Research and Development Tax Credit Improvement Act of 2008

Mr. President, today I am introducing a tax package that would extend relief from the alternative minimum tax and extend other much-needed individual and business provisions.

When the economy is turning down, Americans need certainty about their taxes. Families and businesses need to know what the tax law is.

That is why my bill provides a one year patch for the AMT. The patch will hold the number of taxpayers subject to the AMT at 4.2 million. We will not let more taxpayers fall into the alternative minimum tax.

Last year, Congress did not put a patch in place until December. We must act sooner this year. Through this bill, Congress can act.

That is why my package contains a 2-year extension of provisions that expired at the end of last year.

These include the qualified tuition deduction to give families relief from high tuition costs.

My package also includes the teacher expense deduction. This deduction gives teachers some of the money that they spend on school supplies to educate our children.

The package also includes the State and local sales tax deduction for those States without an income tax.

The bill offers an extension of the research and development credit. This credit gives an incentive to businesses to invest in research. It helps to keep America competitive in the global economy.

My package will also extend provisions that expire this year for an additional year.

The bill extends much-needed energy provisions.

Public and private investment in the renewable energy sector was about $90 billion worldwide last year. That's a 27 percent increase over 2006.

Congress can direct this investment toward the U.S.--rather than overseas--by supporting clean energy tax incentives.

These incentives include tax credits for wind and solar power, efficient buildings and appliances, and clean renewable energy bonds.

These provisions are not only good energy policy. They also create jobs.

This package would also extend wind and solar provisions.

The American solar industry employs 20,000 Americans. With a long- term extension of the solar tax credit, that number would triple.

The American wind industry expanded by 45 percent in 2007. It contributed about 30 percent of the new power capacity in America last year.

These job-creating industries are growing fast. We should support them. We know what happens when we don't.

For example, the tax credit for production of renewable energy was enacted in 1992, starting the growth of renewable power in the U.S.

But since 1999, this credit has expired three times. And when it expires, clean energy suffers, leading to declines between 73 percent and 93 percent in wind energy investment.

We need to keep this credit going to ensure consistent investment in the wind power industry.

This package would also promote energy efficiency. Efficiency is the low- hanging fruit in the energy debate. We can make big strides toward energy independence and a clean environment by getting more for our energy buck.

For example, ENERGY STAR--a voluntary labeling program designed to promote energy-efficient products--saved businesses, organizations, and consumers an estimated $14 billion in 2006.

Efficiency also creates jobs. The American Solar Energy Society reported that in 2006, the efficiency industry created 8 million jobs, over half of them in manufacturing.

The government plays a key role in sustaining the efficiency industry, through tax incentives for efficient commercial buildings, homes, and appliances.

This package would also extend the clean renewable energy bonds, or CREBs.

CREBs passed in the Energy Policy Act of 2005. CREBs spurred more than 700 new wind, biomass, solar, and hydro projects. The number of projects far exceeded the funding available to pay for them.

But CREBs funding lapsed at the end of 2007. That halted development of new projects and the green-collar jobs that go with them. We must keep these projects going.

The CREBs provision was written for non-taxable entities like rural co-ops. Those non-taxable entities cannot use other tax incentives in this package.

I've listed just a few of the important energy items in this extenders bill. There are more. And I plan to build upon this package as it makes its way through the legislative process, with edits and additional items. The Finance Committee has been working to that end for the better part of a year.

Last June, the Finance Committee passed a roughly $30 billion energy- tax package, with a resounding bipartisan vote. A majority of the Senate voted for that bill.

But we were just shy of getting the required 60 votes.

We tried again in December, with a slimmer package. That time, we fell short of the required 60 by just one vote.

We then tried in February, as part of economic stimulus bill. We offered a package very similar to what passed last week. That amendment got 58 votes.

Last week, this body passed, by a solid 88-8 vote, a package of energy-tax extenders, similar to the package considered during the economic stimulus debate.

A vote of 88 to 8 might suggest that there is smooth sailing ahead on energy-tax legislation. But I'm afraid that's not the case.

The day before the Senate passed its housing bill, including the energy-tax package, the House Ways and Means Committee passed its own housing relief bill.

The Ways and Means bill restated the House's position on pay-go. The House requires that the most of the tax package be offset.

How did the Ways and Means Committee offset the bill? Largely with a provision called ``basis reporting.'' President Bush included this in his 2009 budget proposal.

In other words, the House paid for a tax package with an item already supported, at least in principle, by the President.

While I believe that this Congress should have paid for energy-tax legislation with the offsets passed by Finance Committee last year, it's not clear that passing that package gets us any further to extending these important tax incentives.

That is why I have been working on offsets that can pass both bodies and be signed by the President. That is what I will continue to do to get these important energy items--as well as other vital extenders-- passed.

By taking care of this now, we can spend more of our time on other things like tax reform.

I plan to hold several hearings and roundtables to cuss tax reform. We began this week. I'm serious about simplifying our tax code. I am serious about helping the American people.

Congress should do more than just extend legislation. Congress needs to work on new policy, new legislation, and new ideas. And by enacting this legislation, we can turn to those important goals. I urge my colleagues to support this package.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, if I said there was an industry that generates millions of gallons of wastewater every day and that can dump that waste with virtually no oversight, you might think that I was recalling the days before the Clean Water Act. The truth is, though, that such an industry exists today. I am talking about cruise ships.

That is why I am introducing the Clean Cruise Ship Act of 2008. This bill will require cruise ships to upgrade their wastewater treatment systems to meet the standards of today's best available technology, which has been shown to significantly reduce the amount of pollutants discharged from ships. This technology is already being

used successfully on cruise ships in Alaska, thanks to that State's forward-thinking regulations.

The problem is real. The number of cruise ship passengers has been growing nearly twice as fast as any other mode of travel. In the U.S. alone the numbers are approaching ten million passengers a year. Some of these ships can carry 3,000 passengers. That is the size of a small city. As cities do, these ships produce massive amounts of waste--over 200,000 gallons of sewage each week; a million gallons of graywater from galleys, laundry, and showers; and over 35,000 gallons of oily bilge water that collects in ship bottoms.

Wastewater from cities, of course, is highly regulated. America wouldn't tolerate anything less. A city cannot simply dump waste into our waterways. We've seen, of course, what happens when municipal wastewater treatment systems are poorly operated or break down. People fall ill, beaches are closed, and ecosystems are harmed.

So what's the story for waste from cruise ships? Let us start with ``black water'' sewage--human body wastes and other toilet waste. Within three miles of shore, vessels can discharge this waste provided that a ``marine sanitation device'' is installed. The Environmental Protection Agency released a draft report in December, however, that concluded that these systems simply don't work. These sewage treatment devices leave discharges that consistently exceed national effluent standards for fecal coliform and other pathogens and pollutants. In fact, fecal coliform levels in effluent are typically 20 to 200 times greater than in untreated domestic wastewater.

Beyond three miles from shore there are no restrictions on sewage discharge. Cruise ships are free to dump their sewage and foul U.S. waters with impunity.

The situation for graywater may be even more serious. Except in Alaska, cruise ship graywater requires no treatment whatsoever before being discharged, and there are no restrictions on where that dumping can be done. Yet graywater from sinks, tubs, and kitchens contains large amounts of pathogens and pollutants--amounts that would never be tolerated from a land-based business. Fecal coliform concentrations, for example, are ten to a thousand times greater than those in untreated domestic wastewater. These pollutants sicken our marine ecosystems, wash up onto our beaches, and contaminate food and shellfish that end up on our dinner plates.

The Clean Cruise Ship Act seeks to solve this oversight in the current regulations, just as Alaska State law has done. No discharges whatsoever would be allowed within 12 miles of shore. Beyond twelve miles, discharges of sewage, graywater, and bilge water would be allowed, provided that they meet national effluent limits consistent with the best available technology. That technology works and is commercially available now. The recent Environmental Protection Agency study found that these ``advanced wastewater treatment'' systems effectively remove pathogens, suspended solids, metals, and oil and grease.

Under this legislation, the release of raw, untreated sewage would be banned everywhere. No dumping would be allowed of sewage sludge and incinerator ash in U.S. waters. All cruise ships calling on U.S. ports would have to dispose of hazardous waste in accordance to the Resource Conservation and Recovery Act. The bill would establish inspection and enforcement mechanisms to ensure compliance.

There is one thing at this point I'd like to make clear. Many of us here have been working hard to stop aquatic invasive species that slip into our lakes and coastal waters in discharged ballast water. Alien species that have escaped into U.S. waters are causing massive harm. We have to do everything in our power to prevent new invasive species from getting loose.

With this in mind, many of us have been closely watching court cases surrounding the Environmental Protection Agency's responsibility for regulating ballast water under the Clean Water Act. That litigation may have implications for cruise ship wastewater pollution.

I have no intention of interfering with this court case. Likewise, I want to emphasize that this bill in no way undermines the provisions of the Clean Water Act that deal with discharges of pollution into the nation's waters. I have always supported the Clean Water Act. It will continue to be an important tool that, in conjunction with the Clean Cruise Ship Act, can significantly reduce wastewater pollution from cruise ships.

The protection of U.S. waters is vital to our Nation's health and economy. There are 4.5 million square miles of ocean in the U.S. territorial seas--23 percent larger than our Nation's landmass. That's more than any other country has. Cruise ship wastewater threatens the very environments that family vacationers want to visit. Current regulations and voluntary guidelines for the cruise ship industry just aren't good enough. No other industry is allowed to pollute our waters at will. The cruise ship industry is growing at nearly 5 percent each year, which means that the problem is growing, as well.

Uncontrolled dumping of cruise ship pollution must stop. We can achieve that goal with the Clean Cruise Ship Act. I recognize, though, that there may be other valid approaches. I encourage my colleagues to work with me to pass legislation this year that will put a stop to the dumping of hazardous pollutants along our coasts. Together we can clean up this major source of pollution that is harming our waters.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today to introduce legislation to ensure responsible development of the energy resources under Colorado's Roan Plateau in a manner that minimizes the adverse impacts on its unique ecological resources while maximizing the financial returns to the State of Colorado and to our country. This legislation was developed jointly with my colleagues Representative John Salazar and Representative Mark Udall, who plan to introduce the legislation today in the House.

The Roan Plateau, an area of pristine wilderness in northwestern Colorado, rises 3,500 feet out of the Colorado River Valley. It boasts native cutthroat trout streams and has some of the best winter elk and mule deer habitat left in the heavily developed Piceance Basin. The Roan has long been a favorite destination for hunters and anglers. The mule deer, elk, black bear, and native trout that find habitat on top and at the base of the Roan Plateau are an economic engine all their own, drawing tourism and recreation dollars to towns like Glenwood Springs, Rifle, Silt, and Parachute.

Recently the Department of Interior's Bureau of Land Management, which oversees the public lands on the Roan and the minerals beneath them, announced that it is opening these lands for energy development. Under the BLM plan, 67,000 acres of public lands on and around the Roan Plateau will be open for natural gas drilling as soon as this year. We in Colorado are blessed to be home to significant energy resources, and tapping these resources is important to sustain our Nation's energy needs and invigorate the Colorado State economy. But in its current form, the BLM plan lacks adequate protections for the Roan's land, water, and wildlife--the very things that support the outfitters, guides, hotels and restaurants in the area. And by proposing to lease all of the undeveloped public lands at once, the BLM plan would sell Colorado short.

Drilling is already happening on roughly half of the plateau that is either owned or leased by the natural gas industry. Without question, western Colorado is experiencing a boom in energy development. During the decade of the 1990s, the average number of completed gas wells per year in Garfield County--the home of the Roan--was 80. The number of completed wells has climbed rapidly since 2000, setting a new high each year. In 2006, 840 new wells were completed in Garfield County. This rapid expansion of activity has created new jobs in the region, but has also stoked new conflicts between the energy values and environmental, ecological, and recreation values of these lands. The impacts of this development are being felt by landowners and outdoor enthusiasts alike. Sportsmen have watched as public hunting areas, habitat, and important watersheds have been irreparably degraded as a result of widespread development.

With this level of development occurring we must ensure that the most pristine areas of the plateau that remain are protected, that oil and gas development in the region occurs with minimal disturbance, and that Colorado receives the best possible financial return on any oil and gas leases.

Our legislation has three main functions that work to address these issues. First, it requires phased leasing on top of the plateau to maximize state revenues and better protect wildlife habitat and the environment. Second, it ensures protection of critical cutthroat trout watersheds and other wildlife habitat on top and around the base of the Roan Plateau. Lastly, it contains a conforming amendment to the Transfer Act to ensure that Colorado receives its fair share of leasing revenues rather than directing this money, as the Transfer Act specifies, to the Anvil Points cleanup fund, which is in surplus.

The phased leasing provision requires BLM to lease less sensitive areas outside of cutthroat trout watersheds first, rather than leasing all available development areas at once. In selecting areas for leasing, BLM must take into consideration various factors designed to maximize leasing revenues and to minimize the environmental and ecological impacts of development. Phased leasing will generate higher per-lease bids from industry--and more money for the Treasury and Colorado--than the current BLM plan to lease the entire designated development areas at once.

The special protection provisions of the bill expand BLM's designated ``Areas of Critical Environmental Concern,'' ACECs, to include the headwaters of Northwater Creek and the East Fork of Parachute Creek above the confluence with First Anvil Creek--both of which are critical native cutthroat trout watersheds. The bill also permits gas development activities on top of the plateau outside ACECs that are within development corridors along existing ridge-top roads on slopes not exceeding 20 percent. These measures will protect critical elk and mule deer habitat around the base of the plateau, while allowing development and recovery of the available natural gas under the Roan.

In 1907, President Teddy Roosevelt told a crowd that, ``In utilizing and conserving the natural resources of the Nation the one characteristic more essential than any other is foresight. The conservation of our natural resources and their proper use constitute the fundamental problem which underlies almost every other problem of our national life.'' President Roosevelt's wisdom--over a century later--is as valuable as ever to a Nation committed to protecting its land and water, but that is in dire need of affordable, domestic sources of energy.

The Roan is a special place. Protecting our State's last few remaining wild spaces, maximizing oil and gas leasing revenues from these areas and supporting the communities that surround them need not be at odds. This bill will replace BLM's plan with a better, more balanced approach that will protect the most critical areas on the top of the Roan and provide the most benefit to the State of Colorado.

Mr. President, I rise today with my colleagues Senator Collins and Senator Isakson to introduce legislation that would provide the secretaries of the military departments the authority to pay the necessary expenses that would accompany the presentation of a flag to each child of a servicemember killed in the service of the Nation.

The presentation of a remembrance flag to the family of a deceased servicemember is a time-honored tradition for each of the services which commemorates and memorializes the service of our men and women in uniform who have made the ultimate sacrifice to protect the liberties and freedoms we cherish. The remembrance flag is a profound symbol of the enduring appreciation of a grateful Nation.

Regrettably, however, there is an oversight in current law affecting which family members of a deceased servicemember may receive a flag. At present, the statute authorizes the secretaries of the services to present only two remembrance flags--one to the parents of the deceased servicemember and one to the person authorized to direct disposition of the servicemember. In many instances, the person authorized to direct disposition is also a primary next of kin of the servicemember. However, in cases where the primary next of kin are the children of the deceased servicemember, which can occur in extended family situations, authorities do not exist for the secretaries of the services to provide a remembrance flag to the children of deceased servicemembers.

The legislation that my colleagues and I are introducing today will remedy this oversight. We believe that the children of deceased servicemembers should also be able to receive a remembrance flag in honor of the sacrifice made by their parent. Clearly, this is the right thing to do. I sincerely hope that my colleagues will join Senator Collins, Senator Isakson, and me in supporting this important legislation.

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

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.

Mr. President, I rise today to introduce the Research & Development Tax Credit Improvement Act of 2008, legislation which would extend the R&D tax credit for 5 years, phase-out the Basic Credit, and raise the rate of the Alternative Simplified Credit from 12 percent to 20 percent by 2010.

Those who have followed the ongoing discussions regarding the R&D tax credit will recognize that the legislation I am introducing shares the framework of a proposal already put forward by the senior Senator from the State of Utah, my good friend Orrin Hatch. Senator Hatch has done a superb job building a consensus around the need to transition to the Alternative Simplified Credit, and to raise that credit to provide a real incentive to the many companies that are unable to benefit from the Basic Credit structure. I applaud his efforts in this regard, and I thank him for lending his support to the bill I am introducing today.

I also want to note the contribution of the distinguished Chairman of the Finance Committee, Senator Baucus, who has worked side-by-side with Senator Hatch on the Research and Development tax credit.

The chief distinction between our two bills is the duration of the credit. The Hatch-Baucus bill proposes a permanent credit, while my bill would extend the R&D tax credit for five years. I certainly share the goal of providing a permanent R&D tax credit, but I fear that the cost of doing so puts it beyond our reach. Yet we simply cannot continue to play ``stop-and-go'' with this critical research incentive. Since the R&D tax credit was first enacted in 1981, Congress has had to extend it a dozen times, and it expired again at the end of last year. The constant uncertainty about the status of the credit has made it impossible for companies to plan their research investments, and has seriously diminished the credit's role as an incentive for research and development here in the U.S.

A 5-year extension would give companies enough time to plan their research investments with the credit in mind, restoring the incentive- effect the R&D credit has always been intended to provide. Just as important, the time frame I am proposing, coupled with the increase in the rate to 20 percent will allow for a smooth transition away from the Basic Credit to the Alternative Simplified Credit. The Basic Credit has served its purpose, but it has become hopelessly outmoded. Under the Basic Credit methodology, companies wishing to calculate their R&D credit must measure their current investments against a base that is stuck in the past--literally the tax years between 1984 and 1988. This period is simply not relevant to today's investment decisions, and because of that, fewer and fewer companies get any benefit at all from the Basic Credit.

By contrast, the Alternative Simplified Credit methodology allows companies to calculate their credit using a rolling average of their domestic investments over their three most-recent tax years.

The value of doing this is evidenced by the fact that most companies have already switched to the Alternative Simplified Credit, even though it has been on the books for less than a year-and-a-half, and even though the credit rate is only 12 percent compared to the Basic Credit rate of 20 percent.

The five-year extension I am proposing will allow for a smooth transition to the Alternative Simplified Credit, and will bring the R&D tax credit up-to-date. Companies which still rely on the Basic Credit will be allowed to continue that credit for another two years, just as is contemplated by the legislation that Senators Hatch and Baucus have worked so hard on.

Investment in research and development is critical to the breakthroughs we need to keep our economy competitive, and to create the good, high-paying jobs the American people deserve. The R&D tax credit provides an important incentive for this investment, but it needs to be updated so more companies can benefit from it. While making the credit permanent is a worthwhile goal, the 5-year extension I am proposing today is ``do-able'', and I urge my colleagues to support it.