Best Practices: What is the difference between qualified research activities vs. nonqualified research activities under Section 41?

MASSIE says:

Qualified research activities are related to the development or improvement of a business component (e.g., developing new or improved products, designing and testing pre-production prototypes, developing new patents, improving production processes, etc.). 


Qualified research activities must meet IRS’ Four-Part Test criteria:

1. Permitted Purpose (e.g., new or improved function of a product or process)

2. Technological In Nature (e.g., practice the hard science such as engineering, computer science)

3. Eliminate Uncertainty (e.g., remove uncertainty around capability, methodology or design)

4. Process of Experimentation (e.g., substantially constitute a process of experimentation or development story)


Nonqualified research activities do not result in a new or improved product (e.g., research conducted after commercial production of a business component, adaptation of existing business components, market research, research conducted outside of the US, research into taste or cosmetics). 


Disclaimer: The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation.

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