R&D Tax Credit 4-Part Test Eligibility Checklist

Technological in Nature

The activity must rely on principles of physical science, biological science, engineering, or computer science.

Qualifying Activities:

Developing new software algorithms or architectures
Engineering new products or improving existing ones
Conducting laboratory experiments or testing
Developing manufacturing processes
Creating new chemical formulations

Non-Qualifying Activities:

Market research or consumer surveys
Routine data collection or analysis
Historical or literary research
Styling or aesthetic design changes

Process of Experimentation

The activity must involve a process designed to evaluate one or more alternatives to achieve a result where the capability or method is uncertain.

Qualifying Elements:

Identified a technical uncertainty to resolve
Developed hypotheses to test
Designed and conducted experiments or tests
Evaluated test results against success criteria
Iterated based on findings

Documentation Tips:

Keep lab notebooks or engineering logs
Document hypothesis and testing methodology
Record failed attempts and what was learned
Maintain meeting notes discussing technical challenges

Elimination of Uncertainty

The activity must be intended to eliminate uncertainty concerning the development or improvement of a product, process, technique, formula, or invention.

Types of Uncertainty:

Uncertainty about whether the product/process can be developed
Uncertainty about the appropriate design approach
Uncertainty about how to achieve desired performance
Uncertainty about meeting regulatory requirements

Key Considerations:

Uncertainty must exist at the start of the project
The project doesn't need to succeed to qualify
Commercial uncertainty alone doesn't qualify
Routine adaptation doesn't meet this test

Qualified Purpose

The activity must be undertaken for the purpose of creating a new or improved business component for use in a trade or business.

Qualified Purposes:

Developing a new product or software
Improving an existing product's performance, reliability, or quality
Creating new manufacturing or production processes
Developing internal-use software (with exceptions)

Excluded Purposes:

Research conducted for sale to others (unless under contract)
Research funded by another party
Research outside the United States
Research in social sciences, arts, or humanities

Your Eligibility Assessment

After reviewing the 4-Part Test, assess your overall eligibility:

How many of the 4 tests does your research activity satisfy?

Do you have documentation supporting each test?