- 55 -
research expenditures in developing software operated within the
credit, but the House report accompanying ERTA indicated that the
credit applied only where the costs were "incurred in developing
new or significantly improved programs or routines that cause
computers to perform desired tasks (as distinguished from other
software costs where the operational feasibility of the program or
routine is not seriously in doubt)". H. Rept. 97-201, supra at
114, 1981-2 C.B. at 360. This language was not adopted by the
conference report which accompanied ERTA. H. Conf. Rept. 97-215,
at 223 (1981), 1981-2 C.B. 481, 495.
In 1986, Congress became concerned with the lack of an express
statutory definition of qualified research in the R&E credit and of
taxpayers' abuse of the credit. The Senate Finance Committee
report accompanying the Tax Reform Act of 1986 stated:
After reviewing available information and testimony on
the actual use of the credit to date, the committee
believes that the statutory credit provision should set
forth an express definition of qualified research
33(...continued)
Congress to apply only to technological discoveries and not
historical or other nontechnological research.
In Yellow Freight Sys., Inc. & Subs. v. United States, 24
Cl. Ct. 804 (1991), the Court of Federal Claims considered (on a
motion for partial summary judgment) whether the taxpayer's
development of software programs constituted qualified research
under then sec. 44F for 1983 and 1984. That court found that
material facts were in dispute, and thus it did not address
whether the taxpayer's activities fell within the court's
understanding of research and experimentation under sec. 174.
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011