In October 2016, the U.S Department of the Treasury released Bulletin: 2016-42 (T.D. 9786). Specifically, new regulations provide more clarity regarding the definition of Internal Use Software (IUS), thus making more software development initiatives eligible for the Research and Development (R&D) Tax Credit.
This regulation potentially benefits business in a wide range of industries that are creating or improving software systems to support their businesses.
General and administrative functions that may qualify for the credit as IUS are:
In addition to the standard four-part test and the risk and rights requirements, the above general and administrative functions are subject to an additional 3-part high threshold of innovation test:
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.
Does all this seem a bit confusing to you? Not sure where to start? We are here to help.