In October 2016, the U.S Department of the Treasury released new regulations providing more clarity on the definition of Internal Use Software (IUS). As a result, companies learned that more of their software development initiatives were eligible for the R&D Tax Credit. And they weren’t just commercial software vendors, either. Companies from a variety of industries took advantage of the new regulations.
If you’re creating or improving software systems to support your business, you may be eligible. Here’s what you need to know.
Before disqualifying yourself because your company doesn’t create software as its sole purpose, check the qualifying functions below:
Now that you’ve identified an area that can be considered as IUS, you need to not only pass the Four-Part Test but the 3-Part High Threshold of Innovation Test, too. The Four-Part Test helps companies determine if their research and development activities qualify for a tax credit. The four parts include elimination of uncertainty, process of experimentation, technological in nature, and qualified purpose. The 3-Part High Threshold of Innovation Test regulations are:
These regulations are designed to encourage companies in all industries to continue to invest in “software innovation” that allows them to compete more effectively on a global basis.
Not sure where to start? Still have questions? We are here to help.