Appellate court reversed favorable research tax credit decision

✍ Scribed by Shirley Dennis-Escoffier

• Book ID: 102298928
• Publisher: John Wiley and Sons
• Year: 2002
• Tongue: English
• Weight: 46 KB
• Volume: 14
• Category: Article
• ISSN: 1044-8136
• DOI: 10.1002/jcaf.10143

✦ Synopsis

In a recent decision, the Tenth Circuit Court of Appeals reversed a pro-taxpayer District Court decision that had allowed a software developer to claim the research tax credit for research costs it incurred in developing a tax preparation and accounting suite for sale to accountants. The appellate court's decision is contrary to the proposed regulations regarding interpretations of the discovery and experimentation tests. This new decision creates some uncertainty for taxpayers who thought these issues were settled when the last round of proposed regulations was issued.

THE RESEARCH TAX CREDIT

Internal Revenue Code Section 41 allows taxpayers a credit against tax for increasing research activities. IRC Section 41 establishes several tests that must be met for qualified research.