Research activity is considered “qualified research” if it meets all of the following four requirements of Internal Revenue Code (IRC) §41(d)(1):

• Qualify as a business deduction under IRC §174.
• Be undertaken to discover information that is technological in nature.
• Be undertaken to discover information intended to be useful to develop a new or improved business component of the taxpayer.
• Substantially all activities involve a process of experimentation. “Substantially all” means 80% or more of the research activities involve a process of experimentation.

A qualified research activity must meet all four tests to be considered for the Louisiana R&D Credit. Apply the tests separately to each business component of the taxpayer.