Section of Taxation Publications
  VOL. 54
NO. 2
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 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

Research Tax Credit Can Apply to Software Development as Congress Intended: Tax and Accounting Software Corp. v. United States

Robin Davis


In Tax and Accounting Software Corp. v. United States, the United States District Court for the Northern District of Oklahoma held that development of a software program not yet available to the public or members of the computer science field, constituted qualified research for purposes of the research and expenditure tax credit under section 41. This case is the first instance in which a court applied section 41 to commercial software development and represents a surprising departure from previous suggestions that software development which was not revolutionary would not qualify for the credit.

Part I of this Note provides the legislative history of section 41 as well as the facts of TAASC. Part II explains the district court’s opinion. Part III analyzes the district court’s opinion, arguing that the court was correct in disregarding the Service’s position. Finally, Part IV suggests some implications of the case for software developers.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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