- 75 - 3) 1, 694-695; H. Rept. 99-426, at 178 (1986), 1986-3 C.B. (Vol. 2) 1, 178, and as used by the Department of the Treasury in its proposed regulations, section 1.41-4(e)(6), Proposed Income Tax Regs., 62 Fed. Reg. 83 (Jan. 2, 1997). Further, respondent asserts that we should read this and the other internal use software tests narrowly inasmuch as they are exceptions to the general rule that internal use software activities are not eligible for the R&E credit. Sec. 41(d)(4)(E). Petitioner argues that the language in the innovativeness test is straightforward and that we should focus on its plain meaning. Petitioner analyzes the meaning of "substantial" and "significant" to reach the conclusion that these words connote a range of 5- to 20-percent improvement in the product or process. In support of this conclusion, petitioner cites several statutes, regulations, and Nabisco Brands, Inc. & Consol. Subs. v. Commissioner, T.C. Memo. 1995-127 (applying 25 percent in the context of section 1253(b)(2) and discussing the various statutes and regulations which define the term "substantial"). We do not believe that quantifying by way of a percentage that which is "substantial" and "significant" will materially assist us in determining whether the innovativeness test is satisfied. Suffice it to say, the extent of the improvements required by Congress with respect to internal use software is much greater than that required in other fields. The business component test (the third of the seven tests, which applies to all research andPage: Previous 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 Next
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