To amend the Internal Revenue Code of 1986 to make the research credit permanent and to allow such credit for expenses attributable to certain collaborative research consortia.

Summary: Amends the Internal Revenue Code to make permanent the credit for increasing research activities and to allow such a credit for qualified consortia expenses attributable to certain collaborative research consortia. Provides for a reduction for amounts expended on ineligible research.

SECTION 1. RESEARCH CREDIT MADE PERMANENT; CREDIT FOR EXPENSES 
              ATTRIBUTABLE TO CERTAIN COLLABORATIVE RESEARCH CONSORTIA.

    (a) Credit Made Permanent.--Section 41 of the Internal Revenue Code 
of 1986 (relating to credit for increasing research activities) is 
amended by striking subsection (h).
    (b) Credit for Expenses Attributable to Certain Collaborative 
Research Consortia.--
            (1) In general.--Subsection (a) of section 41 of such Code 
        is amended by striking ``and'' at the end of paragraph (1), by 
        striking the period at the end of paragraph (2) and inserting 
        ``, and'', and by adding at the end the following new 
        paragraph:
            ``(3) 20 percent of the sum of--
                    ``(A) the qualified consortia expenses (as defined 
                in subsection (f)) to the extent such expenses do not 
                exceed the amount described in subparagraph (B), and
                    ``(B) the amount paid in cash during the taxable 
                year to a qualified collaborative research consortium 
                for qualified collaborative research (as defined in 
                subsection (f)).''
            (2) Rules relating to qualified research consortia.--
        Section 41 of such Code is amended by redesignating subsections 
        (f) and (g) as subsections (g) and (h), respectively, and by 
        inserting after subsection (e) the following new subsection:
    ``(f) Rules Relating to Qualified Research Consortia.--For purposes 
of subsection (a)(3)--
            ``(1) In general.--The term `qualified consortia expenses' 
        means, with respect to any taxable year, the sum of the 
        following amounts which are paid or incurred by the taxpayer 
        during the taxable year:
                    ``(A) Any wages paid or incurred to an employee of 
                the taxpayer for services performed by such employee in 
                qualified collaborative research or in direct support 
                of employees performing qualified collaborative 
                research.
                    ``(B) Any amount paid or incurred for supplies used 
                in the conduct of qualified collaborative research.
            ``(2) Qualified collaborative research consortium.--The 
        term `qualified collaborative research consortium' means any 
        organization described in subsection (e)(6)(B) if--
                    ``(A) at least 15 unrelated taxpayers paid (during 
                the calendar year in which the taxable year of the 
                taxpayer begins) amounts to such organization for 
                qualified collaborative research,
                    ``(B) no 3 persons paid during such calendar year 
                more than 50 percent of the total amounts paid during 
                such calendar year for qualified collaborative 
                research, and
                    ``(C) no person contributed more than 25 percent of 
                such total amounts.
        For purposes of subparagraph (A), all persons treated as a 
        single employer under subsection (a) or (b) of section 52 shall 
        be treated as related taxpayers.
            ``(3) Qualified collaborative research.--The term 
        `qualified collaborative research' means qualified research--
                    ``(A) which is carried on in the public interest 
                and the results of which are made available to the 
                public on a nondiscriminatory basis, and
                    ``(B) which is performed or supervised by a 
                qualified collaborative research consortium.
            ``(4) Reduction for amounts expended on ineligible 
        research.--The amount which, but for this paragraph, would be 
        taken into account under subsection (a)(3)(B) by the taxpayer 
        for any taxable year shall be reduced by an amount which bears 
        the same ratio to such amount as--
                    ``(A) the amount paid or incurred during the 
                calendar year in which such taxable year begins by the 
                consortia for research which is not qualified research, 
                bears to
                    ``(B) the total amount paid or incurred during such 
                calendar by the consortia for research.
            ``(5) Denial of double benefit.--Any amount taken into 
        account under subparagraph (A) or (B) of subsection (a)(3) 
        shall not be taken into account under subparagraph (A) or (B) 
        of paragraph (1), or under paragraph (2), of subsection (a).''
    (c) Effective Dates.--
            (1) Credit made permanent.--The amendment made by 
        subsection (a) shall apply to amounts paid or incurred after 
        June 30, 1995, in taxable years ending after such date.
            (2) Payments to consortia.--The amendments made by 
        subsection (b) shall apply to taxable years beginning after the 
        date of the enactment of this Act.