(3) Contract research expenses (A) In general The term “contract research expenses” means 65 percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified research. (B) Prepaid amounts If any contract research expenses paid or incurred during any taxable year are attributable to qualified research to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the qualified research is conducted. (C) Amounts paid to certain research consortia (i) In general Subparagraph (A) shall be applied by substituting “75 percent” for “65 percent” with respect to amounts paid or incurred by the taxpayer to a qualified research consortium for qualified research on behalf of the taxpayer and 1 or more unrelated taxpayers. For purposes of the preceding sentence, all persons treated as a single employer under subsection (a) or (b) of section 52 shall be treated as related taxpayers. (ii) Qualified research consortium The term “qualified research consortium” means any organization which— (I) is described in section 501(c)(3) or 501(c)(6) and is exempt from tax under section 501(a), (II) is organized and operated primarily to conduct scientific research, and (III) is not a private foundation. (D) Amounts paid to eligible small businesses, universities, and Federal laboratories (i) In general In the case of amounts paid by the taxpayer to— (I) an eligible small business, (II) an institution of higher education (as defined in section 3304(f) ), or (III) an organization which is a Federal laboratory, for qualified research which is energy research, subparagraph (A) shall be applied 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 corporation (either by vote or value), and (II) in the case of a small business which is not a corporation, the capital and profits interests of the small business. (iii) Small business For purposes 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 employees 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 account only if the person was in existence 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. (iv) Federal laboratory For purposes of this subparagraph, the term “Federal laboratory” has the meaning given such term by section 4(6) of the Stevenson-Wydler Technology Innovation Act of 1980 ( 15 U.S.C. 3703(6) ), as in effect on the date of the enactment of the Energy Tax Incentives Act of 2005.