Colette Gagnet answers:

A: Generally speaking, qualifying activities for R&D are those that are innovative in nature and further develop or improve a product or process. Qualifying activities for software are no different! Below are some examples of qualifying and non-qualifying activities that might apply to software products or processes.

 Software – Qualifying Activities

  • Technical discussions or meetings to advance new features, product development, or other product/feature improvements
  • Design for new or improved products, features, tools, or algorithms
  • Development of functional or technical specifications, use requirements, proof of concept, calculations, modelling, analytics, etc.
  • Coding and testing for development (e.g., proof of concept, prototypes, etc.)
  • Direct supervision of US based employees performing activities listed above
  • Direct support of activities listed above (i.e., providing input as to functional or technical specifications, test plans, design roadmap, use scenarios, and requirements definitions)

 Software – Non-Qualifying Activities

  • Customer technical support or helpdesk
  • Post-release bug-fixes, detecting flaws, and maintenance
  • Software application configuration
  • Performing studies to select vendor products
  • Modifying existing software to meet standards or be compliant
  • Upgrading to newer versions of hardware or software, or installing vendor fix releases
  • Re-hosting or porting an application to new hardware or software platform, or rewriting existing application to new language
  • Writing hardware device drivers
  • Data quality, data cleansing, and data consistency activities
  • Bundling software into product suites
  • Migration of customers from one software product to another
  • Designing Graphical User Interfaces (“GUI”) -  focus is more cosmetic (where data items and graphics should be displayed on screen), and does not involve software development uncertainty
  • Development of software utility programs, such as debuggers, backup systems, performance analyzers and data recovery (although, there can be exceptions)
  • Time spent working outside the US
  • Other non-R&D related matters (e.g., HR, management, budgeting, marketing, customer relations, training, 2nd level and above management, etc.)

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