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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1850 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1850

To provide incentives for universities to develop effective technology 
    development and technology transfer programs, and to enter into 
   partnership with businesses, in coordination with State and local 
governments, to develop technologies and processes critical to meeting 
 specific national goals and promoting the long-term vitality of local 
                              communities.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 26, 1993

 Ms. DeLauro introduced the following bill; which was referred jointly 
  to the Committees on Science, Space, and Technology, Education and 
                Labor, Ways and Means, and the Judiciary

_______________________________________________________________________

                                 A BILL

 
To provide incentives for universities to develop effective technology 
    development and technology transfer programs, and to enter into 
   partnership with businesses, in coordination with State and local 
governments, to develop technologies and processes critical to meeting 
 specific national goals and promoting the long-term vitality of local 
                              communities.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``University-Industry Technology 
Development Act''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) innovation in high technology fields, including the 
        development of new generic basic infrastructure technologies, 
        and the rapid adoption and commercialization of these 
        technologies and processes are increasingly important to 
        ensuring--
                    (A) the continued growth of the Nation's economy;
                    (B) the Nation's continued leadership and 
                competitive strength in the emerging global market;
                    (C) the health and well-being of our Nation's 
                citizens; and
                    (D) national security;
            (2) United States research universities have played and 
        will continue to play a vital role in laying the foundation for 
        innovation in high technology fields;
            (3) timely commercial application of the results of basic 
        research underway at our Nation's universities depends on the 
        actions and skills of business and labor;
            (4) encouraging the participation of State and local 
        government in the development and commercialization of new 
        technologies is in the Nation's interest;
            (5) many of the industrialized nations with which the 
        United States competes in the global market have developed 
        national policies to support university-based innovation and 
        development in high technology fields and to support rapid 
        commercial adoption of advanced manufacturing technologies and 
        processes, including--
                    (A) reducing the cost of capital to businesses 
                developing these technologies and processes;
                    (B) promoting the continued education of the 
                workforce; and
                    (C) providing numerous other measures designed to 
                lessen the risk and cost to individual enterprises of 
                long-term investments in new technologies and 
                systematic upgrades of manufacturing processes;
            (6) current United States national policy does not provide 
        similar levels of support of the kinds described in paragraph 
        (5); and
            (7) in order to accomplish the goals stated in paragraph 
        (1)(A) through (D), the United States must develop and 
        implement policies of the kinds described in paragraph (5).

SEC. 3. ESTABLISHMENT OF PROGRAM.

    (a) University Technology Development Programs.--The Secretary 
shall establish a program for the selection of University Technology 
Development Programs, in accordance with the requirements of this Act, 
that will further the goals stated in subsection (c). Such program 
shall provide incentives and assistance to universities seeking to 
develop broad university-led programs designed to foster the discovery, 
evaluation, and initial development to the proof of concept stage of 
commercially promising basic research undertaken at the university or 
universities taking part in the program.
    (b) University-Industry Technology Partnerships.--The Secretary 
shall establish a program for the selection of University-Industry 
Technology Partnerships, in accordance with the requirements of this 
Act, that will further the goals stated in subsection (c). Such program 
shall provide incentives and assistance for businesses and 
universities, in coordination with State and local governments, to 
enter into partnerships to develop commercial applications for new 
technologies and processes.
    (c) Goals.--The goals referred to in subsections (a) and (b) are--
            (1) continued growth of the Nation's economy;
            (2) the Nation's continued leadership and competitive 
        strength in the emerging global market;
            (3) the health and well-being of our Nation's citizens; and
            (4) national security,
through the development of innovations in high technology fields and 
processes critical to meeting those goals and promoting the long-term 
vitality of local communities.

SEC. 4. REGULATIONS.

    Not later than 120 days after the date of enactment of this Act, 
the Secretary shall issue regulations--
            (1) that specify the required contents and form of 
        preliminary requests for consideration required under section 5 
        and of applications required under sections 7 and 8;
            (2) that establish procedures and schedules for the 
        approval of preliminary requests for consideration under 
        section 5, and for the selection of University Technology 
        Development Programs and University-Industry Technology 
        Partnerships under section 11;
            (3) that determine the forms of assistance available to 
        applicants under section 6, procedures for determining the cost 
        of completing an application required under section 7 or 8, and 
        procedures for determining the amount of assistance each 
        applicant shall receive under section 6;
            (4) that determine the forms of assistance available to 
        University Technology Development Programs and University-
        Industry Technology Partnerships under section 12; and
            (5) as required under section 15.

SEC. 5. PRELIMINARY REQUEST FOR CONSIDERATION.

    (a) Time of Submittal.--After final regulations are issued under 
section 4, at a time determined by the Secretary to be appropriate, and 
annually thereafter for an additional 5 years, any party or parties may 
submit to the Secretary a preliminary request for consideration under 
this section.
    (b) Contents.--A preliminary request for consideration submitted 
under this section shall include--
            (1) a description of the proposed University Technology 
        Development Program or University-Industry Technology 
        Partnership and the ways that it will further the goals 
        described in section 3(c);
            (2) an estimate of the amount and nature of Federal 
        assistance that will be required in the implementation of the 
        proposed University Technology Development Program or 
        University-Industry Technology Partnership; and
            (3) any request for assistance under section 6, along with 
        an explanation of the reasons for the need for such assistance 
        and the estimated cost of completing an application under 
        section 7 or 8.
    (c) Approval.--The Secretary shall approve preliminary requests for 
consideration that the Secretary determines show that the proposal has 
substantial potential to meet the selection criteria described in 
section 10. As part of such approval, the Secretary shall indicate the 
amount of assistance under section 6 that will be available to the 
applicant.

SEC. 6. APPLICATION ASSISTANCE.

    To assist an applicant in conducting research, studies, business 
plans, models, and other technical work, as requested under section 
5(b)(3) and necessary for the development of an application required 
under section 7 or 8, the Secretary, to the extent appropriations are 
available for such purpose, shall provide--
            (1) financial assistance, through grants, loans, or loan 
        guarantees in an amount not to exceed $250,000 per application; 
        and
            (2) technical and other forms of assistance determined 
        necessary by the Secretary.
Funding under paragraph (1) of this section shall not exceed 50 percent 
of the amount necessary for the development of such application. After 
the first year that preliminary requests for consideration are 
submitted under section 5, not more than 20 percent of the funds 
appropriated for carrying out this Act each fiscal year shall be 
available for assistance under this section.

SEC. 7. UNIVERSITY TECHNOLOGY DEVELOPMENT PROGRAM APPLICATION.

    (a) Submittal.--A university or universities seeking to create a 
University Technology Development Program whose preliminary request for 
consideration is approved by the Secretary under section 5(c) may 
develop an application for submittal to the Secretary under this 
section.
    (b) Contents.--An application submitted under this section shall 
set forth the information required by regulations issued under section 
4(1), and shall include, at a minimum, the following:
            (1) A detailed plan setting out the nature and goals of the 
        proposed University Technology Development Program including, 
        to the extent possible, the differences between the proposed 
        program and existing technology transfer programs, and expected 
        returns on investment for each of the participants or 
        investors.
            (2) The location or locations at which the activities of 
        the proposed University Technology Development Program will be 
        undertaken, and a review of the anticipated economic and social 
        benefits to the community of these proposed activities.
            (3) A review of the expected systems integration and 
        coordinated activities that will be employed for achieving the 
        goals of the University Technology Development Program.
            (4) A complete explanation of how the activities of the 
        proposed University Technology Development Program meet the 
        selection criteria described in section 10.
            (5) A full description of all agreements entered into and 
        expected to be entered into between the participants for 
        carrying out the University Technology Development Program, 
        including agreements relating to capital and other 
        contributions, patent rights, copyrights, and royalty and 
        licensing payments.
            (6) An explanation of the specific nature of Federal 
        financial or technical assistance under section 12 that the 
        University Technology Development Program is seeking, and 
        justification for this request.
            (7) A full description of the nature and duration of the 
        contributions that each of the participants has agreed to 
        contribute to the University Technology Development Program.

SEC. 8. PARTNERSHIP CONFERENCE APPLICATION.

    (a) Submittal.--A party or parties seeking to create a University-
Industry Technology Partnership whose preliminary request for 
consideration is approved by the Secretary under section 5(c) may form 
a Partnership Conference for the development of an application for 
submittal to the Secretary under this section.
    (b) Participation Requirement.--An application under this section 
shall be developed by a Partnership Conference convened for such 
purpose, which shall consist of, at a minimum, the following:
            (1) The individual faculty members whose research is to be 
        developed and commercialized by the University-Industry 
        Technology Partnership, or a fully informed representative of 
        such faculty members.
            (2) The Governor, or the Governor's designee, of the State 
        or States in which the University-Industry Technology 
        Partnership is to be located.
            (3) State agencies, in any State in which the University-
        Industry Technology Partnership is to be located, that are 
        charged with developing or carrying out technology transfer 
        programs or economic development programs and which the 
        Governor of such State determines should participate in the 
        Partnership Conference.
            (4) A representative from any local government in whose 
        jurisdiction the University-Industry Technology Partnership is 
        to be located.
            (5) A representative of any university whose faculty member 
        or members are to participate in the University-Industry 
        Technology Partnership.
            (6) Representatives of any private enterprise who will be 
        participating in the University-Industry Technology 
        Partnership.
    (c) Participant Approval Requirement.--An application may not be 
submitted under this section without the approval of each of the 
participants described in subsection (b). In the case of participants 
described in paragraph (1) of that subsection, approval by the 
individual faculty members, rather than their representatives, is 
required.
    (d) Contents.--An application submitted under this section shall 
set forth the information required by regulations issued under section 
4(1), which shall include, at a minimum, the following:
            (1) A detailed plan setting out the technical and business 
        goals of the University-Industry Technology Partnership and the 
        means by which the participants will achieve these goals, 
        including, to the extent possible, the expected returns on 
        investment of each of the participants. These plans shall 
        include a business plan for each specific business venture 
        included in the goals of the University-Industry Technology 
        Partnership. Applications proposing multidisciplinary or 
        multitiered activities from which specific business plans 
        cannot yet be developed fully shall set forth, to the extent 
        possible, the anticipated areas of economic activity that will 
        benefit from the research and development activities of the 
        University-Industry Technology Partnership.
            (2) The location or locations at which the activities of 
        the proposed University-Industry Technology Partnership will be 
        undertaken, and a review of the anticipated economic and social 
        benefits to the community of these proposed activities.
            (3) A review of the expected systems integration and 
        coordinated activities that will be employed for achieving the 
        goals of the University-Industry Technology Partnership.
            (4) A complete explanation of how the activities of the 
        proposed University-Industry Technology Partnership meet the 
        selection criteria described in section 10.
            (5) A full description of all agreements entered into and 
        expected to be entered into between the participants for 
        carrying out the University-Industry Technology Partnership, 
        including agreements relating to capital and other 
        contributions, patent rights, copyrights, and royalty and 
        licensing payments.
            (6) An explanation of the specific nature of Federal 
        financial or technical assistance under section 12 that the 
        University-Industry Technology Partnership is seeking, and 
        justification for this request.
            (7) A full description of the nature and duration of the 
        contributions that each of the participants in the Partnership 
        Conference has agreed to contribute to the University-Industry 
        Technology Partnership.

SEC. 9. ADVISORY PANEL.

    (a) Membership.--(1) There shall be established an advisory panel 
whose membership shall include--
            (A) the Secretary of Labor;
            (B) the Director of the National Institutes of Health;
            (C) the Director of the National Science Foundation;
            (D) the Director of the National Institute of Standards and 
        Technology;
            (E) the Director of the Advanced Research Projects Agency; 
        and
            (F) the Director of the National Economic Council.
    (2) In addition, the President shall invite one representative each 
of--
            (A) the National Academy of Sciences;
            (B) the National Academy of Engineering; and
            (C) the Institute of Medicine,
to serve on the advisory panel.
    (3) In addition, the President shall appoint--
            (A) a representative of the business community;
            (B) a representative of higher education; and
            (C) a representative of organized labor,
to the advisory panel, on the basis of each individual's expertise and 
accomplishments relevant to carrying out the functions of the advisory 
panel, and each member appointed under this paragraph shall be 
appointed to a term of 2 years.
    (b) Functions.--The advisory panel established under this section 
shall by majority vote annually recommend to the Secretary, from among 
the applications submitted under sections 7 and 8, no fewer than 25 and 
no more than 50 meritorious proposals, and shall assist the Secretary 
in undertaking the study required under section 17.
    (c) Conflict of Interest.--If a member of the advisory panel has a 
financial interest in or is otherwise affiliated with any participant 
of a proposed University Technology Development Program or University-
Industry Technology Partnership for which an application is submitted 
under this Act, that member shall not participate in the assessment by 
the advisory panel of such application.

SEC. 10. SELECTION CRITERIA.

    (a) Areas of Review.--Recommendations by the advisory panel under 
section 9(b), and selections by the Secretary under section 11, shall 
be made on the basis of a competitive assessment as to which 
applications submitted best further the goals described in section 
3(c), including consideration of--
            (1) the diversity of the proposals submitted in terms of 
        size, cost, complexity, duration, and number of participants;
            (2) the relationship of the goals of a University 
        Technology Development Program or a University-Industry 
        Technology Partnership to the development of technologies and 
        processes deemed critical by the Secretary, as reported 
        annually to the Congress by the Secretary in accordance with 
        section 603(d) of the National Science and Technology Policy, 
        Organization, and Priorities Act of 1976;
            (3) the likelihood that the goals stated in the application 
        can be attained;
            (4) whether the expected level of risk and return on 
        investment to the participants make it unlikely that the 
        proposed activities would be undertaken without the incentives 
        provided by selection as a University Technology Development 
        Program or a University-Industry Technology Partnership;
            (5) the impact of a proposed University Technology 
        Development Program or a proposed University-Industry 
        Technology Partnership on reaching articulated long-term 
        economic and social needs of the community in which the 
        participating university or universities, or University-
        Industry Technology Partnership is to be located;
            (6) whether the proposed University Technology Development 
        Program or proposed University-Industry Technology Partnership 
        will strengthen and promote the research capabilities of the 
        participating university or universities;
            (7) whether the previous activities of the participants of 
        a proposed University Technology Development Program or a 
        proposed University-Industry Technology Partnership, including 
        existing technology transfer and development programs operated 
        by State or local governments or universities, demonstrate 
        sufficient interest, activity, and ability in technology 
        innovation and commercialization;
            (8) in the case of a proposed University-Industry 
        Technology Partnership, the potential relevance of such 
        partnership to the growth and competitiveness of multiple 
        sectors of the Nation's economy; and
            (9) in the case of a proposed University-Industry 
        Technology Partnership, whether the participants of the 
        proposed partnership have demonstrated a sufficient level of 
        cooperation, and of commitment to the University-Industry 
        Technology Partnership, necessary for its success, including 
        contributions for the provision of adequate staffing, 
        facilities, and equipment, contribution of private funds, and 
        government support, including State and local government loans, 
        loan guarantees, or tax and regulatory relief.
    (b) Special Consideration.--The advisory panel and the Secretary 
shall give special consideration and priority to applications--
            (1) that would enhance the ability of small businesses to 
        incorporate technological developments;
            (2) that would assist disadvantaged urban areas and 
        communities impacted by reductions in Federal defense spending 
        through the creation of new opportunities for employment and 
        worker skill upgrading in those communities;
            (3) that would create or enhance an applied research 
        facility at a university;
            (4) that would target assistance to universities with a 
        history of substantial Federal research funding and experience; 
        and
            (5) if the applicant, or one of the participants in a group 
        applicant, is a university that has previously submitted a 
        proposal that was selected, or has been one of the participants 
        in a group that submitted a proposal that was selected, as a 
        University Technology Development Program or as a University-
        Industry Technology Partnership.
    (c) Equal Selection.--To the extent possible, taking into 
consideration the number and nature of applications received under 
sections 7 and 8, the Secretary and the advisory panel shall attempt to 
select an equal number of University Technology Development Programs 
and University-Industry Technology Partnerships each year.

SEC. 11. SELECTION.

    (a) Selection.--The Secretary shall annually select no fewer than 
10 but no more than 25 meritorious proposals, from among those 
recommended by the advisory panel under section 9(b), as University 
Technology Development Programs or University-Industry Technology 
Partnerships eligible to receive assistance under section 12.
    (b) Explanation by Secretary.--Each applicant whose proposal is 
recommended by the advisory panel under section 9(b) but not selected 
under this section may request an explanation from the Secretary for 
the decision not to select its proposal. The Secretary shall provide 
such applicant a description of changes to the application that the 
Secretary would consider significant during any reconsideration of such 
application. Applicants may resubmit an application, with or without 
modification, in any subsequent year in which the Secretary is 
authorized to select University Technology Development Programs and 
University-Industry Technology Partnerships.

SEC. 12. DIRECT ASSISTANCE.

    The Secretary shall, to the extent appropriations are available for 
such purpose, provide financial assistance, in the form of a grant, 
loan, or loan guarantee, and appropriate technical assistance, to 
University Technology Development Programs and to University-Industry 
Technology Partnerships selected under section 11. Assistance under 
this section shall not exceed 50 percent of the total cost of the 
activities proposed, and no applicant shall receive more than 
$5,000,000 under this section.

SEC. 13. REQUIRED CONTRIBUTION.

    (a) Private Enterprises.--The private business entities 
participating in a University-Industry Technology Partnership shall 
contribute a minimum of 50 percent of the capital requirements of the 
University-Industry Technology Partnership. Such contribution may be 
met through approved financing mechanisms, as defined by the Secretary 
by regulation, including available private and public equity and debt 
financing and State and Federal small business assistance programs.
    (b) Universities.--The university or universities participating in 
a University Technology Development Program shall contribute minimum of 
25 percent of the capital requirements of the program. Such 
contribution may be met through approved financing mechanisms, as 
defined by the Secretary by regulation.

SEC. 14. TECHNOLOGY PARTNERSHIP ACCOUNTS; ALTERNATIVE INVESTMENT TAX 
              CREDIT.

    (a) Technology Partnership Accounts.--
            (1) In general.--Chapter 77 of the Internal Revenue Code of 
        1986 (relating to miscellaneous provisions) is amended by 
        adding at the end thereof the following new section:

``SEC. 7524. TECHNOLOGY PARTNERSHIP ACCOUNTS.

    ``(a) Agreement Rules.--Any University-Industry Technology 
Partnership selected under section 11(a) of the University-Industry 
Technology Development Act may enter into an agreement with the 
Secretary under, and as provided in, this section to establish a 
technology partnership account (hereafter in this section referred to 
as the `account'). Any agreement entered into under this section shall 
be for the purpose of accomplishing the goals of such partnership in 
accordance with the actions proposed by such partnership in its 
application under section 8 of the University-Industry Technology 
Development Act, and shall provide for the deposit in the account of 
the amounts agreed upon as necessary or appropriate to provide for 
qualified withdrawals under subsection (f). The deposits in the 
account, and all withdrawals from the account, whether qualified or 
nonqualified, shall be subject to such conditions and requirements as 
the Secretary may by regulations prescribe or as set forth in such 
agreement.
    ``(b) Ceiling on Deposits.--
            ``(1) Limit during first 5 years.--The amount deposited 
        under subsection (a) in the account for any of the first 5 
        taxable years following the taxable year in which an agreement 
        was entered into shall not exceed the average of the sum of the 
        following amounts for the 5 taxable years preceding the taxable 
        year for which the determination is being made:
                    ``(A) The amount allowable as a deduction under 
                section 167 for such taxable year.
                    ``(B) The net proceeds from--
                            ``(i) the sale or other disposition of any 
                        property of a character subject to the 
                        allowance for depreciation, or
                            ``(ii) insurance or indemnity attributable 
                        to any such property.
                    ``(C) The receipts from the investment or 
                reinvestment of amounts held in such account.
            ``(2) Limit after 5 years.--The amount deposited under 
        subsection (a) in the account for any taxable year after such 
        5th taxable year shall not exceed the amount specified in 
        paragraph (1)(C).
    ``(c) Requirements as to Investments.--
            ``(1) In general.--Amounts in any account established under 
        this section shall be kept in the depository or depositories 
        specified in the agreement and shall be subject to such trustee 
        and other fiduciary requirements as may be specified by the 
        Secretary.
            ``(2) Limitation of account investments.--Amounts in an 
        account may be invested only in interest-bearing securities 
        approved by the Secretary; except that, if the Secretary 
        consents thereto, an agreed percentage (not in excess of 60 
        percent) of the assets of the account may be invested in the 
        stock of domestic corporations. Such stock must be currently 
        fully listed and registered on an exchange registered with the 
        Securities and Exchange Commission or a national securities 
        exchange and must be stock which would be acquired by prudent 
        men of discretion and intelligence in such matters who are 
        seeking a reasonable income and the preservation of capital. If 
        at any time the fair market value of the stock in the account 
        is more than the agreed percentage of the assets in the 
        account, any subsequent investment of withdrawal from the 
        account, shall be made in such a way as to tend to restore the 
        account to a situation in which the fair market value of the 
        stock does not exceed such agreed percentage.
            ``(3) Investment in certain preferred stock permitted.--For 
        purposes of this subsection, if the common stock of a 
        corporation meets the requirements of this subsection and if 
        the preferred stock of such corporation would meet such 
        requirements but for the fact that it cannot be listed and 
        registered as required because it is nonvoting stock, such 
        preferred stock shall be treated as meeting the requirements of 
        this subsection.
    ``(d) Nontaxability of Deposits.--
            ``(1) In general.--For purposes of this title--
                    ``(A) gain from a transaction referred to in 
                subsection (b)(1)(B) shall not be taken into account if 
                an amount equal to the net proceeds from such 
                transaction is deposited in the account,
                    ``(B) the earnings (including gains and losses) 
                from the investment and reinvestment of amounts held in 
                the account shall not be taken into account,
                    ``(C) the earnings and profits of any corporation 
                (within the meaning of section 316) shall be determined 
                without regard to this section and section 7518, and
                    ``(D) in applying the tax imposed by section 531 
                (relating to the accumulated earnings tax), amounts 
                while held in the account shall not be taken into 
                account.
            ``(2) Only qualified deposits eligible for treatment.--
        Paragraph (1) shall apply with respect to any amount only if 
        such amount is deposited in the account pursuant to the 
        agreement and not later than the time provided in regulations.
    ``(e) Establishment of Subaccounts.--
            ``(1) In general.--Within the account established pursuant 
        to this section 3 subaccounts shall be maintained--
                    ``(A) the capital subaccount,
                    ``(B) the capital gain subaccount, and
                    ``(C) the ordinary income subaccount.
            ``(2) Capital subaccount.--The capital subaccount shall 
        consist of--
                    ``(A) amounts referred to in subsection (b)(1)(A),
                    ``(B) amounts referred to in subsection (b)(1)(B) 
                other than that portion thereof which represents gain 
                not taken into account by reason of subsection 
                (d)(1)(A),
                    ``(C) the percentage applicable under section 
                243(a)(1) of any dividend received by the account with 
                respect to which the person maintaining the account 
                would (but for subsection (d)(1)(B)) be allowed a 
                deduction under section 243, and
                    ``(D) interest income exempt from taxation under 
                section 103.
            ``(3) Capital gain subaccount.--The capital gain subaccount 
        shall consist of--
                    ``(A) amounts representing capital gains on assets 
                held for more than 1 year and referred to in subsection 
                (b)(1)(B) or (b)(1)(C), reduced by
                    ``(B) amounts representing capital losses on assets 
                held in the account for more than 1 year.
            ``(4) Ordinary income subaccount.--The ordinary income 
        subaccount shall consist of--
                    ``(A)(i) amounts representing capital gains on 
                assets held for 1 year or less and referred to in 
                subsection (b)(1)(B) or (b)(1)(C), reduced by
                    ``(ii) amounts representing capital losses on 
                assets held in the account for 1 year or less,
                    ``(B) interest (not including any tax-exempt 
                interest referred to in paragraph (2)(D)) and other 
                ordinary income (not including any dividend referred to 
                in subparagraph (D) of this paragraph) received on 
                assets held in the account,
                    ``(C) ordinary income from a transaction described 
                in subsection (b)(1)(B), and
                    ``(D) the portion of any dividend referred to in 
                paragraph (2)(C) not taken into account under such 
                paragraph.
            ``(5) Capital losses only allowed to offset certain 
        gains.--Except on termination of an account, capital losses 
        referred to in paragraph (3)(B) or in paragraph (4)(A)(ii) 
        shall be allowed only as an offset to gains referred to in 
        paragraph (3)(A) or (4)(A)(i), respective.
    ``(f) Purposes of Qualified Withdrawals.--
            ``(1) In general.--A qualified withdrawal from the account 
        is one made in accordance with the terms of the agreement under 
        subsection (a).
            ``(2) Penalty for failing to fulfill any substantial 
        obligation.--Under joint regulations, if the Secretary 
        determines that any substantial obligation under any agreement 
        is not being fulfilled, the Secretary may, after notice and 
        opportunity for hearing to the person maintaining the account, 
        treat the entire account or any portion thereof as an amount 
        withdrawn from the account in a nonqualified withdrawal.
    ``(g) Tax Treatment of Qualified Withdrawals.--
            ``(1) In general.--Any qualified withdrawal from an account 
        shall be treated--
                    ``(A) first as made out of the capital subaccount,
                    ``(B) second as made out of the capital gain 
                subaccount, and
                    ``(C) third as made out of the ordinary income 
                subaccount.
            ``(2) Adjustment to basis where withdrawal from ordinary 
        income subaccount.--If any portion of a qualified withdrawal 
        for plant and equipment is made out of the ordinary income 
        subaccount, the basis of such plant and equipment shall be 
        reduced by an amount equal to such portion.
            ``(3) Adjustment to basis where withdrawal from capital 
        gain subaccount.--If any portion of a qualified withdrawal for 
        plant and equipment is made out of the capital gain subaccount, 
        the basis of such plant and equipment shall be reduced by an 
        amount equal to such portion.
            ``(4) Adjustment to basis where withdrawal pays principal 
        on debt.--If any portion of a qualified withdrawal to pay the 
        principal on any indebtedness is made out of the ordinary 
        income subaccount or the capital gain subaccount, then an 
        amount equal to the aggregate reduction which would be required 
        by paragraphs (2) and (3) if such withdrawal were a qualified 
        withdrawal for a purpose described in such paragraphs shall be 
        applied, in the order provided in joint regulations, to reduce 
        the basis of plant and equipment owned by the person 
        maintaining the account. Any amount of a withdrawal remaining 
        after the application of the preceding sentence shall be 
        treated as a nonqualified withdrawal.
            ``(5) Ordinary income recapture of basis reduction.--If any 
        property the basis of which was reduced under paragraph (2), 
        (3), or (4) is disposed of, any gain realized on such 
        disposition, to the extent it does not exceed the aggregate 
        reduction in the basis of such property under such paragraphs, 
        shall be treated as an amount referred to in subsection 
        (h)(3)(A) which was withdrawn on the date of such disposition. 
        Subject to such conditions and requirements as may be provided 
        in joint regulations, the preceding sentence shall not apply to 
        a disposition where there is a redeposit in an amount 
        determined under joint regulations which will, insofar as 
        practicable, restore the account to the position such account 
        was in before the withdrawal.
    ``(h) Tax Treatment of Nonqualified Withdrawals.--
            ``(1) In general.--Except as provided in subsection (i), 
        any withdrawal from an account which is not a qualified 
        withdrawal shall be treated as a nonqualified withdrawal.
            ``(2) Ordering rule.--Any nonqualified withdrawal from an 
        account shall be treated--
                    ``(A) first as made out of the ordinary income 
                subaccount,
                    ``(B) second as made out of the capital gain 
                subaccount, and
                    ``(C) third as made out of the capital subaccount.
        For purposes of this section, items withdrawn from any 
        subaccount shall be treated as withdrawn on a first-in-first-
        out basis; except that (i) any nonqualified withdrawal for 
        research, development, and design expenses incident to new and 
        advanced plant and equipment, and (ii) any amount treated as a 
        nonqualified withdrawal under the second sentence of subsection 
        (g)(4), shall be treated as withdrawn on a last-in-first-out 
        basis.
            ``(3) Operating rules.--For purposes of this title--
                    ``(A) any amount referred to in paragraph (2)(A) 
                shall be included in income for the taxable year in 
                which the withdrawal is made as an item of ordinary 
                income,
                    ``(B) any amount referred to in paragraph (2)(B) 
                shall be included in income for the taxable year in 
                which the withdrawal is made as an item of gain 
                realized during such year from the disposition of an 
                asset held for more than 1 year, and
                    ``(C) for the period on or before the last date 
                prescribed for payment of tax for the taxable year in 
                which such withdrawal is made--
                            ``(i) no interest shall be payable under 
                        section 6601 and no addition to the tax shall 
                        be payable under section 6651,
                            ``(ii) interest on the amount of the 
                        additional tax attributable to any item 
                        referred to in subparagraph (A) or (B) shall be 
                        paid at the applicable rate (as defined in 
                        paragraph (4)) from the last date prescribed 
                        for payment of the tax for the taxable year for 
                        which such item was deposited in the account, 
                        and
                            ``(iii) no interest shall be payable on 
                        amounts referred to in clauses (i) and (ii) of 
                        paragraph (2).
            ``(4) Applicable rate.--For purposes of paragraph 
        (3)(C)(ii), the applicable rate of interest for any 
        nonqualified withdrawal shall be the rate established in 
        section 6621(a)(2).
            ``(5) Amount not withdrawn from account after 12 years from 
        date of agreement taxed as nonqualified withdrawal.--
                    ``(A) In general.--The applicable percentage of any 
                amount which remains in an account at the close of the 
                10th, 11th, or 12th taxable year following the taxable 
                year in which an agreement was entered into shall be 
                treated as a nonqualified withdrawal in accordance with 
                the following table:

                    ``If the amount remains in the
                                                         The applicable
                      account at the close of the:
                                                         percentage is:
                            10th taxable year........    20 percent    
                            11th taxable year........    60 percent    
                            12th taxable year........   100 percent    
                    ``(B) Earnings treated as deposits.--The earnings 
                of any account for any taxable year (other than net 
                gains) shall be treated for purposes of this paragraph 
                as an amount remaining in the account for such taxable 
                year.
                    ``(C) Amounts committed treated as withdrawn.--For 
                purposes of subparagraph (A), an amount shall not be 
                treated as remaining in an account at the close of any 
                taxable year to the extent there is a binding contract 
                at the close of such year for a qualified withdrawal of 
                such amount with respect to an identified item for 
                which such withdrawal may be made.
                    ``(D) Authority to treat excess funds as 
                withdrawn.--If the Secretary determines that the 
                balance in any account exceeds the amount which is 
                appropriate to meet the account's program objectives, 
                the amount of such excess shall be treated as a 
                nonqualified withdrawal under subparagraph (A) unless 
                the person maintaining the account develops appropriate 
                program objectives within 3 years to dissipate such 
                excess.
            ``(6) Nonqualified withdrawals taxed at highest marginal 
        rate.--
                    ``(A) In general.--In the case of any taxable year 
                for which there is a nonqualified withdrawal (including 
                any amount so treated under paragraph (5)), the tax 
                imposed by chapter 1 shall be determined--
                            ``(i) by excluding such withdrawal from 
                        gross income, and
                            ``(ii) by increasing the tax imposed by 
                        chapter 1 by the product of the amount of such 
                        withdrawal and the highest rate of tax 
                        specified in section 11.
                With respect to the portion of any nonqualified 
                withdrawal made out of the capital gain subaccount 
                during a taxable year to which section 1201(a) applies, 
                the rate of tax taken into account under the preceding 
                sentence shall not exceed 34 percent.
                    ``(B) Tax benefit rule.--If any portion of a 
                nonqualified withdrawal is properly attributable to 
                deposits (other than earnings on deposits) made by the 
                taxpayer in any taxable year which did not reduce the 
                taxpayer's liability for tax under chapter 1 for any 
                taxable year preceding the taxable year in which such 
                withdrawal occurs--
                            ``(i) such portion shall not be taken into 
                        account under subparagraph (A), and
                            ``(ii) an amount equal to such portion 
                        shall be treated as allowed as a deduction 
                        under section 172 for the taxable year in which 
                        such withdrawal occurs.
                    ``(C) Coordination with deduction for net operating 
                losses.--Any nonqualified withdrawal excluded from 
                gross income under subparagraph (A) shall be excluded 
                in determining taxable income under section 172(b)(2).
    ``(i) Certain Corporate Reorganizations.--Under joint regulations, 
transfer of an account from one person to another person in a 
transaction to which section 381 applies may be treated as if such 
transaction did not constitute a nonqualified withdrawal.
    ``(j) Records; Reports; Changes in Regulations.--
            ``(1) In general.--Each person maintaining an account under 
        this section shall keep such records and shall make such 
        reports as the Secretary shall require. The Secretary and the 
        Secretary of Commerce shall jointly prescribe all rules and 
        regulations, not inconsistent with the foregoing provisions of 
        this section, as may be necessary or appropriate to the 
        determination of tax liability under this section. If, after an 
        agreement has been entered into under this section, a change is 
        made either in the joint regulations or in the regulations 
        prescribed by the Secretary under this section which could have 
        a substantial effect on the rights or obligations of any person 
        maintaining an account under this section, such person may 
        terminate such agreement.
            ``(2) Joint regulations.--For purposes of this section, the 
        term `joint regulations' means the regulations prescribed under 
        this subsection.
    ``(k) Departmental Reports and Certification.--
            ``(1) In general.--For each calendar year, the Secretary 
        shall provide the Secretary of Commerce, within 120 days after 
        the close of such calendar year, a written report with respect 
        to the accounts established under this section.
            ``(2) Content of reports.--Each report shall set forth the 
        name and taxpayer identification number of each person--
                    ``(A) establishing an account during such calendar 
                year;
                    ``(B) maintaining an account as of the last day of 
                such calendar year;
                    ``(C) terminating an account during such calendar 
                year;
                    ``(D) making any withdrawal from or deposit into 
                (and the amounts thereof) an account during such 
                calendar year; or
                    ``(E) with respect to which a determination has 
                been made during such calendar year that such person 
                has failed to fulfill a substantial obligation under 
                any account agreement to which such person is a 
                party.''
            (2) Minimum tax treatment.--Section 56(c) of the Internal 
        Revenue Code of 1986 (relating to adjustments applicable to 
        corporations) is amended by adding at the end thereof the 
        following new paragraph:
            ``(4) Technology partnership accounts.--In the case of a 
        technology partnership account established under section 7524--
                    ``(A) subparagraphs (A) and (B) of section 
                7524(d)(1) shall not apply, and
                    ``(B) no reduction in basis shall be made under 
                subsection (g) with respect to the withdrawal from the 
                account of any amount to which subparagraph (A) 
                applies.''
            (3) Clerical amendment.--The table of sections for chapter 
        77 of the Internal Revenue Code of 1986 is amended by adding at 
        the end thereof the following new item:

                              ``Sec. 7524. Technology partnership 
                                        accounts.''
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (b) Alternative Investment Tax Credit.--
            (1) Allowance of Credit.--Section 46 of the Internal 
        Revenue Code of 1986 (relating to amount of investment credit) 
        is amended by striking ``and'' at the end of paragraph (2), by 
        striking the period at the end of paragraph (3) and inserting 
        ``, and'', and by adding at the end thereof the following new 
        paragraph:
            ``(4) in the case of a University-Industry Technology 
        Partnership selected under section 11(a) of the University-
        Industry Technology Development Act which does not have a 
        technology partnership account (within the meaning of section 
        7524) for the taxable year or any prior taxable year, the 
        technology partnership credit.''
            (2) Amount of credit.--Section 48 of such Code is amended 
        by adding at the end thereof the following new subsection:
    ``(c) Technology Partnership Credit.--
            ``(1) General rule.--For purposes of section 46, the 
        technology partnership credit for the taxable year is an amount 
        equal to 20 percent of the amount paid or incurred during such 
        taxable year for a purpose for which a qualified withdrawal 
        would be permitted by the taxpayer from a technology 
        partnership account (within the meaning of section 7524) if the 
        taxpayer had such an account. Such credit shall be in addition 
        to any other credit allowable under this subpart.
            ``(2) Special rule.--If any credit is determined under 
        subsection (a) for any amount which is includible in the basis 
        of any property, such property shall be treated as investment 
        credit property for purposes of this subpart.''
            (3) Technical amendments.--
                    (A) Clause (ii) of section 49(a)(1)(C) of such Code 
                is amended by inserting ``or property with respect to 
                which a technology partnership credit is allowed under 
                section 48(c)'' after ``energy property''.
                    (B) Paragraph (5) of section 50(a) of such Code is 
                amended by adding at the end thereof the following new 
                subparagraph:
                    ``(D) Special rules for certain property.--In the 
                case of property with respect to which a technology 
                partnership credit is allowed under section 48(c) and 
                which is 3-year property (within the meaning of section 
                168(e))--
                            ``(i) the percentage set forth in clause 
                        (ii) of the table contained in paragraph (1)(B) 
                        shall be 66 percent,
                            ``(ii) the percentage set forth in clause 
                        (iii) of such table shall be 33 percent, and
                            ``(iii) clauses (iv) and (v) of such table 
                        shall not apply.''
                    (C) The section heading of section 48 of such Code 
                is amended by inserting before the period ``; 
                technology partnership credit''.
                    (D) The table of sections for subpart E of part IV 
                of subchapter A of chapter 1 of such Code is amended by 
                inserting before the period in the item relating to 
                section 48 ``; technology partnership credit''.
            (4) Effective Date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.

SEC. 15. CAPITAL GAINS EXCLUSION.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 137 
as section 138 and by inserting after section 136 the following new 
section:

``SEC. 137. EXCLUSION FOR GAIN FROM TECHNOLOGY PROGRAM INVESTMENTS.

    ``(a) General Rule.--Gross income shall not include the applicable 
percentage of any long-term capital gain recognized on the sale or 
exchange of a technology program investment held for more than 5 years.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means, 
        with respect to any technology program investment, the sum of--
                    ``(A) 25 percent, plus
                    ``(B) 5 percentage points for each full year such 
                investment is held after the 5th year such investment 
                is held.
        In no event shall the applicable percentage exceed 75 percent.
            ``(2) Reduction of exclusion for investments made more than 
        3 years after enactment.--In the case of any technology program 
        investment made during any fiscal year (hereinafter referred to 
        as the `acquisition year') after the third fiscal year 
        beginning after the date of the enactment of this section, the 
        applicable percentage determined under paragraph (1) (without 
        regard to this paragraph) shall be reduced (but not below zero) 
        by the product of 15 percentage points and the number of fiscal 
        years that the acquisition year is after such third fiscal 
        year.
    ``(c) Technology Program Investment.--For purposes of this section, 
the term `technology program investment' means any investment of a type 
approved by the Secretary of Commerce which provides funding for any 
University Technology Development Program, or any University-Industry 
Technology Partnership, selected under section 11(a) of the University-
Industry Technology Development Act.
    ``(d) Certain Tax-Free and Other Transfers.--For purposes of this 
section--
            ``(1) In general.--In the case of a transfer of a 
        technology program investment to which this subsection applies, 
        the transferee shall be treated as--
                    ``(A) having acquired such investment in the same 
                manner as the transferor, and
                    ``(B) having held such investment during any 
                continuous period immediately preceding the transfer 
                during which it was held (or treated as held under this 
                subsection) by the transferor.
            ``(2) Transfers to which subsection applies.--This 
        subsection shall apply to any transfer--
                    ``(A) by gift, or
                    ``(B) at death.
            ``(3) Certain rules made applicable.--Rules similar to the 
        rules of section 1244(d)(2) shall apply for purposes of this 
        section.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by striking the last item and inserting the following new 
items:

                              ``Sec. 137. Exclusion for gain from 
                                        technology program investments.
                              ``Sec. 138. Cross references to other 
                                        Acts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 16. ANTITRUST EXEMPTION.

    (a) Court Actions.--All cooperative activities and joint ventures 
in furtherance of the goals of a University Technology Development 
Program or a University-Industry Technology Partnership shall be judged 
by the rule of reason in any antitrust action brought in Federal or 
State court. Damages in any such action shall be limited to actual 
damages and attorneys fees. A private party that brings an antitrust 
action against a University Technology Development Program or a 
University-Industry Technology Partnership ruled to be frivolous, 
unreasonable, without foundation, or in bad faith shall pay the 
attorneys fees of the accused party.
    (b) Requested Ruling.--A University Technology Development Program 
or a University-Industry Technology Partnership may seek a ruling by 
the Secretary that a proposed activity is not a violation of Federal 
antitrust laws. The Secretary, in consultation with the Attorney 
General, shall render a ruling within 90 days after such a request.

SEC. 17. STUDY AND REPORT.

    (a) Study.--The Secretary, in coordination with the advisory panel 
established under section 9, shall undertake a study of the 
effectiveness of this Act in furthering the goals described in section 
3(c).
    (b) Report.--Not later than 5 years after the date of enactment of 
this Act, the Secretary shall report to the Congress on the results of 
such study, including a recommendation of whether the program should be 
reauthorized for an additional period.

SEC. 18. FEDERAL AGENCY COOPERATION.

    Federal agencies with responsibilities or expertise in technology 
related fields shall cooperate with the Secretary in carrying out this 
Act.

SEC. 19. DEFINITIONS.

    For purposes of this Act--
            (1) the term ``Partnership Conference'' means a conference 
        described in section 8(b); and
            (2) the term ``Secretary'' means the Secretary of Commerce.

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