Page images
PDF
EPUB

BUSINESS ACTIVITIES OF EXEMPT SCIENTIFIC

RESEARCH ORGANIZATIONS

Scott Dunham, San Francisco, Calif.

INTRODUCTION

This statement is made in response to the invitation of the chairman of the Committee on Ways and Means to participate in the committee's study of opportunities for constructive reform of the Federal income tax system. The subject of this statement is business income of exempt scientific research organizations. Consideration of this special problem has taken into account the factors of equity and fairness, progression in the distribution of tax burdens, the desirability of providing a climate for economic growth, and the need for ease of taxpayer compliance and administration of the law.

PUBLIC INTEREST IN SCIENCE ALWAYS RECOGNIZED BY CONGRESS

Exemption from Federal income tax of nonprofit scientific organizations is an expression of congressional policy which has always recognized the importance to our Nation of scientific effort. The purpose of the exemption provision in the Revenue Code has, of course, always been to foster and encourage such effort.

GOVERNMENT SUPPORT OF SCIENTIFIC ACTIVITY IN AMERICA

Government support of science and technology in America is older than the United States. Such support was being provided by some of the several colonies prior to the Constitutional Convention of 1787. During the colonial period the American Academy of Arts and Sciences was founded in Boston, and the American Philosophical Society was established in Philadelphia in 1780. John Adams was responsible for incorporating in the constitution of Massachusetts requirements which made it the duty of legislators and magistratesin all future periods of the Commonwealth, to cherish the interests of literature and the sciences * * * to encourage private societies and public institutions, rewards and immunities for the promotion of agriculture, arts, sciences * SUPPORT OF SCIENCE AND SCIENTIFIC ACTIVITIES BY THE GOVERNMENT OF THE UNITED STATES

The promotion of science was recommended to the first Government of the United States by George Washington in his first inaugural address. From that time until the present the Federal Government has frequently acted affirmatively in the support of science and technology whenever the practical problems of the Nation required such support. Such actions include the foundation of the Academy at West Point; the support of the Lewis and Clark Expedition; the

Coast Survey Act of 1807; establishment of a Department of Agriculture in 1862; the National Academy of Sciences and the Army Signal Corps in 1863; the Geological Survey in 1879; the Bureau of Animal Industry in 1884; the prototype of the Biological Survey in 1886; the Agricultural Experiment Station in 1887; the Weather Bureau in 1890; the Bureau of Chemistry, Plant Industry, and Soil, and the National Bureau of Standards in 1901; the Bureau of Mines in 1910; the Public Health Service in 1912, and so on.

RECOGNITION OF SPECIAL PUBLIC INTEREST IN SCIENTIFIC RESEARCH VIEWED HISTORICALLY

Recognition of the interest of science and scientific research to the general public is as ancient as scientific inquiry. The idea of bringing people together for the purpose of scientific discussions and experimental research goes back at least to Plato. Support of scientific effort by national governments has a long and impressive history. The Alexandrine Museum maintained by the Ptolemies was a prototype of the modern research institution with its library of 700,000 volumes, and its laboratories and instruments that were available to Greek scholars. Euclid, Hipparchus, and Apollonius were among those who used the museum's facilities. Galileo was a member of a scientific research group which was organized in Rome in 1600 and known as the Accademia del Lincei. Leopold de Medici founded the famed Accademia del Ciamento in Florence in 1657 and he and his brother, the ruling Grand Duke Ferdinand II, actively participated in the scientific activities of this establishment. The Royal Society of England had its origins in the 1640's; Boyle, Wren, Newton, and many other English scientists received support from this society, which was chartered by the King of England. In France Louis XIV chartered the French Academie des Sciences, and it became, under the patronage of Colbert, a place where truly cooperative research was conducted. In Russia Catherine the Great established the Academie Imperiale des Sciences de St. Petersburg in 1725 and liberally endowed it.

Much later, after (and possibly as a result of) the Franco-Prussian War, scientific research became a matter of first and lasting importance in Germany. Toward the end of the 19th century the Reichsanstalt was established as a place for the conduct of all kinds of scientific experiments. The contributions of science to the strength and prosperity of Germany are known to all.

From the beginning the benefits of cooperative research effort have been apparent. Group use of experimental facilities, execution of mutually planned experiments, and mutual support by specialists in related subjects have been shown to increase the productivity of the group and of the individuals composing it. These advantages were recognized and recorded by Francis Bacon who described in his "New Atlantis" a reasonable model for a fully developed research institute.

PRESENT IMPORTANCE OF SCIENCE

It has already been noted that our Federal Government has always recognized the general importance of science and technology and has supported it whenever there has been need for such action. Today

scientific knowledge and its rapid expansion and application vitally concern the United States and its citizens.

The security and prosperity of the United States depend today, as never before, upon the rapid extension of scientific knowledge. So important, in fact, has this extension become to our country that it may reasonably be said to be a major factor in national survival. *** A generation which has witnessed the awful destructiveness of the atom bomb or which has read newspaper accounts of developments in biological warfare needs no special demonstration of the relation of science to military preparedness. *** Scientific discovery is equally the basis for our progress against poverty and disease. This, alone, would provide adequate justification for public interest and support. If we are to remain a bulwark of democracy in the world we must continually strengthen and expand our domestic economy and our foreign trade. A principal means to this end is through the constant advancement of scientific knowledge and the consequent steady improvement of our technology. * * *1

Of all the forces shaping and reshaping life in America some of the most insistent and powerful spring from science and technology. The full power of these forces could scarcely have been envisaged by the framers of the Constitution however great their interest in science ****

The urgency of the scientific and technological problems confronting the National Government at present and during the past 20 years is reflected in the dramatic rise in Federal outlays for scientific research and development illustrated in figure 1.

PRESENT POSITION OF EXEMPT SCIENTIFIC RESEARCH ORGANIZATIONS

Part of the needs of the Nation in science and technology have been met by the nonprofit scientific research organizations that are the subject of this discussion. Some background perspective may clarify the position of these organizations in the context of national development. The type of research organization which is dealt with here is completely independent operationally and is not under the control of any private individual, group of individuals, or private business. It is a nonprofit organization, all of the assets and income of which are irrevocably dedicated to the furtherance of its exempt purpose. There are approximately 60 such scientific corporations in the United States, (fig. 2), exclusive of approximately 31 nonprofit research organizations which exist and operate as part of colleges or universities. Many of these have been created by or under the aegis of colleges or universities, and, while they operate independently of the sponsoring institution, they work cooperatively with it. Some of the subsequent discussion is unavoidably applicable to exempt scientific organizations generally, but it is not intended to include comment on or affecting the tax exemption of colleges or universities.*

3

The nonprofit, tax-exempt, scientific research institutes of the United States occupy a unique position among the Nation's scientific facilities. They are neither owned nor controlled by the Government; neither are they owned nor controlled by industry. Their services are available to and widely used by various Government departments. Their

1 "Science and Public Policy," vol. 1, a report to President Truman by the President's Scientific Research Board, 1947. 2 Strengthening American Science," a report of President Eisenhower's Science Advisory Committee, Dec. 27, 1958. 3 "Nonprofit Research and Patent Management Organization," by Archie M. Palmer, Publication No. 372 of the National Academy of Sciences National Research Council, 1955.

4 Exempt scientific organizations include large numbers of organizations other than scientific research institutes: for eample, museums and technical societies may be in this class. We do not have information on whether scientific research institutes are a large or a small fraction of the total.

[blocks in formation]

NOTE: Does not include Department of Defense production and procurement funds, nor pay and allowances of military

personnel in research and development. These items were over one billion dollars for 1959.

SOURCES: 1940-59 National Science Foundation, Federal Funds for Science, 1958.

1923-40 Office of Scientific Research & Development, Science, The Endless Frontier, 1945.
1900-23 A. H. Dupree, Science in the Federal Government, 1940 and National Resources Committee,
Research--A National Resource, 1938.

1960

« PreviousContinue »