I

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘University-Industry

5 Technology Development Act’’.
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1 SEC. 2. FINDINGS.

2 The Congress finds that—

3 (1) innovation in high technology fields, includ4 ing the development of new generic basic infrastruc5 ture technologies, and the rapid adoption and com6 mercialization of these technologies and processes

7 are increasingly important to ensuring—

8 (A) the continued growth of the Nation’s

9 economy;

10 (B) the Nation’s continued leadership and

11 competitive strength in the emerging global

12 market;

13 (C) the health and well-being of our Na14 tion’s citizens; and

15 (D) national security;

16 (2) United States research universities have

17 played and will continue to play a vital role in laying

18 the foundation for innovation in high technology

19 fields;

20 (3) timely commercial application of the results

21 of basic research underway at our Nation’s univer22 sities depends on the actions and skills of business

23 and labor;

24 (4) encouraging the participation of State and

25 local government in the development and commer-
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1 cialization of new technologies is in the Nation’s in2 terest;

3 (5) many of the industrialized nations with

4 which the United States competes in the global mar5 ket have developed national policies to support uni6 versity-based innovation and development in high

7 technology fields and to support rapid commercial

8 adoption of advanced manufacturing technologies

9 and processes, including—

10 (A) reducing the cost of capital to busi11 nesses developing these technologies and proc12 esses;

13 (B) promoting the continued education of

14 the workforce; and

15 (C) providing numerous other measures

16 designed to lessen the risk and cost to individ17 ual enterprises of long-term investments in new

18 technologies and systematic upgrades of manu19 facturing processes;

20 (6) current United States national policy does

21 not provide similar levels of support of the kinds de22 scribed in paragraph (5); and

23 (7) in order to accomplish the goals stated in

24 paragraph (1)(A) through (D), the United States
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1 must develop and implement policies of the kinds de2 scribed in paragraph (5).

3 SEC. 3. ESTABLISHMENT OF PROGRAM.

4 (a) UNIVERSITY TECHNOLOGY DEVELOPMENT PRO5 GRAMS.—The Secretary shall establish a program for the

6 selection of University Technology Development Pro7 grams, in accordance with the requirements of this Act,

8 that will further the goals stated in subsection (c). Such

9 program shall provide incentives and assistance to univer10 sities seeking to develop broad university-led programs de11 signed to foster the discovery, evaluation, and initial devel12 opment to the proof of concept stage of commercially

13 promising basic research undertaken at the university or

14 universities taking part in the program.

15 (b) UNIVERSITY-INDUSTRY TECHNOLOGY PARTNER16 SHIPS.—The Secretary shall establish a program for the

17 selection of University-Industry Technology Partnerships,

18 in accordance with the requirements of this Act, that will

19 further the goals stated in subsection (c). Such program

20 shall provide incentives and assistance for businesses and

21 universities, in coordination with State and local govern22 ments, to enter into partnerships to develop commercial

23 applications for new technologies and processes.

24 (c) GOALS.—The goals referred to in subsections (a)

25 and (b) are—
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1 (1) continued growth of the Nation’s economy;

2 (2) the Nation’s continued leadership and com3 petitive strength in the emerging global market;

4 (3) the health and well-being of our Nation’s

5 citizens; and

6 (4) national security,

7 through the development of innovations in high technology

8 fields and processes critical to meeting those goals and

9 promoting the long-term vitality of local communities.

10 SEC. 4. REGULATIONS.

11 Not later than 120 days after the date of enactment

12 of this Act, the Secretary shall issue regulations—

13 (1) that specify the required contents and form

14 of preliminary requests for consideration required

15 under section 5 and of applications required under

16 sections 7 and 8;

17 (2) that establish procedures and schedules for

18 the approval of preliminary requests for consider19 ation under section 5, and for the selection of Uni20 versity Technology Development Programs and Uni21 versity-Industry Technology Partnerships under sec22 tion 11;

23 (3) that determine the forms of assistance

24 available to applicants under section 6, procedures

25 for determining the cost of completing an application
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1 required under section 7 or 8, and procedures for

2 determining the amount of assistance each applicant

3 shall receive under section 6;

4 (4) that determine the forms of assistance

5 available to University Technology Development Pro6 grams and University-Industry Technology Partner7 ships under section 12; and

8 (5) as required under section 15.

9 SEC. 5. PRELIMINARY REQUEST FOR CONSIDERATION.

10 (a) TIME OF SUBMITTAL.—After final regulations

11 are issued under section 4, at a time determined by the

12 Secretary to be appropriate, and annually thereafter for

13 an additional 5 years, any party or parties may submit

14 to the Secretary a preliminary request for consideration

15 under this section.

16 (b) CONTENTS.—A preliminary request for consider17 ation submitted under this section shall include—

18 (1) a description of the proposed University

19 Technology Development Program or University-In20 dustry Technology Partnership and the ways that it

21 will further the goals described in section 3(c);

22 (2) an estimate of the amount and nature of

23 Federal assistance that will be required in the imple24 mentation of the proposed University Technology
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1 Development Program or University-Industry Tech2 nology Partnership; and

3 (3) any request for assistance under section 6,

4 along with an explanation of the reasons for the

5 need for such assistance and the estimated cost of

6 completing an application under section 7 or 8.

7 (c) APPROVAL.—The Secretary shall approve prelimi8 nary requests for consideration that the Secretary deter9 mines show that the proposal has substantial potential to

10 meet the selection criteria described in section 10. As part

11 of such approval, the Secretary shall indicate the amount

12 of assistance under section 6 that will be available to the

13 applicant.

14 SEC. 6. APPLICATION ASSISTANCE.

15 To assist an applicant in conducting research, stud16 ies, business plans, models, and other technical work, as

17 requested under section 5(b)(3) and necessary for the de18 velopment of an application required under section 7 or

19 8, the Secretary, to the extent appropriations are available

20 for such purpose, shall provide—

21 (1) financial assistance, through grants, loans,

22 or loan guarantees in an amount not to exceed

23 $250,000 per application; and

24 (2) technical and other forms of assistance de25 termined necessary by the Secretary.
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1 Funding under paragraph (1) of this section shall not ex2 ceed 50 percent of the amount necessary for the develop3 ment of such application. After the first year that prelimi4 nary requests for consideration are submitted under sec5 tion 5, not more than 20 percent of the funds appropriated

6 for carrying out this Act each fiscal year shall be available

7 for assistance under this section.

8 SEC. 7. UNIVERSITY TECHNOLOGY DEVELOPMENT PRO9 GRAM APPLICATION.

10 (a) SUBMITTAL.—A university or universities seeking

11 to create a University Technology Development Program

12 whose preliminary request for consideration is approved

13 by the Secretary under section 5(c) may develop an appli14 cation for submittal to the Secretary under this section.

15 (b) CONTENTS.—An application submitted under this

16 section shall set forth the information required by regula17 tions issued under section 4(1), and shall include, at a

18 minimum, the following:

19 (1) A detailed plan setting out the nature and

20 goals of the proposed University Technology Devel21 opment Program including, to the extent possible,

22 the differences between the proposed program and

23 existing technology transfer programs, and expected

24 returns on investment for each of the participants or

25 investors.
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1 (2) The location or locations at which the ac2 tivities of the proposed University Technology Devel3 opment Program will be undertaken, and a review of

4 the anticipated economic and social benefits to the

5 community of these proposed activities.

6 (3) A review of the expected systems integra7 tion and coordinated activities that will be employed

8 for achieving the goals of the University Technology

9 Development Program.

10 (4) A complete explanation of how the activities

11 of the proposed University Technology Development

12 Program meet the selection criteria described in sec13 tion 10.

14 (5) A full description of all agreements entered

15 into and expected to be entered into between the

16 participants for carrying out the University Tech17 nology Development Program, including agreements

18 relating to capital and other contributions, patent

19 rights, copyrights, and royalty and licensing pay20 ments.

21 (6) An explanation of the specific nature of

22 Federal financial or technical assistance under sec23 tion 12 that the University Technology Development

24 Program is seeking, and justification for this re25 quest.
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1 (7) A full description of the nature and dura2 tion of the contributions that each of the partici3 pants has agreed to contribute to the University

4 Technology Development Program.

5 SEC. 8. PARTNERSHIP CONFERENCE APPLICATION.

6 (a) SUBMITTAL.—A party or parties seeking to create

7 a University-Industry Technology Partnership whose pre8 liminary request for consideration is approved by the Sec9 retary under section 5(c) may form a Partnership Con10 ference for the development of an application for submittal

11 to the Secretary under this section.

12 (b) PARTICIPATION REQUIREMENT.—An application

13 under this section shall be developed by a Partnership

14 Conference convened for such purpose, which shall consist

15 of, at a minimum, the following:

16 (1) The individual faculty members whose re17 search is to be developed and commercialized by the

18 University-Industry Technology Partnership, or a

19 fully informed representative of such faculty mem20 bers.

21 (2) The Governor, or the Governor’s designee,

22 of the State or States in which the University-Indus23 try Technology Partnership is to be located.

24 (3) State agencies, in any State in which the

25 University-Industry Technology Partnership is to be
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1 located, that are charged with developing or carrying

2 out technology transfer programs or economic devel3 opment programs and which the Governor of such

4 State determines should participate in the Partner5 ship Conference.

6 (4) A representative from any local government

7 in whose jurisdiction the University-Industry Tech8 nology Partnership is to be located.

9 (5) A representative of any university whose

10 faculty member or members are to participate in the

11 University-Industry Technology Partnership.

12 (6) Representatives of any private enterprise

13 who will be participating in the University-Industry

14 Technology Partnership.

15 (c) PARTICIPANT APPROVAL REQUIREMENT.—An

16 application may not be submitted under this section with17 out the approval of each of the participants described in

18 subsection (b). In the case of participants described in

19 paragraph (1) of that subsection, approval by the individ20 ual faculty members, rather than their representatives, is

21 required.

22 (d) CONTENTS.—An application submitted under this

23 section shall set forth the information required by regula24 tions issued under section 4(1), which shall include, at a

25 minimum, the following:
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1 (1) A detailed plan setting out the technical

2 and business goals of the University-Industry Tech3 nology Partnership and the means by which the par4 ticipants will achieve these goals, including, to the

5 extent possible, the expected returns on investment

6 of each of the participants. These plans shall include

7 a business plan for each specific business venture in8 cluded in the goals of the University-Industry Tech9 nology Partnership. Applications proposing multi10 disciplinary or multitiered activities from which spe11 cific business plans cannot yet be developed fully

12 shall set forth, to the extent possible, the anticipated

13 areas of economic activity that will benefit from the

14 research and development activities of the Univer15 sity-Industry Technology Partnership.

16 (2) The location or locations at which the ac17 tivities of the proposed University-Industry Tech18 nology Partnership will be undertaken, and a review

19 of the anticipated economic and social benefits to the

20 community of these proposed activities.

21 (3) A review of the expected systems integra22 tion and coordinated activities that will be employed

23 for achieving the goals of the University-Industry

24 Technology Partnership.
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1 (4) A complete explanation of how the activities

2 of the proposed University-Industry Technology

3 Partnership meet the selection criteria described in

4 section 10.

5 (5) A full description of all agreements entered

6 into and expected to be entered into between the

7 participants for carrying out the University-Industry

8 Technology Partnership, including agreements relat9 ing to capital and other contributions, patent rights,

10 copyrights, and royalty and licensing payments.

11 (6) An explanation of the specific nature of

12 Federal financial or technical assistance under sec13 tion 12 that the University-Industry Technology

14 Partnership is seeking, and justification for this re15 quest.

16 (7) A full description of the nature and dura17 tion of the contributions that each of the partici18 pants in the Partnership Conference has agreed to

19 contribute to the University-Industry Technology

20 Partnership.

21 SEC. 9. ADVISORY PANEL.

22 (a) MEMBERSHIP.—(1) There shall be established an

23 advisory panel whose membership shall include—

24 (A) the Secretary of Labor;
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1 (B) the Director of the National Institutes of

2 Health;

3 (C) the Director of the National Science Foun4 dation;

5 (D) the Director of the National Institute of

6 Standards and Technology;

7 (E) the Director of the Advanced Research

8 Projects Agency; and

9 (F) the Director of the National Economic

10 Council.

11 (2) In addition, the President shall invite one rep12 resentative each of—

13 (A) the National Academy of Sciences;

14 (B) the National Academy of Engineering; and

15 (C) the Institute of Medicine,

16 to serve on the advisory panel.

17 (3) In addition, the President shall appoint—

18 (A) a representative of the business community;

19 (B) a representative of higher education; and

20 (C) a representative of organized labor,

21 to the advisory panel, on the basis of each individual’s ex22 pertise and accomplishments relevant to carrying out the

23 functions of the advisory panel, and each member ap24 pointed under this paragraph shall be appointed to a term

25 of 2 years.
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1 (b) FUNCTIONS.—The advisory panel established

2 under this section shall by majority vote annually rec3 ommend to the Secretary, from among the applications

4 submitted under sections 7 and 8, no fewer than 25 and

5 no more than 50 meritorious proposals, and shall assist

6 the Secretary in undertaking the study required under sec7 tion 17.

8 (c) CONFLICT OF INTEREST.—If a member of the ad9 visory panel has a financial interest in or is otherwise af10 filiated with any participant of a proposed University

11 Technology Development Program or University-Industry

12 Technology Partnership for which an application is sub13 mitted under this Act, that member shall not participate

14 in the assessment by the advisory panel of such applica15 tion.

16 SEC. 10. SELECTION CRITERIA.

17 (a) AREAS OF REVIEW.—Recommendations by the

18 advisory panel under section 9(b), and selections by the

19 Secretary under section 11, shall be made on the basis

20 of a competitive assessment as to which applications sub21 mitted best further the goals described in section 3(c), in22 cluding consideration of—

23 (1) the diversity of the proposals submitted in

24 terms of size, cost, complexity, duration, and num25 ber of participants;
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1 (2) the relationship of the goals of a University

2 Technology Development Program or a University3 Industry Technology Partnership to the development

4 of technologies and processes deemed critical by the

5 Secretary, as reported annually to the Congress by

6 the Secretary in accordance with section 603(d) of

7 the National Science and Technology Policy, Organi8 zation, and Priorities Act of 1976;

9 (3) the likelihood that the goals stated in the

10 application can be attained;

11 (4) whether the expected level of risk and re12 turn on investment to the participants make it un13 likely that the proposed activities would be under14 taken without the incentives provided by selection as

15 a University Technology Development Program or a

16 University-Industry Technology Partnership;

17 (5) the impact of a proposed University Tech18 nology Development Program or a proposed Univer19 sity-Industry Technology Partnership on reaching

20 articulated long-term economic and social needs of

21 the community in which the participating university

22 or universities, or University-Industry Technology

23 Partnership is to be located;

24 (6) whether the proposed University Technology

25 Development Program or proposed University-Indus-
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1 try Technology Partnership will strengthen and pro2 mote the research capabilities of the participating

3 university or universities;

4 (7) whether the previous activities of the par5 ticipants of a proposed University Technology Devel6 opment Program or a proposed University-Industry

7 Technology Partnership, including existing tech8 nology transfer and development programs operated

9 by State or local governments or universities, dem10 onstrate sufficient interest, activity, and ability in

11 technology innovation and commercialization;

12 (8) in the case of a proposed University-Indus13 try Technology Partnership, the potential relevance

14 of such partnership to the growth and competitive15 ness of multiple sectors of the Nation’s economy;

16 and

17 (9) in the case of a proposed University-Indus18 try Technology Partnership, whether the partici19 pants of the proposed partnership have dem20 onstrated a sufficient level of cooperation, and of

21 commitment to the University-Industry Technology

22 Partnership, necessary for its success, including con23 tributions for the provision of adequate staffing, fa24 cilities, and equipment, contribution of private

25 funds, and government support, including State and
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1 local government loans, loan guarantees, or tax and

2 regulatory relief.

3 (b) SPECIAL CONSIDERATION.—The advisory panel

4 and the Secretary shall give special consideration and pri5 ority to applications—

6 (1) that would enhance the ability of small busi7 nesses to incorporate technological developments;

8 (2) that would assist disadvantaged urban areas

9 and communities impacted by reductions in Federal

10 defense spending through the creation of new oppor11 tunities for employment and worker skill upgrading

12 in those communities;

13 (3) that would create or enhance an applied re14 search facility at a university;

15 (4) that would target assistance to universities

16 with a history of substantial Federal research fund17 ing and experience; and

18 (5) if the applicant, or one of the participants

19 in a group applicant, is a university that has pre20 viously submitted a proposal that was selected, or

21 has been one of the participants in a group that sub22 mitted a proposal that was selected, as a University

23 Technology Development Program or as a Univer24 sity-Industry Technology Partnership.
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1 (c) EQUAL SELECTION.—To the extent possible, tak2 ing into consideration the number and nature of applica3 tions received under sections 7 and 8, the Secretary and

4 the advisory panel shall attempt to select an equal number

5 of University Technology Development Programs and Uni6 versity-Industry Technology Partnerships each year.

7 SEC. 11. SELECTION.

8 (a) SELECTION.—The Secretary shall annually select

9 no fewer than 10 but no more than 25 meritorious propos10 als, from among those recommended by the advisory panel

11 under section 9(b), as University Technology Development

12 Programs or University-Industry Technology Partnerships

13 eligible to receive assistance under section 12.

14 (b) EXPLANATION BY SECRETARY.—Each applicant

15 whose proposal is recommended by the advisory panel

16 under section 9(b) but not selected under this section may

17 request an explanation from the Secretary for the decision

18 not to select its proposal. The Secretary shall provide such

19 applicant a description of changes to the application that

20 the Secretary would consider significant during any recon21 sideration of such application. Applicants may resubmit

22 an application, with or without modification, in any subse23 quent year in which the Secretary is authorized to select

24 University Technology Development Programs and Uni25 versity-Industry Technology Partnerships.
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1 SEC. 12. DIRECT ASSISTANCE.

2 The Secretary shall, to the extent appropriations are

3 available for such purpose, provide financial assistance, in

4 the form of a grant, loan, or loan guarantee, and appro5 priate technical assistance, to University Technology De6 velopment Programs and to University-Industry Tech7 nology Partnerships selected under section 11. Assistance

8 under this section shall not exceed 50 percent of the total

9 cost of the activities proposed, and no applicant shall re10 ceive more than $5,000,000 under this section.

11 SEC. 13. REQUIRED CONTRIBUTION.

12 (a) PRIVATE ENTERPRISES.—The private business

13 entities participating in a University-Industry Technology

14 Partnership shall contribute a minimum of 50 percent of

15 the capital requirements of the University-Industry Tech16 nology Partnership. Such contribution may be met

17 through approved financing mechanisms, as defined by the

18 Secretary by regulation, including available private and

19 public equity and debt financing and State and Federal

20 small business assistance programs.

21 (b) UNIVERSITIES.—The university or universities

22 participating in a University Technology Development

23 Program shall contribute minimum of 25 percent of the

24 capital requirements of the program. Such contribution

25 may be met through approved financing mechanisms, as

26 defined by the Secretary by regulation.
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1 SEC. 14. TECHNOLOGY PARTNERSHIP ACCOUNTS; ALTER2 NATIVE INVESTMENT TAX CREDIT.

3 (a) TECHNOLOGY PARTNERSHIP ACCOUNTS.—

4 (1) IN GENERAL.—Chapter 77 of the Internal

5 Revenue Code of 1986 (relating to miscellaneous

6 provisions) is amended by adding at the end thereof

7 the following new section:

8 ‘‘SEC. 7524. TECHNOLOGY PARTNERSHIP ACCOUNTS.

9 ‘‘(a) AGREEMENT RULES.—Any University-Industry

10 Technology Partnership selected under section 11(a) of

11 the University-Industry Technology Development Act may

12 enter into an agreement with the Secretary under, and as

13 provided in, this section to establish a technology partner14 ship account (hereafter in this section referred to as the

15 ‘account’). Any agreement entered into under this section

16 shall be for the purpose of accomplishing the goals of such

17 partnership in accordance with the actions proposed by

18 such partnership in its application under section 8 of the

19 University-Industry Technology Development Act, and

20 shall provide for the deposit in the account of the amounts

21 agreed upon as necessary or appropriate to provide for

22 qualified withdrawals under subsection (f). The deposits

23 in the account, and all withdrawals from the account,

24 whether qualified or nonqualified, shall be subject to such

25 conditions and requirements as the Secretary may by reg26 ulations prescribe or as set forth in such agreement.
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1 ‘‘(b) CEILING ON DEPOSITS.—

2 ‘‘(1) LIMIT DURING FIRST 5 YEARS.—The

3 amount deposited under subsection (a) in the ac4 count for any of the first 5 taxable years following

5 the taxable year in which an agreement was entered

6 into shall not exceed the average of the sum of the

7 following amounts for the 5 taxable years preceding

8 the taxable year for which the determination is being

9 made:

10 ‘‘(A) The amount allowable as a deduction

11 under section 167 for such taxable year.

12 ‘‘(B) The net proceeds from—

13 ‘‘(i) the sale or other disposition of

14 any property of a character subject to the

15 allowance for depreciation, or

16 ‘‘(ii) insurance or indemnity attrib17 utable to any such property.

18 ‘‘(C) The receipts from the investment or

19 reinvestment of amounts held in such account.

20 ‘‘(2) LIMIT AFTER 5 YEARS.—The amount de21 posited under subsection (a) in the account for any

22 taxable year after such 5th taxable year shall not ex23 ceed the amount specified in paragraph (1)(C).

24 ‘‘(c) REQUIREMENTS AS TO INVESTMENTS.—
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1 ‘‘(1) IN GENERAL.—Amounts in any account

2 established under this section shall be kept in the

3 depository or depositories specified in the agreement

4 and shall be subject to such trustee and other fidu5 ciary requirements as may be specified by the Sec6 retary.

7 ‘‘(2) LIMITATION OF ACCOUNT INVEST8 MENTS.—Amounts in an account may be invested

9 only in interest-bearing securities approved by the

10 Secretary; except that, if the Secretary consents

11 thereto, an agreed percentage (not in excess of 60

12 percent) of the assets of the account may be invested

13 in the stock of domestic corporations. Such stock

14 must be currently fully listed and registered on an

15 exchange registered with the Securities and Ex16 change Commission or a national securities exchange

17 and must be stock which would be acquired by pru18 dent men of discretion and intelligence in such mat19 ters who are seeking a reasonable income and the

20 preservation of capital. If at any time the fair mar21 ket value of the stock in the account is more than

22 the agreed percentage of the assets in the account,

23 any subsequent investment of withdrawal from the

24 account, shall be made in such a way as to tend to

25 restore the account to a situation in which the fair
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1 market value of the stock does not exceed such

2 agreed percentage.

3 ‘‘(3) INVESTMENT IN CERTAIN PREFERRED

4 STOCK PERMITTED.—For purposes of this sub5 section, if the common stock of a corporation meets

6 the requirements of this subsection and if the pre7 ferred stock of such corporation would meet such re8 quirements but for the fact that it cannot be listed

9 and registered as required because it is nonvoting

10 stock, such preferred stock shall be treated as meet11 ing the requirements of this subsection.

12 ‘‘(d) NONTAXABILITY OF DEPOSITS.—

13 ‘‘(1) IN GENERAL.—For purposes of this title—

14 ‘‘(A) gain from a transaction referred to in

15 subsection (b)(1)(B) shall not be taken into ac16 count if an amount equal to the net proceeds

17 from such transaction is deposited in the ac18 count,

19 ‘‘(B) the earnings (including gains and

20 losses) from the investment and reinvestment of

21 amounts held in the account shall not be taken

22 into account,

23 ‘‘(C) the earnings and profits of any cor24 poration (within the meaning of section 316)
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1 shall be determined without regard to this sec2 tion and section 7518, and

3 ‘‘(D) in applying the tax imposed by sec4 tion 531 (relating to the accumulated earnings

5 tax), amounts while held in the account shall

6 not be taken into account.

7 ‘‘(2) ONLY QUALIFIED DEPOSITS ELIGIBLE FOR

8 TREATMENT.—Paragraph (1) shall apply with re9 spect to any amount only if such amount is depos10 ited in the account pursuant to the agreement and

11 not later than the time provided in regulations.

12 ‘‘(e) ESTABLISHMENT OF SUBACCOUNTS.—

13 ‘‘(1) IN GENERAL.—Within the account estab14 lished pursuant to this section 3 subaccounts shall

15 be maintained—

16 ‘‘(A) the capital subaccount,

17 ‘‘(B) the capital gain subaccount, and

18 ‘‘(C) the ordinary income subaccount.

19 ‘‘(2) CAPITAL SUBACCOUNT.—The capital sub20 account shall consist of—

21 ‘‘(A) amounts referred to in subsection

22 (b)(1)(A),

23 ‘‘(B) amounts referred to in subsection

24 (b)(1)(B) other than that portion thereof which
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1 represents gain not taken into account by rea2 son of subsection (d)(1)(A),

3 ‘‘(C) the percentage applicable under sec4 tion 243(a)(1) of any dividend received by the

5 account with respect to which the person main6 taining the account would (but for subsection

7 (d)(1)(B)) be allowed a deduction under section

8 243, and

9 ‘‘(D) interest income exempt from taxation

10 under section 103.

11 ‘‘(3) CAPITAL GAIN SUBACCOUNT.—The capital

12 gain subaccount shall consist of—

13 ‘‘(A) amounts representing capital gains on

14 assets held for more than 1 year and referred

15 to in subsection (b)(1)(B) or (b)(1)(C), reduced

16 by

17 ‘‘(B) amounts representing capital losses

18 on assets held in the account for more than 1

19 year.

20 ‘‘(4) ORDINARY INCOME SUBACCOUNT.—The

21 ordinary income subaccount shall consist of—

22 ‘‘(A)(i) amounts representing capital gains

23 on assets held for 1 year or less and referred

24 to in subsection (b)(1)(B) or (b)(1)(C), reduced

25 by
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1 ‘‘(ii) amounts representing capital losses

2 on assets held in the account for 1 year or less,

3 ‘‘(B) interest (not including any tax-ex4 empt interest referred to in paragraph (2)(D))

5 and other ordinary income (not including any

6 dividend referred to in subparagraph (D) of this

7 paragraph) received on assets held in the ac8 count,

9 ‘‘(C) ordinary income from a transaction

10 described in subsection (b)(1)(B), and

11 ‘‘(D) the portion of any dividend referred

12 to in paragraph (2)(C) not taken into account

13 under such paragraph.

14 ‘‘(5) CAPITAL LOSSES ONLY ALLOWED TO OFF15 SET CERTAIN GAINS.—Except on termination of an

16 account, capital losses referred to in paragraph

17 (3)(B) or in paragraph (4)(A)(ii) shall be allowed

18 only as an offset to gains referred to in paragraph

19 (3)(A) or (4)(A)(i), respective.

20 ‘‘(f) PURPOSES OF QUALIFIED WITHDRAWALS.—

21 ‘‘(1) IN GENERAL.—A qualified withdrawal

22 from the account is one made in accordance with the

23 terms of the agreement under subsection (a).

24 ‘‘(2) PENALTY FOR FAILING TO FULFILL ANY

25 SUBSTANTIAL OBLIGATION.—Under joint regula-
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1 tions, if the Secretary determines that any substan2 tial obligation under any agreement is not being ful3 filled, the Secretary may, after notice and oppor4 tunity for hearing to the person maintaining the ac5 count, treat the entire account or any portion there6 of as an amount withdrawn from the account in a

7 nonqualified withdrawal.

8 ‘‘(g) TAX TREATMENT OF QUALIFIED WITHDRAW9 ALS.—

10 ‘‘(1) IN GENERAL.—Any qualified withdrawal

11 from an account shall be treated—

12 ‘‘(A) first as made out of the capital sub13 account,

14 ‘‘(B) second as made out of the capital

15 gain subaccount, and

16 ‘‘(C) third as made out of the ordinary in17 come subaccount.

18 ‘‘(2) ADJUSTMENT TO BASIS WHERE WITH19 DRAWAL FROM ORDINARY INCOME SUBACCOUNT.—If

20 any portion of a qualified withdrawal for plant and

21 equipment is made out of the ordinary income sub22 account, the basis of such plant and equipment shall

23 be reduced by an amount equal to such portion.

24 ‘‘(3) ADJUSTMENT TO BASIS WHERE WITH25 DRAWAL FROM CAPITAL GAIN SUBACCOUNT.—If any
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1 portion of a qualified withdrawal for plant and

2 equipment is made out of the capital gain sub3 account, the basis of such plant and equipment shall

4 be reduced by an amount equal to such portion.

5 ‘‘(4) ADJUSTMENT TO BASIS WHERE WITH6 DRAWAL PAYS PRINCIPAL ON DEBT.—If any portion

7 of a qualified withdrawal to pay the principal on any

8 indebtedness is made out of the ordinary income

9 subaccount or the capital gain subaccount, then an

10 amount equal to the aggregate reduction which

11 would be required by paragraphs (2) and (3) if such

12 withdrawal were a qualified withdrawal for a pur13 pose described in such paragraphs shall be applied,

14 in the order provided in joint regulations, to reduce

15 the basis of plant and equipment owned by the per16 son maintaining the account. Any amount of a

17 withdrawal remaining after the application of the

18 preceding sentence shall be treated as a nonqualified

19 withdrawal.

20 ‘‘(5) ORDINARY INCOME RECAPTURE OF BASIS

21 REDUCTION.—If any property the basis of which was

22 reduced under paragraph (2), (3), or (4) is disposed

23 of, any gain realized on such disposition, to the ex24 tent it does not exceed the aggregate reduction in

25 the basis of such property under such paragraphs,
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1 shall be treated as an amount referred to in sub2 section (h)(3)(A) which was withdrawn on the date

3 of such disposition. Subject to such conditions and

4 requirements as may be provided in joint regula5 tions, the preceding sentence shall not apply to a

6 disposition where there is a redeposit in an amount

7 determined under joint regulations which will, inso8 far as practicable, restore the account to the position

9 such account was in before the withdrawal.

10 ‘‘(h) TAX TREATMENT OF NONQUALIFIED WITH11 DRAWALS.—

12 ‘‘(1) IN GENERAL.—Except as provided in sub13 section (i), any withdrawal from an account which is

14 not a qualified withdrawal shall be treated as a non15 qualified withdrawal.

16 ‘‘(2) ORDERING RULE.—Any nonqualified with17 drawal from an account shall be treated—

18 ‘‘(A) first as made out of the ordinary in19 come subaccount,

20 ‘‘(B) second as made out of the capital

21 gain subaccount, and

22 ‘‘(C) third as made out of the capital sub23 account.

24 For purposes of this section, items withdrawn from

25 any subaccount shall be treated as withdrawn on a
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1 first-in-first-out basis; except that (i) any non2 qualified withdrawal for research, development, and

3 design expenses incident to new and advanced plant

4 and equipment, and (ii) any amount treated as a

5 nonqualified withdrawal under the second sentence

6 of subsection (g)(4), shall be treated as withdrawn

7 on a last-in-first-out basis.

8 ‘‘(3) OPERATING RULES.—For purposes of this

9 title—

10 ‘‘(A) any amount referred to in paragraph

11 (2)(A) shall be included in income for the tax12 able year in which the withdrawal is made as an

13 item of ordinary income,

14 ‘‘(B) any amount referred to in paragraph

15 (2)(B) shall be included in income for the tax16 able year in which the withdrawal is made as an

17 item of gain realized during such year from the

18 disposition of an asset held for more than 1

19 year, and

20 ‘‘(C) for the period on or before the last

21 date prescribed for payment of tax for the tax22 able year in which such withdrawal is made—

23 ‘‘(i) no interest shall be payable under

24 section 6601 and no addition to the tax

25 shall be payable under section 6651,
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1 ‘‘(ii) interest on the amount of the ad2 ditional tax attributable to any item re3 ferred to in subparagraph (A) or (B) shall

4 be paid at the applicable rate (as defined

5 in paragraph (4)) from the last date

6 prescribed for payment of the tax for the

7 taxable year for which such item was de8 posited in the account, and

9 ‘‘(iii) no interest shall be payable on

10 amounts referred to in clauses (i) and (ii)

11 of paragraph (2).

12 ‘‘(4) APPLICABLE RATE.—For purposes of

13 paragraph (3)(C)(ii), the applicable rate of interest

14 for any nonqualified withdrawal shall be the rate es15 tablished in section 6621(a)(2).

16 ‘‘(5) AMOUNT NOT WITHDRAWN FROM ACCOUNT

17 AFTER 12 YEARS FROM DATE OF AGREEMENT TAXED

18 AS NONQUALIFIED WITHDRAWAL.—

19 ‘‘(A) IN GENERAL.—The applicable per20 centage of any amount which remains in an ac21 count at the close of the 10th, 11th, or 12th

22 taxable year following the taxable year in which

23 an agreement was entered into shall be treated

24 as a nonqualified withdrawal in accordance with

25 the following table:
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‘‘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

1 ‘‘(B) EARNINGS TREATED AS DEPOSITS.—

2 The earnings of any account for any taxable

3 year (other than net gains) shall be treated for

4 purposes of this paragraph as an amount re5 maining in the account for such taxable year.

6 ‘‘(C) AMOUNTS COMMITTED TREATED AS

7 WITHDRAWN.—For purposes of subparagraph

8 (A), an amount shall not be treated as remain9 ing in an account at the close of any taxable

10 year to the extent there is a binding contract at

11 the close of such year for a qualified withdrawal

12 of such amount with respect to an identified

13 item for which such withdrawal may be made.

14 ‘‘(D) AUTHORITY TO TREAT EXCESS

15 FUNDS AS WITHDRAWN.—If the Secretary de16 termines that the balance in any account ex17 ceeds the amount which is appropriate to meet

18 the account’s program objectives, the amount of

19 such excess shall be treated as a nonqualified

20 withdrawal under subparagraph (A) unless the

21 person maintaining the account develops appro22 priate program objectives within 3 years to dis23 sipate such excess.
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1 ‘‘(6) NONQUALIFIED WITHDRAWALS TAXED AT

2 HIGHEST MARGINAL RATE.—

3 ‘‘(A) IN GENERAL.—In the case of any

4 taxable year for which there is a nonqualified

5 withdrawal (including any amount so treated

6 under paragraph (5)), the tax imposed by chap7 ter 1 shall be determined—

8 ‘‘(i) by excluding such withdrawal

9 from gross income, and

10 ‘‘(ii) by increasing the tax imposed by

11 chapter 1 by the product of the amount of

12 such withdrawal and the highest rate of

13 tax specified in section 11.

14 With respect to the portion of any nonqualified

15 withdrawal made out of the capital gain sub16 account during a taxable year to which section

17 1201(a) applies, the rate of tax taken into ac18 count under the preceding sentence shall not

19 exceed 34 percent.

20 ‘‘(B) TAX BENEFIT RULE.—If any portion

21 of a nonqualified withdrawal is properly attrib22 utable to deposits (other than earnings on de23 posits) made by the taxpayer in any taxable

24 year which did not reduce the taxpayer’s liabil25 ity for tax under chapter 1 for any taxable year
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1 preceding the taxable year in which such with2 drawal occurs—

3 ‘‘(i) such portion shall not be taken

4 into account under subparagraph (A), and

5 ‘‘(ii) an amount equal to such portion

6 shall be treated as allowed as a deduction

7 under section 172 for the taxable year in

8 which such withdrawal occurs.

9 ‘‘(C) COORDINATION WITH DEDUCTION

10 FOR NET OPERATING LOSSES.—Any non11 qualified withdrawal excluded from gross in12 come under subparagraph (A) shall be excluded

13 in determining taxable income under section

14 172(b)(2).

15 ‘‘(i) CERTAIN CORPORATE REORGANIZATIONS.—

16 Under joint regulations, transfer of an account from one

17 person to another person in a transaction to which section

18 381 applies may be treated as if such transaction did not

19 constitute a nonqualified withdrawal.

20 ‘‘(j) RECORDS; REPORTS; CHANGES IN REGULA21 TIONS.—

22 ‘‘(1) IN GENERAL.—Each person maintaining

23 an account under this section shall keep such

24 records and shall make such reports as the Sec25 retary shall require. The Secretary and the Sec-
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1 retary of Commerce shall jointly prescribe all rules

2 and regulations, not inconsistent with the foregoing

3 provisions of this section, as may be necessary or ap4 propriate to the determination of tax liability under

5 this section. If, after an agreement has been entered

6 into under this section, a change is made either in

7 the joint regulations or in the regulations prescribed

8 by the Secretary under this section which could have

9 a substantial effect on the rights or obligations of

10 any person maintaining an account under this sec11 tion, such person may terminate such agreement.

12 ‘‘(2) JOINT REGULATIONS.—For purposes of

13 this section, the term ‘joint regulations’ means the

14 regulations prescribed under this subsection.

15 ‘‘(k) DEPARTMENTAL REPORTS AND CERTIFI16 CATION.—

17 ‘‘(1) IN GENERAL.—For each calendar year, the

18 Secretary shall provide the Secretary of Commerce,

19 within 120 days after the close of such calendar

20 year, a written report with respect to the accounts

21 established under this section.

22 ‘‘(2) CONTENT OF REPORTS.—Each report shall

23 set forth the name and taxpayer identification num24 ber of each person—
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1 ‘‘(A) establishing an account during such

2 calendar year;

3 ‘‘(B) maintaining an account as of the last

4 day of such calendar year;

5 ‘‘(C) terminating an account during such

6 calendar year;

7 ‘‘(D) making any withdrawal from or de8 posit into (and the amounts thereof) an account

9 during such calendar year; or

10 ‘‘(E) with respect to which a determination

11 has been made during such calendar year that

12 such person has failed to fulfill a substantial

13 obligation under any account agreement to

14 which such person is a party.’’

15 (2) MINIMUM TAX TREATMENT.—Section 56(c)

16 of the Internal Revenue Code of 1986 (relating to

17 adjustments applicable to corporations) is amended

18 by adding at the end thereof the following new para19 graph:

20 ‘‘(4) TECHNOLOGY PARTNERSHIP ACCOUNTS.—

21 In the case of a technology partnership account es22 tablished under section 7524—

23 ‘‘(A) subparagraphs (A) and (B) of section

24 7524(d)(1) shall not apply, and
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1 ‘‘(B) no reduction in basis shall be made

2 under subsection (g) with respect to the with3 drawal from the account of any amount to

4 which subparagraph (A) applies.’’

5 (3) CLERICAL AMENDMENT.—The table of sec6 tions for chapter 77 of the Internal Revenue Code

7 of 1986 is amended by adding at the end thereof the

8 following new item:

‘‘Sec. 7524. Technology partnership accounts.’’

9 (4) EFFECTIVE DATE.—The amendments made

10 by this subsection shall apply to taxable years begin11 ning after the date of the enactment of this Act.

12 (b) ALTERNATIVE INVESTMENT TAX CREDIT.—

13 (1) ALLOWANCE OF CREDIT.—Section 46 of

14 the Internal Revenue Code of 1986 (relating to

15 amount of investment credit) is amended by striking

16 ‘‘and’’ at the end of paragraph (2), by striking the

17 period at the end of paragraph (3) and inserting ‘‘,

18 and’’, and by adding at the end thereof the following

19 new paragraph:

20 ‘‘(4) in the case of a University-Industry Tech21 nology Partnership selected under section 11(a) of

22 the University-Industry Technology Development

23 Act which does not have a technology partnership

24 account (within the meaning of section 7524) for the
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1 taxable year or any prior taxable year, the tech2 nology partnership credit.’’

3 (2) AMOUNT OF CREDIT.—Section 48 of such

4 Code is amended by adding at the end thereof the

5 following new subsection:

6 ‘‘(c) TECHNOLOGY PARTNERSHIP CREDIT.—

7 ‘‘(1) GENERAL RULE.—For purposes of section

8 46, the technology partnership credit for the taxable

9 year is an amount equal to 20 percent of the amount

10 paid or incurred during such taxable year for a pur11 pose for which a qualified withdrawal would be per12 mitted by the taxpayer from a technology partner13 ship account (within the meaning of section 7524) if

14 the taxpayer had such an account. Such credit shall

15 be in addition to any other credit allowable under

16 this subpart.

17 ‘‘(2) SPECIAL RULE.—If any credit is deter18 mined under subsection (a) for any amount which is

19 includible in the basis of any property, such property

20 shall be treated as investment credit property for

21 purposes of this subpart.’’

22 (3) TECHNICAL AMENDMENTS.—

23 (A) Clause (ii) of section 49(a)(1)(C) of

24 such Code is amended by inserting ‘‘or property

25 with respect to which a technology partnership
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1 credit is allowed under section 48(c)’’ after ‘‘en2 ergy property’’.

3 (B) Paragraph (5) of section 50(a) of such

4 Code is amended by adding at the end thereof

5 the following new subparagraph:

6 ‘‘(D) SPECIAL RULES FOR CERTAIN PROP7 ERTY.—In the case of property with respect to

8 which a technology partnership credit is allowed

9 under section 48(c) and which is 3-year prop10 erty (within the meaning of section 168(e))—

11 ‘‘(i) the percentage set forth in clause

12 (ii) of the table contained in paragraph

13 (1)(B) shall be 66 percent,

14 ‘‘(ii) the percentage set forth in clause

15 (iii) of such table shall be 33 percent, and

16 ‘‘(iii) clauses (iv) and (v) of such table

17 shall not apply.’’

18 (C) The section heading of section 48 of

19 such Code is amended by inserting before the

20 period ‘‘; TECHNOLOGY PARTNERSHIP

21 CREDIT’’.

22 (D) The table of sections for subpart E of

23 part IV of subchapter A of chapter 1 of such

24 Code is amended by inserting before the period
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1 in the item relating to section 48 ‘‘; technology

2 partnership credit’’.

3 (4) EFFECTIVE DATE.—The amendments made

4 by this subsection shall apply to taxable years begin5 ning after the date of the enactment of this Act.

6 SEC. 15. CAPITAL GAINS EXCLUSION.

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended

9 by redesignating section 137 as section 138 and by insert10 ing after section 136 the following new section:

11 ‘‘SEC. 137. EXCLUSION FOR GAIN FROM TECHNOLOGY PRO12 GRAM INVESTMENTS.

13 ‘‘(a) GENERAL RULE.—Gross income shall not in14 clude the applicable percentage of any long-term capital

15 gain recognized on the sale or exchange of a technology

16 program investment held for more than 5 years.

17 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

18 this section—

19 ‘‘(1) IN GENERAL.—The term ‘applicable per20 centage’ means, with respect to any technology pro21 gram investment, the sum of—

22 ‘‘(A) 25 percent, plus

23 ‘‘(B) 5 percentage points for each full year

24 such investment is held after the 5th year such

25 investment is held.
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1 In no event shall the applicable percentage exceed 75

2 percent.

3 ‘‘(2) REDUCTION OF EXCLUSION FOR INVEST4 MENTS MADE MORE THAN 3 YEARS AFTER ENACT5 MENT.—In the case of any technology program in6 vestment made during any fiscal year (hereinafter

7 referred to as the ‘acquisition year’) after the third

8 fiscal year beginning after the date of the enactment

9 of this section, the applicable percentage determined

10 under paragraph (1) (without regard to this para11 graph) shall be reduced (but not below zero) by the

12 product of 15 percentage points and the number of

13 fiscal years that the acquisition year is after such

14 third fiscal year.

15 ‘‘(c) TECHNOLOGY PROGRAM INVESTMENT.—For

16 purposes of this section, the term ‘technology program in17 vestment’ means any investment of a type approved by

18 the Secretary of Commerce which provides funding for any

19 University Technology Development Program, or any Uni20 versity-Industry Technology Partnership, selected under

21 section 11(a) of the University-Industry Technology De22 velopment Act.

23 ‘‘(d) CERTAIN TAX-FREE AND OTHER TRANS24 FERS.—For purposes of this section—
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1 ‘‘(1) IN GENERAL.—In the case of a transfer of

2 a technology program investment to which this sub3 section applies, the transferee shall be treated as—

4 ‘‘(A) having acquired such investment in

5 the same manner as the transferor, and

6 ‘‘(B) having held such investment during

7 any continuous period immediately preceding

8 the transfer during which it was held (or treat9 ed as held under this subsection) by the trans10 feror.

11 ‘‘(2) TRANSFERS TO WHICH SUBSECTION AP12 PLIES.—This subsection shall apply to any trans13 fer—

14 ‘‘(A) by gift, or

15 ‘‘(B) at death.

16 ‘‘(3) CERTAIN RULES MADE APPLICABLE.—

17 Rules similar to the rules of section 1244(d)(2) shall

18 apply for purposes of this section.

19 (b) CLERICAL AMENDMENT.—The table of sections

20 for such part III is amended by striking the last item and

21 inserting the following new items:

‘‘Sec. 137. Exclusion for gain from technology program investments.

‘‘Sec. 138. Cross references to other Acts.’’

22 (c) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years beginning after

24 the date of the enactment of this Act.
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1 SEC. 16. ANTITRUST EXEMPTION.

2 (a) COURT ACTIONS.—All cooperative activities and

3 joint ventures in furtherance of the goals of a University

4 Technology Development Program or a University-Indus5 try Technology Partnership shall be judged by the rule

6 of reason in any antitrust action brought in Federal or

7 State court. Damages in any such action shall be limited

8 to actual damages and attorneys fees. A private party that

9 brings an antitrust action against a University Technology

10 Development Program or a University-Industry Tech11 nology Partnership ruled to be frivolous, unreasonable,

12 without foundation, or in bad faith shall pay the attorneys

13 fees of the accused party.

14 (b) REQUESTED RULING.—A University Technology

15 Development Program or a University-Industry Tech16 nology Partnership may seek a ruling by the Secretary

17 that a proposed activity is not a violation of Federal anti18 trust laws. The Secretary, in consultation with the Attor19 ney General, shall render a ruling within 90 days after

20 such a request.

21 SEC. 17. STUDY AND REPORT.

22 (a) STUDY.—The Secretary, in coordination with the

23 advisory panel established under section 9, shall undertake

24 a study of the effectiveness of this Act in furthering the

25 goals described in section 3(c).
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1 (b) REPORT.—Not later than 5 years after the date

2 of enactment of this Act, the Secretary shall report to the

3 Congress on the results of such study, including a rec4 ommendation of whether the program should be reauthor5 ized for an additional period.

6 SEC. 18. FEDERAL AGENCY COOPERATION.

7 Federal agencies with responsibilities or expertise in

8 technology related fields shall cooperate with the Secretary

9 in carrying out this Act.

10 SEC. 19. DEFINITIONS.

11 For purposes of this Act—

12 (1) the term ‘‘Partnership Conference’’ means a

13 conference described in section 8(b); and

14 (2) the term ‘‘Secretary’’ means the Secretary

15 of Commerce.

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