Basic Research Subcommittee Holds Hearing on IT Bill

(July 18, 1999) The House Basic Research Subcommittee held a hearing on June 14 on HR 2086, a broad information technology bill, that would permanently extend the R&D tax credit, establish a grant program for universities and community colleges for students to intern at information technology companies, direct the NSF to conduct a study on the availability of encryption technologies around the world, and fund IT research.

The House Science Committee's Subcommittee on Basic Research held a hearing Wednesday afternoon, July 14, on HR 2086 IH, the Networking and Information Technology Research and Development Act. This bill's provision to permanent the research and development tax credit has long been advocated by high-tech companies.

HR 2086 was introduced on June 9, by Rep. James Sensenbrenner (R-WI), and many other members of the House Science Committee. Section 8 of the bill briefly provides that the research and development tax credit is made permanent. It would accomplish this by simply amending Section 41 of the Internal Revenue Code of 1986 by striking subsection (h).

This was the second time that a subcommittee of the Science Committee held a hearing on the bill. On July 1, the Technology Subcommittee held a hearing which focused the sections of the bill pertaining to the R&D tax credit, and internship grant program. However, this did not stop witnesses at the Basic Research Subcommittee from also stating their support for making the tax credit permanent.

Nick Smith

Rep. Nick Smith (R-MI), the Chairman of the Subcommittee, presided at the hearing. He described the bill in his opening statement. He said that,  "Overall, the bill authorizes a total of nearly $4.8 billion over five years for the agencies under the Science Committee’s jurisdiction. Its centerpiece is the Networking and Information Technology Research and Development program, which includes authorizations for individual or small-team grants; large grants of up to $1 million for long-term basic research; information technology research centers; terascale computing hardware; and for-credit university internship programs for research at private companies. In addition, the bill provides authorizations for the existing High Performance Computing and Communications programs and the completion of the Next Generation Internet program."

Rep. Smith also stated that "extending the R&D tax credit is particularly important to promoting greater private sector R&D."

The Subcommittee heard from four witnesses:

• Neal Lane, Assistant to the President for Science and Technology,
and Director Office of Science and Technology Policy, Washington, DC.
• Roberta Katz, President and CEO of Technology Network, Palo Alto, CA.
• Edward Lazowska, Professor and Chairman of the Department of Computer Science & Engineering, University of Washington, and Chairman of the Computing Research Association.
• Alan Blatecky, Vice President for Information Technology, MCNC, Research Triangle Park, North Carolina.

Neal Lane testified at the hearing on behalf of the Clinton administration. He criticized the Congressional appropriations committees, criticized the encryption section of the bill, and said that the administration does not support the out-year funding levels contained in the bill.

Neal Lane testified, "As Jack Lew, the Director of OMB has said, 'the Appropriations Committees are now implementing an untenable budget resolution which is a blueprint for chaos.' "

Neal Lane also elaborated on the administration's opposition to the Section 7 of the bill, which provides that "The National Science Foundation shall undertake a study comparing the availability of encryption technologies in foreign countries to the encryption technologies subject to export restrictions in the United States."

Neal Lane stated that "The Administration is also concerned about a provision in H.R. 2086 calling for the NSF to conduct a study to assess foreign encryption technologies and domestic technologies subject to export restriction. The Administration recognizes the concerns of Congress in this area, but does not support a statutory mandate requiring that a study be conducted by NSF."

He did not state that if such a study were conducted it would provide further evidence that the administration is blocking the export of U.S. encryption products that are already widely available from foreign producers.

Rep. Smith asked Neal Lane if the "administration is prepared to support the increased funding in this bill for information technology. When you were here before the subcommittee earlier you indicated that the funding for the, the prospects for funding for out-years was flat as far as the discretionary funding -- does the administration prepared to support the increased funding for IT?"

Neal Lane obfuscated a negative reply. "Mr. Chairman, we certainly appreciate the statement of high priority for this important research area that is made by this projected out-year budget in the bill. The administration's position remains as it was before. We have bottom line constraint on out-years that is based on the agreement that the President has with the Congress. But, as I stated earlier, the out-year budget for any particular agency or any particular program is not specified as a matter of policy. I think these out year numbers, we expect to revisit, the budget each year as the President brings it forward, and I will continue to argue for strong funding for this particular initiative."

On the R&D tax credit, Neal Lane said the following: "The Administration supports making the tax credit permanent. However, it must be paid for per the PAYGO requirements of the Budget Enforcement Act."

The private sector and academic witnesses were far more supportive of the bill. Roberta Katz, who previously worked as General Counsel for Netscape, testified in support of HR 2086, and the R&D tax credit in particular. She testified via video conferencing.

Alan Blatecky called HR 2086 a "much-needed bill." He stated that "the future productivity and competitiveness of the U.S. economy will be largely dependent upon the vitality of the federal research and development programs to further push the envelope of information technologies."

He also stated that "we support the provision of establishing a scientific internship program as it is encourages and develops an effective mechanism to link the private sector with the universities and community colleges. This will broaden the educational experience of students, and create a more effective way to transfer technology."

Edward Lazowska offered his "enthusiastic support" for the bill.

Most members of the Subcommittee listened, but did not make opening statements, or ask questions.

Rep. Lynn Woolsey (D-CA) congratulated Roberta Katz on being a women, and a role model. She then asked the panel of witnesses, "are we doing enough for girls and students who are traditionally left out of the math and science field?"

The members of the Subcommittee who participated in all or part of the hearing included Judy Biggert (R-IL), Mike Doyle (D-PA), Bob Etheridge (D-NC), Bart Gordon (D-TN), Gil Gutkneckt (R-MN), E.B. Johnson (D-TX), John Larson (D-CT), Connie Morella (R-MD), Nick Smith (R-MI), Mark Udall (D-CO), and Lynn Woolsey (D-CA).