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Credit for Increasing Research Activities; Correction

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Internal Revenue Service (IRS), Treasury.


Correcting amendment.


This document contains corrections to final regulations (TD 9786) that were published in the Federal Register on Tuesday, October 4, 2016 (81 FR 68299). The final regulations provided guidance regarding the application of the credit for increasing research activities.


This correction is effective November 3, 2016 and is applicable on or after October 4, 2016.

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Martha Garcia or Jennifer Records of the Office of Associate Chief Counsel (Passthroughs and Special Industries) at (202) 317-6853 (not a toll-free number).

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The final regulations (TD 9786) that are the subject of this correction are under section 41 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (TD 9786) contain errors that may prove to be misleading and are in need of clarification.

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List of Subjects in 26 CFR Part 1

  • Income taxes
  • Reporting and recordkeeping requirements
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Correction of Publication

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

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Paragraph 1. The authority citation for part 1 continues to read in part as follows:

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Authority: 26 U.S.C. 7805 * * *

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Par. 2. Section 1.41-4(c)(6)(viii) is amended by:

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a. Revising the fifth sentence of Example 14 paragraph (ii).

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b. Revising the fifth sentence of Example 17 paragraph (i).

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The revisions read as follows:

Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003.
* * * * *

(c) * * *

(6) * * *

(viii) * * *

Example 14.

* * *

(ii) * * * If X's research activities related to the development or improvement of Subset B constitute qualified research under section 41(d), without regard to section 41(d)(4)(E), and the allocable expenditures are qualified research expenditures under section 41(b), X may include $6,250 (25% × $25,000) of the software research expenditures of Subset B in computing the amount of X's credit, pursuant to paragraph (c)(6)(vi)(C) of this section.

* * * * *

Example 17.

* * *

(i) * * * The ability to use the idle employees' computers would save X significant costs because X would not have Start Printed Page 76497to buy new hardware to expand the computing power. * * *

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Martin V. Franks,

Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration).

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[FR Doc. 2016-26522 Filed 10-31-16; 4:15 pm]