Federal tax incentives and financing for the reusable launch vehicle

Financing a very large new space transportation system is a major venture. It requires an initial investment of many billions of dollars and will be expected to perform successfully during its lifetime of at least twenty-five years. In the past, space systems of this magnitude have been funded, owned and operated by the government. Today, as the responsibility for opening and maintaining space systems is expected to shift from government to industry leadership, the reusable launch vehicle (RLV) presents the private sector with the challenge of finding ways of financing and building a system that will prove to be a successful private venture. The government, recognizing that it is a major customer of the RLV and that new technology must be developed for the RLV to work and to adequately reduce the cost of access to space, will fund some initial technology development as well as provide some incentives for a private operator. This paper shows that using the current tax system's corporate investment benefits, coupled with a favorable debt financing arrangement, a profitable privately owned RLV system is within the realm of possibility. (C) 1997 Elsevier Science Ltd.