Tax Notes: Technology Consulting Company Takes on R&D ‘Funding’ Rule

By: Erin McManus (Originally published in Tax Notes Federal, May 30, 2022, pp. 1451-1454)

In the following article, our Co-Founder and Managing Partner, Les shares his thoughts on the following Treasury regulation and how companies like the taxpayer, claim a credit when they’re creating custom products for customers on a contract basis.

“Digital technology company Perficient Inc. is challenging a Treasury regulation that leaves many contractors out in the cold when attempting to claim the research credit. The IRS has interpreted payment under most of Perficient’s customer contracts, based on a statistical sample, as not being contingent on success. And Perficient didn’t retain substantive rights in the research it conducted, making the research “funded” and thus ineligible for the research credit under section 41, according to the IRS’s memorandum in support of partial summary judgment filed and served May 11 in Perficient Inc. v. Commissioner…”