text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Defense Reinvestment and High-Tech 
  Job Creation Act of 1993''.
  
  SEC. 2. DEFENSE CONVERSION CREDIT.
  
      (a) General Rule.--Section 46 of the Internal Revenue Code of 1986 
  (relating to amount of investment credit) is amended--
              (1) by striking ``and'' at the end of paragraph (2),
              (2) by striking the period at the end of paragraph (3) and 
          inserting ``, and'', and
              (3) by adding at the end thereof the following new 
          paragraph:
              ``(4) the defense conversion credit.''
      (b) Defense Conversion Credit.--Section 48 of such Code is amended 
  by adding at the end thereof the following new subsection:
      ``(c) Defense Conversion Credit.--
              ``(1) In general.--For purposes of section 46, the defense 
          conversion credit for any taxable year is the sum of--
                      ``(A) the defense conversion employment credit for 
                  the taxable year, and
                      ``(B) the defense conversion investment credit for 
                  the taxable year.
              ``(2) Defense conversion employment credit.--
                      ``(A) In general.--The defense conversion 
                  employment credit for any taxable year is 10 percent of 
                  the qualified wages paid or incurred by a qualified 
                  employer during such year.
                      ``(B) Qualified wages.--For purposes of this 
                  subsection--
                              ``(i) In general.--The term `qualified 
                          wages' means the wages (as defined in clause 
                          (ii)) paid or incurred by the qualified 
                          employer during the taxable year to, and 
                          amounts paid or incurred by the qualified 
                          employer to third parties for retraining 
                          expenses with respect to, qualified conversion 
                          employees during the period commencing on July 
                          31, 1993, and ending on December 31, 1995 (`the 
                          qualified period').
                              ``(ii) Wages defined.--Except as provided 
                          in subparagraph (C)(ii), the term `wages' has 
                          the meaning given to such term by subsection 
                          (b) of section 3306 (determined without regard 
                          to any dollar limitation contained in such 
                          section), but the amount of wages during any 
                          taxable year which may be taken into account 
                          with respect to any individual shall not exceed 
                          25 percent of the wages (determined without 
                          regard to this subsection) paid to such 
                          individual during such taxable year or portion 
                          thereof included within the qualified period.
                              ``(iii) Retraining expenses.--The term 
                          `retraining expenses' includes all amounts paid 
                          or incurred with respect to educational or 
                          training programs in which a qualified 
                          conversion employee participates to learn or 
                          improve skills necessary or useful to such 
                          employee's employment in the qualified 
                          employer's nondefense-related business.
                      ``(C) Qualified conversion employees.--
                              ``(i) In general.--For purposes of this 
                          subsection, the term `qualified conversion 
                          employees' means an employee of a qualified 
                          employer who had been employed by the qualified 
                          employer or another employer in a defense-
                          related business and who is employed by the 
                          qualified employer in a nondefense-related 
                          business during the taxable year.
                              ``(ii) Proration in case of dual 
                          employment.--If a qualified conversion employee 
                          is employed by the qualified employer in both a 
                          defense-related business and a nondefense-
                          related business during the taxable year, only 
                          the portion of the employee's wages properly 
                          allocable to employment in the nondefense-
                          related business shall be treated as `wages' 
                          for purposes of subparagraph (B)(ii).
                      ``(D) Qualified employer.--For purposes of this 
                  paragraph, a qualified employer is an employer which is 
                  engaged in a qualified business (as defined in 
                  paragraph (3)(D)).
              ``(3) Defense conversion investment credit.--
                      ``(A) In general.--The defense conversion 
                  investment credit for any taxable year is the 
                  applicable percentage of the qualified conversion 
                  investment by a qualified business during the taxable 
                  year.
                      ``(B) Applicable percentage.--For purposes of this 
                  paragraph--
                              ``(i) In general.--The applicable 
                          percentage shall be 7 percent for all taxable 
                          years ending after December 31, 1992, and on or 
                          before December 31, 1994, and shall be 5 
                          percent for all taxable years ending after 
                          December 31, 1994, and on or before December 
                          31, 1999.
                              ``(ii) Incremental employment incentive 
                          percentage.--The applicable percentage shall be 
                          10 percent for any taxable year ending after 
                          December 31, 1992, and on or before December 
                          31, 1994, and shall be 8 percent for any 
                          taxable year ending after December 31, 1994, 
                          and on or before December 31, 1999, if in such 
                          year the number of employees of the qualified 
                          business increases 4 percent or more over the 
                          average number of employees of the qualified 
                          business during the 3 preceding years (the 
                          `qualifying increase').
                              ``(iii) Recapture in case of decreased 
                          employment.--If a qualified business claims the 
                          benefit of the incremental employment incentive 
                          percentage under clause (ii), and its average 
                          employment during any of the 3 years following 
                          the year in which the benefit of the increased 
                          percentage was claimed falls below the 
                          qualifying increase level (a `disqualifying 
                          decrease'), the qualified business shall 
                          increase its tax liability for the year during 
                          which the disqualifying decrease occurred by 
                          the difference between the credit to which it 
                          would have been entitled under clause (i) and 
                          the credit claimed under clause (ii).
                      ``(C) Qualified conversion investment.--For 
                  purposes of this paragraph--
                              ``(i) In general.--The term `qualified 
                          conversion investment' means the costs paid or 
                          incurred by a qualified business during the 
                          taxable year for the purpose of acquiring, 
                          constructing, creating, or developing any 
                          tangible or intangible assets, in connection 
                          with the conduct of the qualified business' 
                          nondefense-related business, except that such 
                          term shall not include direct production costs 
                          of any property held by the qualified business 
                          for sale to customers in the ordinary course of 
                          its trade or business.
                              ``(ii) Intangible assets.--The term 
                          `intangible assets' includes all `intangible 
                          property' as defined in section 936(h)(3)(B) 
                          (other than literary, musical or artistic 
                          compositions) and specifically includes 
                          processes and products, models, and prototypes.
                      ``(D) Qualified business.--For purposes of this 
                  subsection and pursuant to regulations to be prescribed 
                  by the Secretary--
                              ``(i) In general.--The term `qualified 
                          business' means any corporation, partnership, 
                          or sole proprietorship or separate unit thereof 
                          in existence on January 1, 1993, which derived 
                          a substantial portion of its gross receipts or 
                          incurred a substantial portion of its gross 
                          costs during the 5 years preceding January 1, 
                          1993, from 1 or more defense-related 
                          businesses, and which derives a significant 
                          portion of its gross receipts from (or incurs a 
                          significant amount of costs in acquiring or 
                          developing) 1 or more nondefense-related 
                          businesses during the taxable year.
                              ``(ii) Defense-related business.--A 
                          `defense-related business' is an activity in 
                          connection with the development or production 
                          (pursuant to a contract or subcontract) of any 
                          property designed, modified, or equipped for 
                          military purposes (including NASA).
                              ``(iii) Nondefense-related business.--A 
                          `nondefense-related business' is any activity 
                          in connection with the development or 
                          production of any property not designed, 
                          modified, or equipped for military purposes 
                          which uses a significant portion of assets and 
                          employees which had been employed in a defense-
                          related business.''
      (c) Accelerated Depreciation of Excess Defense Conversion 
  Property.--
              (1) Subsection (b)(3) of section 168 of such Code is 
          amended by adding at the end thereof the following new 
          subparagraph:
                      ``(F) Property described in subsection 
                  (e)(3)(B)(vii).''
              (2) Subsection (e)(3)(B) of section 168 of such Code is 
          amended by striking ``and'' at the end of clause (v), by 
          striking the period at the end of clause (vi) and inserting ``, 
          and'', and by adding at the end thereof the following new 
          clause:
                              ``(vii) any qualifying excess defense 
                          conversion property.''
              (3) Subsection (i) of section 168 of such Code is amended 
          by adding at the end thereof the following new paragraph:
              ``(14) Qualifying excess defense conversion property.--
                      ``(A) The term `qualifying excess defense 
                  conversion property' means, with respect to property 
                  owned or leased by the taxpayer and otherwise subject 
                  to depreciation under this section and which is `excess 
                  defense conversion property' (as defined in 
                  subparagraph (B)), the basis of property (or the 
                  portion thereof) constituting excess defense conversion 
                  property owned by the taxpayer or the total discounted 
                  cost of lease obligations during the remaining term of 
                  the lease applicable to excess conversion property 
                  leased by the taxpayer.
                      ``(B) The term `excess defense conversion property' 
                  means property that--
                              ``(i) has been used by the taxpayer in a 
                          defense-related business (as defined in section 
                          48(c)(3)(D)); and
                              ``(ii) is not being used in the taxable 
                          year, and is not reasonably expected to be used 
                          in the foreseeable future, in a defense-related 
                          business.
                      ``(C) Any deductions claimed by a taxpayer with 
                  respect to property reported on its return as 
                  qualifying excess defense conversion property and which 
                  is later determined as not constituting excess defense 
                  conversion property shall be recaptured at the rate of 
                  150 percent of the deductions so claimed.
                      ``(D) For purposes of this section, the amount of 
                  the property's basis constituting qualifying excess 
                  defense conversion property shall be considered to be 
                  placed in service on the first day of the taxable year 
                  in which the property is determined to constitute 
                  qualifying excess defense conversion property.''
      (d) Effective Date.--The amendments made by this section shall take 
  effect on July 31, 1993.
target: Defense Reinvestment and High-Tech Job Creation Act of 1993 - Amends the Internal Revenue Code to allow a tax credit for defense conversion equal to the defense conversion employment credit (ten percent of wages paid by an employer) and the defense conversion investment credit (applicable percentage of a qualified business investment). 
  Makes qualified excess defense conversion property eligible for the straight-line depreciation method and classifies it as five-year depreciable property.
feat_title: Defense Reinvestment and High-Tech Job Creation Act of 1993