Court Explores Concept of Research

It has been some time since a court explored the concept of research in the tax-exempt organizations law context, such as in connection with the field of scientific research or the unrelated business rules. A recent US Tax Court opinion, however, reviewed this concept in the setting of the research and development tax credit (IRC § 41) (Leon Max v. Commissioner (March 29)). While the statutory law concerning the credit is more detailed, the basic issue in both tax fields is the same: Is the activity truly research or is it merely carried on incident to commercial operations (e.g., testing or designing)? As the following illustrates, the law in this regard as to the credit generally aligns with exempt organizations law.