The U.S. Supreme Court has upheld a U.S. District Court ruling that denied research and development tax credits claimed by a married couple. The taxpayers own a construction company operating as an S corporation, and the lower court had ruled that the corporation’s projects failed to meet the business components test. It also found the taxpayers failed to identify any new or improved processes that resulted from their company’s construction operations. What’s more, three of the business’s representative projects fell short of meeting the “substantial rights” prong of the funded research exclusion. The Supreme Court upheld the tax deficiency assessed by the IRS. (Grigsby, CA-5)
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