- 51 -
Dec. 23, 1997), which addressed the application of section 41 to
qualified research in the development of internal use software. We
discuss that case infra.
1. Section 41
Section 41,31 captioned "Credit For Increasing Research
Activities", provides a nonrefundable credit against a taxpayer's
U.S. income tax liability as provided in section 38 (general
business credits). Any excess credit may be carried forward or
carried back as provided in section 39. The credit is computed as
an amount equal to the sum of 20 percent of the excess of the
taxpayer's qualified research expenses over a "base amount", and 20
percent of the taxpayer's basic research expenses. Sec. 41(a)-(c).
Qualified expenses include those amounts paid for "in-house"
research services (i.e., wages) or supplies, or "contract" research
by nonemployees. Sec. 41(b).
Section 41(d) defines qualified research and provides in part:
SEC. 41(d). Qualified Research Defined.--For purposes of
this section--
(1) In general.--The term "qualified research"
means research--
(A) with respect to which expenditures
may be treated as expenses under section 174,
31 The R&E credit under sec. 41 expires on June 30, 1998,
with a limited exception. Taxpayer Relief Act of 1997, Pub. L.
105-34, sec. 601(a)(1), 111 Stat. 788, 861.
Page: Previous 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 NextLast modified: May 25, 2011