One of the country’s largest grocery retailers is challenging the IRS’s denial of a federal research and development (R&D) tax credit. The dispute is a closely watched one, since it centers on what counts as qualifying research in both software development and food product innovation.
In Publix Super Markets, Inc. & Subsidiaries v. United States, filed August 25, 2026, in the U.S. District Court for the Middle District of Florida, Publix seeks to recover $2.62 million in research tax credits. The IRS fully disallowed those credits, originally claimed for the 2018 tax year.
Publix contends that approximately $38.4 million in qualified research expenses (QREs) satisfied the requirements of Internal Revenue Code Section 41. The company argues the IRS incorrectly applied the facts and the law when it denied the credit.
What Is the Publix R&D Tax Credit Case About?
The dispute centers on research activities conducted within two major areas of Publix’s business: its Information Systems department and its Manufacturing division.
According to the complaint, Publix performed research involving numerous software development projects, as well as the development and improvement of private-label food products.
The case is notable because it illustrates how R&D tax credit opportunities can extend beyond traditional technology, pharmaceutical, and manufacturing companies. Large retailers may conduct significant qualifying research through software development, supply chain technology, data analytics, food science, and product development.
Publix’s Software Development Projects
Publix states that its Information Systems department conducted research across a broad range of technology projects. The projects identified in the complaint include software and systems related to:
- Website development
- Point-of-sale systems
- Pharmacy operations
- Supply chain management
- Transportation systems
- Marketing analytics
- Vendor portals
- Online payment systems
Publix argues these projects involved technological uncertainty, experimentation, and the development of new or improved business components that weren’t commercially available when the research took place. Taxpayers must demonstrate that activities satisfy the statutory requirements for qualified research under Section 41, which makes this a central question in the case.
Internal-Use Software Is a Key Issue
One of the most significant issues in the case involves internal-use software.
Publix argues that certain software projects weren’t developed primarily for internal use. For projects that may qualify as internal-use software, Publix contends the software still met the high threshold of innovation the applicable rules require.
Internal-use software draws consistent IRS scrutiny, since taxpayers generally face additional requirements when claiming the R&D credit for software developed primarily for internal business operations. The Publix litigation could offer additional insight into how courts evaluate software development activities and what evidence taxpayers need to demonstrate a project meets those standards.
Food Product Innovation May Also Qualify for the R&D Tax Credit
Publix’s research credit claim extends beyond software. The company also alleges that its food manufacturing operations performed qualifying research while developing and improving private-label products, including:
- GreenWise Clean Label Deli Meat
- Extended shelf-life pies
- Eggnog
- New ice cream offerings
- GreenWise mayo-free salad dressing
According to Publix, these projects required experimentation involving ingredients, formulations, production processes, and product performance. The company describes activities including laboratory testing, pilot production runs, experimentation, and evaluation of product characteristics. These kinds of activities can qualify for the R&D tax credit when they satisfy the applicable requirements, including technological uncertainty and a genuine process of experimentation aimed at developing or improving a business component.
How Publix Documented Its Research Activities
Another notable element of the case is the level of R&D tax credit documentation and substantiation described in the complaint.
Publix alleges that its tax department and outside advisors ran a months-long study to identify and substantiate qualifying research activities and QREs. The process reportedly included:
- Interviews with more than 40 managers
- Reviews of project records
- Analysis of time-tracking information
- Reviews of payroll data
- Analysis of accounting information
- Project-level evaluation of research activities
Publix maintains that this process supported the identification of both qualifying research activities and the associated QREs. The complaint also notes that the research expenditures made up only a small percentage of Publix’s overall operating costs, which the company argues shows a targeted approach rather than simply sweeping in broad departmental expenses.
Why the Publix Case Matters for Large Companies
The Publix lawsuit highlights an important point for companies evaluating the federal R&D tax credit: qualifying research isn’t necessarily limited to traditional laboratories or engineering departments.
Large companies in industries like retail, food and beverage, financial services, transportation, and consumer products may run research activities throughout their operations, often without formally labeling them “R&D.” Potential research activities can include:
- Software development
- Product development
- Process improvements
- Manufacturing experimentation
- Supply chain technology
- Data and analytics systems
- New product formulations
- Testing and prototyping
At the same time, these activities can draw significant IRS scrutiny, particularly when a claim involves software, internal-use technology, or complex documentation. We’ve written before about how funded research arrangements can complicate a claim, and Publix’s dispute touches similar substantiation questions.
What Does the Publix Case Mean for R&D Tax Credit Claims?
The court will ultimately decide whether Publix’s software development and food product development activities satisfy the statutory and regulatory requirements for qualified research. Because the case involves both software and product innovation, tax professionals will likely watch for insight into how courts evaluate:
- Technological uncertainty
- The process of experimentation
- Internal-use software
- Qualified research expenses
- Project-level documentation
- Contemporaneous records
- Taxpayer substantiation
- The relationship between research activities and Section 41
The case may also shed light on the IRS’s current examination positions, and on the kind of evidence taxpayers need to defend substantial R&D tax credit claims. That question echoes what we’ve seen in how Section G will reshape project-level reporting starting in 2026.
What Taxpayers Can Learn From the Publix R&D Tax Credit Dispute
For companies claiming the federal research tax credit, the Publix case is another reminder that strong substantiation matters. A defensible claim should draw a clear line connecting the company’s activities, the business components it developed or improved, the technical challenges it faced, the experimentation it performed, and the QREs it’s claiming.
Companies should also consider whether their documentation holds up in enough detail to support the claim if the IRS examines it later. For large taxpayers especially, identifying qualifying research at the project and activity level matters. Research can happen across multiple departments and functions, which makes a systematic process for identifying, documenting, and substantiating those activities increasingly important.
What Happens Next in the Publix vs. IRS Case?
As the litigation progresses, Publix Super Markets, Inc. & Subsidiaries v. United States could become an important development in the R&D tax credit landscape. Its mix of retail software development, internal-use software questions, food product innovation, QREs, and IRS substantiation issues makes it particularly relevant to large corporate taxpayers.
For tax departments evaluating or defending R&D tax credit claims, this case is worth watching for further developments and judicial guidance on how Section 41 applies to modern research activities.
MASSIE R&D Tax Credits will continue to monitor developments in this case, along with other issues affecting the federal R&D tax credit.
December 16, 2026
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