
INSIGHTS FROM OUR NATIONAL TAX OFFICE	OCTOBER 20, 2016

R&D Tax Credit - Final Regulations Released for Internal-Use Software

The IRS recently finalized regulations related to claiming research and development (R&D) tax credits for certain types of software development. These regulations allow R&D tax credits on software projects that previously may have been excluded under the internal-use software (IUS) rules.

The new regulations are especially important for companies that invest heavily in internal software development projects that allow their customers to interact with their internal systems, such as banking, insurance or retail companies. Businesses that may not have been able to take advantage of the R&D credit in the past should determine if the new rules allow an opportunity to now claim valuable R&D credits.

Effective Dates

The effective dates are somewhat complicated, but for the changes in the final regulations, those are prospective and apply to taxable years beginning on or after October 4, 2016.

In addition, the IRS will not challenge positions consistent with the previously proposed regulations for any taxable year that both ends on or after January 20, 2015, and begins before October 4, 2016. This will allow some opportunity for planning and potential amendment of prior filed returns for claiming the R&D tax credit.

Click here to read more about the final regulations and the background surrounding the changes. Contact your Eide Bailly professional or visit our R&D tax incentive tax page with questions or for additional information.

Eide Bailly's National Tax Office serves as a resource for clients to help analyze complex tax issues related to business decisions. Our professionals are committed to helping clients stay informed about tax news, developments and trends through various specialty areas, including cost segregation studies, wealth transfer, state and local taxation, international tax, IRS controversy and procedures, R&D tax incentives, tax-exempt organizations, tax legislation, accounting methods and pass-through entities.

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This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Eide Bailly LLP and the author do not assume responsibility for any individual's reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique before recommending the technique to a client or implementing it on the client's behalf. To request reprints of this publication, send a written request to RequestReprints@eidebailly.com. © 2016 Eide Bailly LLP.