REG-153656-3

Notice of Proposed Rulemaking Notice of Public Hearing Credit for Increasing Research Activities

AGENCY: Internal Revenue Service (1RS), Treasury.

ACTION: Withdrawal of advance notice of proposed rulemaking; notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains proposed regulations concerning the application of section 41 of the Internal Revenue Code (Code), which provides a credit for increasing research activities. The proposed regulations provide guidance on computer software that is developed by (or for the benefit of) the taxpayer primarily for internal use by the taxpayer (internal use software) under section 41(d)(4)(E). These proposed regulations also include examples to illustrate the application of the process of experimentation requirement to computer software under section 41(d)(1)(C). The regulations will affect taxpayers engaged in research activities involving computer software. This document also provides notice of a public hearing on these proposed regulations and withdraws the advance notice of proposed rulemaking published on January 2, 2004.

DATES: Written or electronic comments must be received by March 23,2015. Outlines of topics to be discussed at the public hearing scheduled for April 17, 2015, must be received by March 23, 2015.

ADDRESSES: Send submissions to: CC: PA:LPD:PR (REG-153656-03), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153656-03), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, D.C.; or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (1RS REG153656-03). The public hearing will be held in 1RS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, D.C.

FOR FURTHER INFORMATION CONTACT

Concerning the regulations, Martha Garcia, [phone]; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, call Oluwafunmilayo (Funmi) Taylor, [phone] (not tollfree numbers).

SUPPLEMENTARY INFORMATION:

Background

This document amends 26 CFR part 1 to provide rules relating to the credit for increasing research activities (research credit) under section 41 of the Code. On January 2, 1997, the Treasury Department and the 1RS published a notice of proposed rulemaking (REG-209494-90, referred to in this preamble as the 1997 proposed regulations) in the Federal Register (62 FR 81) to provide guidance on...