Tax Breaks To Boost Private Space Exploration

by Leroy Baker, Tax-News.com, New York

19 August 2010

United States Senator Bill Nelson has announced legislation that would offer major tax and other incentives to encourage growth in the private space exploration industry.

Nelson's plan would create up to five regional business enterprise zones around the country as "magnets for commercial space ventures."

As it grapples with record federal deficits, the Obama administration no longer perceives the funding of space exploration a priority and is cancelling the space shuttle program. One more shuttle flight is scheduled for next year after the Senate approved a bill to provide additional funding to the program, but a cloud of uncertainty currently hangs over the US space industry, not to mention the hundreds of high technology firms supplying equipment to the US space program.

Nelson's bill, known as the Commercial Space Jobs and Investment Act of 2010 would create a new 'commercial space capital formation credit' allowing investors to claim a tax credit worth 20% of their equity investment in a business producing equipment such as launch vehicles and re-entry vehicles. The equity investment would have to be held for a minimum of five years for the investor to qualify for the tax credit.

The bill would also give the Secretary of Commerce authority to designate up to five 'Commercial Space Enterprise Zones' in areas suffering from high unemployment or economic dislocation. Companies established in these zones would be entitled to an enhanced research and development tax credit of 30% (instead of 20%) and could claim a special depreciation allowance on 'qualified commercial space property.'

Nelson, a Florida Democrat, says that his proposals would attract jobs to areas where there are lots of scientists and engineers, especially near places where the space exploration is already well established, such as Florida's Kennedy Space Center (KSC).

“President Kennedy was right when he predicted that space exploration would create a great number of new companies and strengthen our economy,” Nelson said. “What we’re doing now is everything we can to ensure KSC’s continued importance to our nation’s space exploration effort, while also broadening the economic opportunities along our Space Coast.”

Frank DiBello, President of Space Florida said that Nelson's proposals represent "a significant step forward in ensuring the right incentives are in place to attract industry to Florida, and the broader domestic marketplace."

"This bill will stimulate the commercial space industry to create jobs in our state, at a time when we need it most," he added.

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