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CCH (cch.taxgroup.com) reports:

The IRS has issued guidance that sets forth conditions under which research agreements will not result in private business use under Code Sec. 141(b), and addresses whether a research agreement causes the modified private business test in Code Sec. 145(a)(2)( to be met for qualified Code Sec. 501(c)(3) bonds. The procedure expands the previous safe harbor for industry or federally sponsored research agreements by including agreements with either a single sponsor or multiple sponsors, and by providing that the rights of the federal government and its agencies under the Bayh-Dole Act do not result in private business use. It modifies and supersedes Rev. Proc. 97-14, 1997-1 CB 634.
The procedure provides operating guidelines for corporate sponsored and industry or federally sponsored research agreements. A research agreement relating to property used for basic research supported by a sponsor does not result in private business use if any license or other use of resulting technology by the sponsor is permitted only on the same terms as the recipient would permit that use by any unrelated, nonsponsoring party. The sponsor must pay a competitive price for its use and the price must be determined at the time the licence or other resulting technology is available for use.
A research agreement relating to property used pursuant to an industry or federally sponsored research agreement does not result in private business use if:
(1) a single sponsor agrees, or multiple sponsors agree, to fund governmentally performed basic research;
(2) the qualified user determines the research to be performed and the manner in which it is to be performed;
(3) title to any patent or other product incidentally resulting from the basic research lies exclusively with the qualified user; and
(4) the sponsor or sponsors are entitled to no more than a nonexclusive, royalty-free license to use the product of any of that research.
For purposes of the new procedure, "qualified user" includes any state or local governmental unit or instrumentality thereof, or Code Sec. 501(c)(3) organization if the financed property is not used in an unrelated trade or business under Code Sec. 513.
With respect to industry and federally sponsored research agreements, the federal government's rights to the product of the research under the Bayh-Dole Act will not result in private business use, provided that the applicable requirements of the procedure are otherwise met and that the license granted to the federal government to use the product is no more than a nonexclusive, royalty-free license.
The revenue procedure is effective for any research agreement entered into, materially modified, or extended on or after June 26, 2007. An issuer may also apply this procedure to any research agreement entered into prior to June 26, 2007.
Rev. Proc. 2007-47, 2007FED ¶46,529
Other References:
Code Sec. 141
CCH Reference - 2007FED ¶7707.03
CCH Reference - 2007FED ¶7707.60
Code Sec. 145
CCH Reference - 2007FED ¶7830.70
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