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internal use software in January 1997. The regulatory language was
nearly identical to that provided in the conference report. Sec.
1.41-4(e)(5), Proposed Income Tax Regs., 62 Fed. Reg. 83 (Jan. 2,
1997).
Ordinarily, proposed regulations carry no more weight than a
position advanced on brief by the Commissioner. F.W. Woolworth Co.
v. Commissioner, 54 T.C. 1233, 1265-1266 (1970). However, with
regard to the R&E credit under section 41, Congress has
specifically expressed its position with respect to the three
internal use software tests. Thus, we look to the tests as an
expression of legislative intent rather than a position of the
Commissioner.
The proposed regulations add two features worthy of note that
are not expressly provided in the conference report accompanying
the TRA 1986. First, the regulations provide that all facts and
circumstances shall be considered in determining whether a taxpayer
satisfies the requirements for qualified research in the
development of internal use software. Second, the regulations
require that the software meet a "high threshold of innovation" to
obtain the credit under section 41. Sec. 1.41-4(e)(6), Proposed
Income Tax Regs., 62 Fed. Reg. 83 (Jan. 2, 1997).
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