such organization for scientific or engineering
research, and
‘‘(D) to which no single person paid or in-
curred (including as contributions) during such
calendar year an amount equal to more than 50
percent of the total amounts received by such
organization during such calendar year for sci-
entific or engineering research.
All persons treated as a single employer under sub-
section (a) or (b) of section 52 shall be treated as
related persons for purposes of subparagraph (C)
and as a single person for purposes of subparagraph
(D).’’
(c) CONFORMING AMENDMENT.—Paragraph (3) of
section 41(b) of the Internal Revenue Code of 1986 is
amended by striking subparagraph (C).
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 6. IMPROVEMENT TO CREDIT FOR SMALL BUSINESSES
AND RESEARCH PARTNERSHIPS.
(a) ASSISTANCE TO SMALL AND START-UP BUSI-
NESSES.—The Secretary of the Treasury or the Sec-
retary’s delegate shall take such actions as are appropriate
to—
(1) provide assistance to small and start-up
businesses in complying with the requirements of
section 41 of the Internal Revenue Code of 1986,
and
(2) reduce the costs of such compliance.
(b) REPEAL
OF LIMITATION
ON CONTRACT RE-
SEARCH EXPENSES PAID TO SMALL BUSINESSES, UNI-
VERSITIES, 
AND
FEDERAL
LABORATORIES.—Section
41(b)(3) of the Internal Revenue Code of 1986, as amend-
ed by section 5(c), is amended by adding at the end the
following new subparagraph:
‘‘(C) AMOUNTS PAID TO ELIGIBLE SMALL
BUSINESSES, 
UNIVERSITIES, 
AND
FEDERAL
LABORATORIES.—
‘‘(i) IN
GENERAL.—In the case of
amounts paid by the taxpayer to an eligible
small business, an institution of higher
education (as defined in section 3304(f)),
or an organization which is a Federal lab-
oratory 
(as 
defined 
in 
subsection
(e)(3)(E)), subparagraph (A) shall be ap-
plied by substituting ‘100 percent’ for ‘65
percent’.
‘‘(ii) ELIGIBLE
SMALL
BUSINESS.—
For purposes of this subparagraph, the
term ‘eligible small business’ means a
small business with respect to which the
taxpayer does not own (within the meaning
of section 318) 50 percent or more of—
‘‘(I) in the case of a corporation,
the outstanding stock of the corpora-
tion (either by vote or value), and
‘‘(II) in the case of a small busi-
ness which is not a corporation, the
capital and profits interests of the
small business.
‘‘(iii) SMALL
BUSINESS.—For pur-
poses of this subparagraph—
‘‘(I) IN
GENERAL.—The term
‘small business’ means, with respect
to any calendar year, any person if
the annual average number of employ-
ees employed by such person during
either of the 2 preceding calendar
years was 500 or fewer. For purposes
of the preceding sentence, a preceding
calendar year may be taken into ac-
count only if the person was in exist-
ence throughout the year.
‘‘(II) STARTUPS, 
CONTROLLED
GROUPS, AND PREDECESSORS.—Rules
similar to the rules of subparagraphs
(B) and (D) of section 220(c)(4) shall
apply for purposes of this clause.’’
(c) CREDIT FOR PATENT FILING FEES.—Section
41(a) of the Internal Revenue Code of 1986, as amended
by section 5(a), is amended by striking ‘‘and’’ at the end
of paragraph (2), by striking the period at the end of para-
graph (3) and inserting ‘‘, and’’, and by adding at the
end the following new paragraph:
‘‘(4) 20 percent of the patent filing fees paid or
incurred by a small business (as defined in sub-
section (b)(3)(C)(iii)) to the United States or to any
foreign government in carrying on any trade or busi-
ness.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
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