[Congressional Record Volume 154, Number 61 (Thursday, April 17, 2008)]
[Senate]
[Pages S3155-S3156]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mr. Kerry, Mr. Smith, and Mr. Brown):
  S. 2885. A bill to amend the Internal Revenue Code of 1986 to expand 
the availability of industrial development bonds to facilities 
manufacturing intangible property; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to introduce legislation that 
would provide State and local development finance authorities with 
greater flexibility in promoting economic growth that meets the 
changing realities of an ever more global economy. Specifically, my 
bill would expand the definition of ``manufacturing'' as it pertains to 
the small-issue Industrial Development Bond, IDB, program to include 
the creation of ``intangible'' property. I am pleased to be joined by 
colleagues from both sides of the aisle including Senators Kerry, 
Smith, and Brown, in introducing this critical legislation to promote 
economic development.
  Our Nation's capacity to innovate is a key reason why our economy 
remains the envy of the world, even during these difficult economic 
times. Knowledge-based businesses have been at the forefront of this 
innovation that has bolstered the economy over the long-term. For 
example, science parks have helped lead the technological revolution 
and have created more than 300,000 high-paying science and technology 
jobs, along with another 450,000 indirect jobs for a total of 750,000 
jobs in North America.
  It is clear that the promotion of knowledge-based industries can be a 
key economic tool for states and localities. This is especially true 
for states that have seen a loss in traditional manufacturing. In my 
home state of Maine, we lost 28 percent of our total manufacturing 
employment over the last decade. I believe that it critical that we 
provide states and localities with a wider range of options in 
promoting economic development. My legislation will do just that by 
expanding the availability small-issue IDBs to new economy industries, 
such as software and biotechnology, that have proven their ability to 
provide high-paying jobs.
  These IDBs allow State and local development finance authorities, 
like the Finance Authority of Maine, to issue tax-exempt bonds for the 
purpose of raising capital to provide low-cost financing of 
manufacturing facilities. These bonds, therefore, provide local 
authorities with an invaluable tool to attract new employers and assist 
existing one's to grow. The result is a win- win situation for local 
communities providing them with much needed jobs. Consequently, it only 
makes since to ensure that these finance authorities have maximum 
flexibility in options to grow jobs.
  In addition, my bill provides some technical clarity to distinguish 
between the phrases ``functionally related and subordinate facilities'' 
and ``directly related and acillary facilities.'' Until 1988, there was 
little confusion based on Treasury regulations going back to 1972 that 
made it clear that ``functionally related and subordinate facilities'' 
were clearly eligible for financing through private activity tax-exempt 
bonds.
  But, Congress enacted the Technical and Miscellaneous Revenue Bond 
Act of 1988 that imposed a limitation that not more than 25 percent of 
tax- exempt bond financing could be used on ``directly related and 
ancillary facilities.'' While these two phrases appear to be very 
similar, they are indeed distinguishable from each other. 
Unfortunately, the Internal Revenue Service has blurred this 
distinction between the phrases which has had an adverse impact on the 
way facilities are able to utilize tax-exempt bond financing. My

[[Page S3156]]

legislation would make it clear that ``functionally related and 
subordinate facilities'' are not susceptible to the 25 percent 
limitation.
  We must continue to encourage all avenues of economic development if 
Americas to compete in a changing and increasingly global economy and 
my legislation is one small step in furtherance of that goal. I urge my 
colleagues to join me in supporting this bill.
  Mr. President I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2885

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

     SECTION 1. EXPANSION OF AVAILABILITY OF INDUSTRIAL 
                   DEVELOPMENT BONDS TO FACILITIES MANUFACTURING 
                   INTANGIBLE PROPERTY.

       (a) Expansion to Intangible Property.--
       (1) In general.--The first sentence of section 
     144(a)(12)(C) of the Internal Revenue Code of 1986 (defining 
     manufacturing facility) is amended--
       (A) by inserting ``, creation,'' after ``used in the 
     manufacturing'', and
       (B) by inserting ``or intangible property which is 
     described in section 197(d)(1)(C)(iii)'' before the period at 
     the end.
       (2) Clarification.--The last sentence of section 
     144(a)(12)(C) of such Code is amended to read as follows: 
     ``For purposes of the first sentence of this subparagraph, 
     the term `manufacturing facility' includes--
       ``(i) facilities which are functionally related and 
     subordinate to a manufacturing facility (determined without 
     regard to this clause), and
       ``(ii) facilities which are directly related and ancillary 
     to a manufacturing facility (determined without regard to 
     this clause) if--

       ``(I) such facilities are located on the same site as the 
     manufacturing facility, and
       ``(II) not more than 25 percent of the net proceeds of the 
     issue are used to provide such facilities.''.

       (b) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

  Mr. KERRY. Mr. President, today, Senator Snowe and I are introducing 
legislation that would expand the availability of the Industrial 
Development Bond, IDB, program. The small-issue IDB program has given 
State and local governments a low-cost source of financing to create 
and retain jobs in manufacturing plants.
  Over the years, numerous technological advances have driven software 
and biotechnology to the forefront of our economy. According to the 
U.S. Census Bureau, there are more than 400 biotechnology companies in 
Massachusetts alone, employing more than 42,000 and paying more than $5 
billion in annual salaries.
  Currently, the small-issue IDB program is limited only to 
manufacturing facilities. As our economy continues to evolve, so must 
our policies. Our legislation would allow IDBs to be used for high-
technology and biotechnology uses. The definition of manufacturing 
would be broadened to include the creation of intangible property--
specifically, patents, copyrights, formulas, processes, designs, 
patterns, know-how and other similar items.
  Expanding the current definition of manufacturing to include 
``knowledge based'' companies would promote economic development in our 
local communities as well as nationwide. This legislation is supported 
by the Council of Development Finance Agencies.
  In addition to expanding the definition of manufacturing, the 
legislation clarifies that a manufacturing facility includes 
functionally related and subordinate facilities as part of the 
facility.
  This legislation will provide a boost to the economy by fostering 
development in technology. I urge my colleagues to support this common 
sense change.
                                 ______