WASHINGTON -- Targeted capital gains became a casualty, atleast temporarily, in a partisan tussle as the Senate struggledWednesday night to finish cobbling the president's deficit-reduction package.

But look for it to re-emerge later this summer as the legislatorsreconcile differences between the final House and Senateversions of the package in conference, Chuck Ludlam, theBiotechnology Industry Organization's (BIO) vice president forgovernment relations, told BioWorld.

The R&D tax credit has suffered a similar fate.

Both measures are of great importance to the biotechnologyindustry. The tax credit, which had been in effect for 20 yearswhen it expired last July 1, allows companies to take the creditup to 14 years after expenses are incurred, benefittingcompanies that may spend years doing research beforebecoming profitable. The targeted capital gains bill is directedat young high-technology companies.

"It was a very strange situation (regarding the capital gainsmeasure) where tactics dominated substance," a source toldBioWorld. More money had been left in the budget as it wasreported out of the Senate Finance Committee than wasnecessary to meet deficit-reduction goals.

Sen. George Mitchell, D-Maine, had amended the bill to allocatethat money to targeted capital gains, as well as to otherincentives for small business, all of which would strengthen thepresident's deficit reduction package.

Although the Senate has unanimously supported ArkansasDemocratic Sen. Dale Bumpers' targeted capital gains twice inthe past, the vote split almost exactly along party lines"because the Republicans don't want to be helpful and wouldbe happy to see the (president's) package die," the source toldBioWorld.

But "the chances for passage are still excellent," Ludlam toldBioWorld. "We have a strong provision in the House bill, themajority in the Senate favors it, the president supports it andthere is strong Republican support for it."

Ludlam was referring to the House/Senate conference, wheredifferences between the two bodies' versions of the deficitreduction package will be reconciled. He expects this to takeplace over several weeks in July.

Meanwhile, the R&D tax credit lives in spirit only despite thefact that it, too, enjoys broad bipartisan support. Sen. DianneFeinstein, D-Calif., introduced the measure after the leftoverfunds from the Finance Committee had been used up. OnThursday the Senate passed the measure as a so-called sense ofthe Senate resolution, which means that it lacks budgetaryauthority, although it will carry weight during theHouse/Senate conference.

Still, Ludlam fears that the tax credit will not be maderetroactive for July 1, 1992 to July 1, 1993. "That would beextremely damaging to all research-intensive firms,particularly biotechnology firms, and we have been workingvery hard to ensure that doesn't happen," he said.

But the demise of the energy tax, which would have raised $72billion in revenues, has put tremendous pressure on the budgetprocess.

-- David C. Holzman Washington Editor

(c) 1997 American Health Consultants. All rights reserved.

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