[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.41-0]

[Page 112-113]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.41-0  Table of contents.

    This section lists the paragraphs contained in Secs. 1.41-1 through 
1.41-8 as follows:

Sec. 1.41-1  Credit for increasing research activities.
    (a) Amount of credit.
    (b) Introduction to regulations under section 41.
Sec. 1.41-2  Qualified research expenses.
    (a) Trade or business requirement.
    (1) In general.
    (2) New business.
    (3) Research performed for others.
    (i) Taxpayer not entitled to results.
    (ii) Taxpayer entitled to results.
    (4) Partnerships.
    (i) In general.
    (ii) Special rule for certain partnerships and joint ventures.
    (b) Supplies and personal property used in the conduct of qualified 
research.
    (1) In general.
    (2) Certain utility charges.
    (i) In general.
    (ii) Extraordinary expenditures.
    (3) Right to use personal property.
    (4) Use of personal property in taxable years beginning after 
December 31, 1985.
    (c) Qualified services.
    (1) Engaging in qualified research.
    (2) Direct supervision.
    (3) Direct support.
    (d) Wages paid for qualified services.
    (1) In general.
    (2) ``Substantially all.''
    (e) Contract research expenses.
    (1) In general.
    (2) Performance of qualified research.
    (3) ``On behalf of.''
    (4) Prepaid amounts.
    (5) Examples.
Sec. 1.41-3  Base amount for taxable years beginning on or after January 
          3, 2001.
    (a) New taxpayers.
    (b) Special rules for short taxable years.
    (1) Short credit year.
    (2) Short taxable year preceding credit year.
    (3) Short taxable year in determining fixed-base percentage.
    (c) Definition of gross receipts.
    (1) In general.
    (2) Amounts excluded.
    (3) Foreign corporations.
    (d) Consistency requirement.
    (1) In general.
    (2) Illustrations.
    (e) Effective date.
Sec. 1.41-4  Qualified research for expenditures paid or incurred on or 
          after January 3, 2001.
    (a) Qualified research.
    (1) General rule.
    (2) Requirements of section 41(d)(1).
    (3) Undertaken for the purpose of discovering information.
    (i) In general.
    (ii) Common knowledge.
    (iii) Means of discovery.
    (iv) Patent safe harbor.
    (v) Rebuttable presumption.
    (4) Technological in nature.
    (5) Process of experimentation.
    (6) Substantially all requirement.
    (7) Use of computers and information technology.
    (8) Illustrations.
    (b) Application of requirements for qualified research.
    (1) In general.
    (2) Shrinking-back rule.
    (3) Illustration.
    (c) Excluded activities.
    (1) In general.
    (2) Research after commercial production.
    (i) In general.
    (ii) Certain additional activities related to the business 
component.
    (iii) Activities related to production process or technique.
    (iv) Clinical testing.
    (3) Adaptation of existing business components.
    (4) Duplication of existing business component.
    (5) Surveys, studies, research relating to management functions, 
etc.
    (6) Internal-use computer software.
    (i) General rule.
    (ii) Requirements.
    (iii) Primarily for internal use.

[[Page 113]]

    (iv) Software used in the provision of services.
    (A) Computer services.
    (B) Noncomputer services.
    (v) Exception for certain software used in providing noncomputer 
services.
    (vi) High threshold of innovation test.
    (vii) Application of high threshold of innovation test.
    (viii) Illustrations.
    (ix) Effective dates.
    (7) Activities outside the United States, Puerto Rico, and other 
possessions.
    (i) In general.
    (ii) Apportionment of in-house research expenses.
    (iii) Apportionment of contract research expenses.
    (8) Research in the social sciences, etc.
    (9) Research funded by any grant, contract, or otherwise.
    (10) Illustrations.
    (d) Documentation.
    (e) Effective dates.
Sec. 1.41-5  Basic research for taxable years beginning after December 
          31, 1986. [Reserved]
Sec. 1.41-6  Aggregation of expenditures.
    (a) Controlled group of corporations; trades or businesses under 
common control.
    (1) In general.
    (2) Definition of trade or business.
    (3) Determination of common control.
    (4) Examples.
    (b) Minimum base period research expenses.
    (c) Tax accounting periods used.
    (1) In general.
    (2) Special rule where timing of research is manipulated.
    (d) Membership during taxable year in more than one group.
    (e) Intra-group transactions.
    (1) In general.
    (2) In-house research expenses.
    (3) Contract research expenses.
    (4) Lease payments.
    (5) Payment for supplies.
Sec. 1.41-7  Special rules.
    (a) Allocations.
    (1) Corporation making an election under subchapter S.
    (i) Pass-through, for taxable years beginning after December 31, 
1982, in the case of an S corporation.
    (ii) Pass-through, for taxable years beginning before January 1, 
1983, in the case of a subchapter S corporation.
    (2) Pass-through in the case of an estate or trust.
    (3) Pass-through in the case of a partnership.
    (i) In general.
    (ii) Certain expenditures by joint ventures.
    (4) Year in which taken into account.
    (5) Credit allowed subject to limitation.
    (b) Adjustments for certain acquisitions and dispositions--Meaning 
of terms.
    (c) Special rule for pass-through of credit.
    (d) Carryback and carryover of unused credits.
Sec. 1.41-8  Special rules for taxable years ending on or after January 
          3, 2001.
    (a) Alternative incremental credit.
    (b) Election.
    (1) In general.
    (2) Time and manner of election.
    (3) Revocation.
    (4) Effective date.

[T.D. 8930, 65 FR 287, Jan. 3, 2001]