Key Legislators Back Federal R&D Support

By Neil Munro

Staff Writer

White House officials are offering to pay 25 percent of a new, long-term research program for the U.S. semiconductor industry.

The research effort, to be carried out at U.S. universities, is being mapped out by officials in the White House, universities and industry, according to Tom Kalil, staff director at the National Economic Council.

"We're very close" to an agreement, he said March 12.

The joint effort comes as industry steps up its long-running campaign for a permanent extension of the on-again, off-again research and development tax credit. The credit, scheduled to expire May 31, allows companies to deduct their increased R&D expenditures from their tax bill.

Four key legislators have allied in support of a bill that would make the tax credit permanent: Rep. Nancy Johnson, R-Conn., who chairs the oversight panel of the tax-writing House Ways and Means Committee; Rep. Robert Matsui, D-Calif, the leading Democratic member on the Ways and Means Committee; Sen. Orrin Hatch, R-Utah, the chairman of the Senate Judiciary Committee; and Sen. Max Baucus, D-Mont., the leading Democratic member on the taxation panel of the Senate Finance Committee.

"By making the tax credit permanent, we will give companies and universities the stability and certainty to plan ahead and make greater commitments to research and development," according to a statement from Baucus's office.

Industry groups, including the Washington-based Business Software Alliance, Washington-based Information Technologies Industry Council and the Arlington, Va.-based Computing Technology Industry Association, are lobbying in support of the bill.

Because the tax credit currently is not permanent, companies can't be sure it will exist in the next year or two, reducing their incentive to grow R&D spending, say industry executives.

University officials are also stepping up their parallel lobbying campaign to defend government R&D programs now carried out at research-intensive universities. Also, an alliance of 21 industry and university- based research groups are trying to expand government spending on R&D.

Under the budget proposed by President Bill Clinton, government R&D spending will rise 2 percent to $75.5 billion. Of that total, Pentagon spending accounts for slightly more than $40 billion.

The new semiconductor research program will cost $8 million in the first year, before growing to $60 million in the fifth and subsequent years, said Jeff Weir, a spokesman for the Semiconductor Industry Association, San Jose, Calif.

The money will be awarded to the universities via the Pentagon's Arlington, Va.-based Defense Advanced Research Projects Agency, long used to support cutting-edge research. Initially, two universities will be chosen as focus centers to coordinate research on semiconductor connections and design techniques, he said.

"It is our most ambitious research and development venture since Sematech," he said. Sematech was a government-backed, multicompany research center established in the mid-1980s to shore up the U.S. semiconductor industry, which was then facing severe pressure from Japanese rivals.

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