R&D Tax Credit
The Four-Part Test
The R&D tax credit four-part test is the IRS standard in IRC Section 41. Every activity you claim must satisfy all four parts: a permitted purpose, work that is technological in nature, elimination of technical uncertainty, and a process of experimentation.
Mitch Feldman · Co-Founder · R&D Tax Credit Practice · Houston, Texas·October 29, 2026
Permitted purpose
The activity must create or improve a product, process, formula, invention, software, or technique. The aim has to be functionality, performance, reliability, or quality, not aesthetic or purely cost-driven changes.
Technological in nature
The work must rely on the principles of a hard science such as engineering, computer science, biology, chemistry, or physics. The outcome does not have to be groundbreaking. The process must be grounded in scientific or engineering principles.
Elimination of uncertainty
At the outset, your team must not have known how to achieve the desired result, whether because of uncertainty about capability, method, or design. The uncertainty must be technical and real, not a business or funding question.
Process of experimentation
The activity must evaluate one or more alternatives through a systematic approach such as modeling, simulation, or trial and error. That investigation has to sit inside a scientific or engineering framework.
This article is general information, not legal or tax advice. For how FCA applies this to a claim, see R&D Tax Credits.