National Innovation Act of 2006

National Innovation Act of 2005 - Directs the President to establish the: (1) President's Council on Innovation; and (2) Innovation Acceleration Grants Program to support and promote innovation in the United States.

Requires the National Science Foundation (NSF) to: (1) submit a multiyear plan that describes how the funds authorized by this Act for doubling research funding shall be used; (2) study how the federal government should support the new discipline of service science; (3) expand the Graduate Research Fellowship Program and the Integrative Graduate Education and Research Traineeship Program; (4) establish a clearinghouse for sharing program elements used in successful professional science master's degree programs; (5) award grants for pilot programs to four-year institutions of higher education to facilitate the creation or improvement of such programs; and (6) award grants to local educational agencies to enable implementation of innovation-based experiential learning.

Requires the Office of Science and Technology Policy to submit recommendations for an increase in funding for research and development in physical sciences and engineering.

Requires the Department of Commerce to: (1) review federal programs that support local economic development and implement a strategy to fund initiatives that improve the ability of communities to participate successfully in the modern economy through innovation; (2) promote economic development opportunities for serving local communities as specified; and (3) coordinate activities focused on promoting innovation through development of regional innovation hot spots.

Requires the National Institute of Standards and Technology (NIST) to support research and development for advanced manufacturing systems designed to increase productivity and efficiency and to create competitive advantages for U.S. businesses.

Make permanent the research credit for qualified research expenses and provides for an alternative simplified credit for such expenses.

Requires studies: (1) to explore methods for managing costs associated with catastrophic healthcare events and with chronic disease; and (2) for establishing lifelong learning accounts for educational or training purposes; and (3) of methods to mitigate new forms of risk for businesses that affect innovation.

Directs the Secretary of the Treasury to: (1) issue regulations relating to private foundation support of innovations in economic development; and (2) establish an advisory group to examine best practices for valuation of intangibles.

Makes it the goal of the Department of Defense (DOD) to allocate: (1) at least 3% of the total DOD budget to science and technology; and (2) of such amount, at least 20% to basic research.

Extends and expands the Science, Mathematics, and Research for Transformation (SMART) Defense Scholarship Pilot Program.

Expands the National Defense Science and Engineering Graduate (NDSEG) fellowship program.

Requires DOD to: (1) award institution-based traineeships in areas of importance to DOD in mathematics, science, or engineering; and (2) undertake specified actions with respect to defense manufacturing research and development.