tions, if the Secretary determines that any substan-
tial obligation under any agreement is not being ful-
filled, the Secretary may, after notice and oppor-
tunity for hearing to the person maintaining the ac-
count, treat the entire account or any portion there-
of as an amount withdrawn from the account in a
nonqualified withdrawal.
‘‘(g) TAX TREATMENT OF QUALIFIED WITHDRAW-
ALS.—
‘‘(1) IN GENERAL.—Any qualified withdrawal
from an account shall be treated—
‘‘(A) first as made out of the capital sub-
account,
‘‘(B) second as made out of the capital
gain subaccount, and
‘‘(C) third as made out of the ordinary in-
come subaccount.
‘‘(2) ADJUSTMENT
TO
BASIS
WHERE
WITH-
DRAWAL FROM ORDINARY INCOME SUBACCOUNT.—If
any portion of a qualified withdrawal for plant and
equipment is made out of the ordinary income sub-
account, the basis of such plant and equipment shall
be reduced by an amount equal to such portion.
‘‘(3) ADJUSTMENT
TO
BASIS
WHERE
WITH-
DRAWAL FROM CAPITAL GAIN SUBACCOUNT.—If any
portion of a qualified withdrawal for plant and
equipment is made out of the capital gain sub-
account, the basis of such plant and equipment shall
be reduced by an amount equal to such portion.
‘‘(4) ADJUSTMENT
TO
BASIS
WHERE
WITH-
DRAWAL 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 pur-
pose 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 per-
son 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 ex-
tent 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 sub-
section (h)(3)(A) which was withdrawn on the date
of such disposition. Subject to such conditions and
requirements as may be provided in joint regula-
tions, the preceding sentence shall not apply to a
disposition where there is a redeposit in an amount
determined under joint regulations which will, inso-
far as practicable, restore the account to the position
such account was in before the withdrawal.
‘‘(h) TAX TREATMENT
OF NONQUALIFIED WITH-
DRAWALS.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (i), any withdrawal from an account which is
not a qualified withdrawal shall be treated as a non-
qualified withdrawal.
‘‘(2) ORDERING RULE.—Any nonqualified with-
drawal from an account shall be treated—
‘‘(A) first as made out of the ordinary in-
come subaccount,
‘‘(B) second as made out of the capital
gain subaccount, and
‘‘(C) third as made out of the capital sub-
account.
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 non-
qualified 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 tax-
able 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 tax-
able 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 tax-
able 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 ad-
ditional tax attributable to any item re-
ferred 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 de-
posited 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 es-
tablished 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 per-
centage of any amount which remains in an ac-
count 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 re-
maining 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 remain-
ing 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 de-
termines that the balance in any account ex-
ceeds 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 appro-
priate program objectives within 3 years to dis-
sipate 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 chap-
ter 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 sub-
account during a taxable year to which section
1201(a) applies, the rate of tax taken into ac-
count under the preceding sentence shall not
exceed 34 percent.
‘‘(B) TAX BENEFIT RULE.—If any portion
of a nonqualified withdrawal is properly attrib-
utable to deposits (other than earnings on de-
posits) made by the taxpayer in any taxable
year which did not reduce the taxpayer’s liabil-
ity for tax under chapter 1 for any taxable year
preceding the taxable year in which such with-
drawal 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 non-
qualified withdrawal excluded from gross in-
come 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 REGULA-
TIONS.—
‘‘(1) IN GENERAL.—Each person maintaining
an account under this section shall keep such
records and shall make such reports as the Sec-
retary shall require. The Secretary and the Sec-
retary of Commerce shall jointly prescribe all rules
and regulations, not inconsistent with the foregoing
provisions of this section, as may be necessary or ap-
propriate 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 sec-
tion, 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
CERTIFI-
CATION.—
‘‘(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 num-
ber 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 de-
posit 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 para-
graph:
‘‘(4) TECHNOLOGY PARTNERSHIP ACCOUNTS.—
In the case of a technology partnership account es-
tablished 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 with-
drawal from the account of any amount to
which subparagraph (A) applies.’’
(3) CLERICAL AMENDMENT.—The table of sec-
tions 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 begin-
ning 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 Tech-
nology 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 tech-
nology 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 pur-
pose for which a qualified withdrawal would be per-
mitted by the taxpayer from a technology partner-
ship 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 deter-
mined 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 ‘‘en-
ergy 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 PROP-
ERTY.—In the case of property with respect to
which a technology partnership credit is allowed
under section 48(c) and which is 3-year prop-
erty (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 begin-
ning after the date of the enactment of this Act.
SEC. 15. CAPITAL GAINS EXCLUSION.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. EXCLUSION FOR GAIN FROM TECHNOLOGY PRO-
GRAM INVESTMENTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude 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 per-
centage’ means, with respect to any technology pro-
gram 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 INVEST-
MENTS MADE MORE THAN 3 YEARS AFTER ENACT-
MENT.—In the case of any technology program in-
vestment 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 para-
graph) 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 in-
vestment’ means any investment of a type approved by
the Secretary of Commerce which provides funding for any
University Technology Development Program, or any Uni-
versity-Industry Technology Partnership, selected under
section 11(a) of the University-Industry Technology De-
velopment Act.
‘‘(d) CERTAIN
TAX-FREE
AND
OTHER
TRANS-
FERS.—For purposes of this section—
‘‘(1) IN GENERAL.—In the case of a transfer of
a technology program investment to which this sub-
section 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 treat-
ed as held under this subsection) by the trans-
feror.
‘‘(2) TRANSFERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to any trans-
fer—
‘‘(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 invest-
ments.
‘‘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-Indus-
try 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 Tech-
nology 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 Tech-
nology Partnership may seek a ruling by the Secretary
that a proposed activity is not a violation of Federal anti-
trust laws. The Secretary, in consultation with the Attor-
ney 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 rec-
ommendation of whether the program should be reauthor-
ized 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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