The four tests used to establish an activity as qualifying for purposes of the R&D credit.
The four tests are:
- New or Improved Business Component (Product, Process, Software, Invention, or Formula)
- Functionality
- Performance
- Reliability, or
- Quality
- NOT qualified if related solely to style, taste, cosmetic, or seasonal design factor
- Elimination of Uncertainty
- Related to the capability or methodology for developing or improving a product or process
- Process of Experimentation (to resolve uncertainty)
- Includes Trial and Error
- Prototyping
- Modeling and simulation efforts
- Technological in Nature (based in a hard science) – process of experimentation is reliant on the principles of:
- Physical Sciences
- Biological Sciences
- Engineering, or
- Computer Science