward proposal that would build on the success of the R&D 
credit to provide these small research companies with the resources 
they need to continue their vital work. Specifically, I am introducing 
a proposal to allow these small firms to elect to take a refundable tax 
credit, equal to 75 percent of the nominal value of their current-year 
research credits or deductions or 75 percent of the value of the 
current- year net operating losses multiplied by the highest marginal 
tax rate for corporations (currently 35 percent).
  I have also included safeguard provisions to ensure that the 
government's investment in these companies is put to good use. Any 
company that elects to take this refundable tax credit would become 
ineligible for normal R&D tax credits and normal corporate tax 
deductions until they are able to payback the original amount of the 
refundable tax credit in federal income taxes after they turn a profit. 
Furthermore, my proposal requires that the proceeds from the refundable 
tax credit must be used towards ongoing research-related activities. My 
legislation also maintains that if it is determined that a company 
claiming this credit is not using the proceeds for research, the IRS 
can recapture that portion of the credit.
  This proposal does not seek to supercede or replace the R&D tax 
credit. Rather, it complements the tremendous success of the R&D 
credit. It helps the struggling companies that the R&D credit doesn't 
reach. I am hopeful that my colleagues will recognize, as I do, the 
magnificent potential of the biotech industry and make this investment 
in its future.
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