May 20, 2003
RE: Jobs and Growth Reconciliation Tax Act
Dear House Ways and Means Committee Member:
We are writing in opposition to a provision in the Senate version of the Jobs and Growth Reconciliation Tax Act that will have a significantly adverse effect on the academic and scientific research conducted at our nation’s universities. Specifically, section 364 of the Senate bill would limit the charitable deduction for contributions of patents, copyrights, trademarks and other similar intellectual property to universities and other qualified charities. We urge you to oppose the inclusion of this provision in the final version of the reconciliation tax bill.
Currently, charitable contributions of intellectual property are deductible at fair market value. This tax incentive encourages businesses holding valuable patents to seek out and donate to non-profit universities patents and other intellectual property. Such donations provide universities with the opportunity to further their teaching and research missions by providing kernels of new ideas that can lead to exciting new discoveries and the development of important technologies. For example, the University of California at San Diego (UCSD) has recently licensed a patented technology it received as a charitable donation from a large manufacturer. The patent was for an anti-adherent wound dressing that a burn researcher at the University believes will provide significant benefits to burn patients. In UCSD’s view, such charitable donations of patents and trademarks provide a powerful vehicle for developing research relationships that otherwise would not occur.
In another recent example, Kansas State University (KSU) has successfully undertaken research to better understand a nutritional beverage technology that was recently donated to the University. While the patent did not meet the strategic goals of the donor corporation, KSU now has the opportunity to develop the technology and conduct research on its impact on bone density, and may have the opportunity to benefit from its commercialization. In both cases, the charitable donations of patents and trademarks allowed our academic institutions to ensure that American technology innovations that industry was unable to pursue for strategic and market reasons could be further researched, advanced and commercialized. And, in turn, the universities’ academic and research resources were enhanced.
The Senate’s proposed limitation of such charitable contributions is an unnecessarily broad attempt to respond to potential abuses. We understand that proponents of the Senate provision suggest that there have been abuses in the valuation of the intellectual property that has been donated over the years. If this is the case, such abuses should be addressed in a targeted manner, such as the development of additional valuation criteria or more effective enforcement by the Internal Revenue Service. Moreover, most institutions have their own guidelines in place to assist them in determining whether a proposed intellectual property donation should be accepted. As a result, many of the proposed gifts are rejected if they do not further the educational purposes of the institution.
We urge you to oppose including the Senate’s provision to limit the charitable contributions of intellectual property in the final version of the reconciliation tax bill. If you have any questions regarding this matter, please feel free to call Sheldon Steinbach or Laura Eugster Doyle at (202) 939-9355.
American Council on Education
On behalf of:
American Association of Community Colleges
American Association of Law Librarians
American Association of State Colleges and Universities
American Council on Education
American Library Association
Association of American Medical Colleges
Association of American Universities
Association of Research Libraries
National Association of College and University Business Officers
National Association of Independent Colleges and Universities
National Association of State Universities and Land-Grant Colleges