[LUAU] QHTB

[Stan Baptista]

>   * You have to be doing original "R & D", developing some
> kind of new
> software which will be sold in some form.  In our case, that
> was the
> new software components linking together various open source
> pieces. 
> Just doing enhancements to existing F/OSS projects would not
> count. 
> General consulting work would not count.

With respect to the Act 221/215 _research credit_, there are some serious misconceptions here, particularly for software.

>   * You have to be doing original "R & D", developing some kind of new software

No. For the research credit, new software makes the most compelling case but enhancements can be allowed under some circumstances.

>  which will be sold in some form.

No. So-called "internal-use software" (primarly for the Taxpayer's own use) is allowed under IRC section 41(d), which is the federal credit upon which the Hawaii research credit is based.

> Just doing enhancements to existing F/OSS projects would not

> count. 

Again, it depends on the nature of the enhancements. Major architectural or algorithmic changes, for example,  could qualify.

> General consulting work would not count.


The major consideration for contract work is who retains ownership of the work product. If you, the contractee, does work for a company and the contract specifies that all rights to that work are retained by the company, then it may claim the credit. On the other hand, if  you retain ownership of the work in some fashion, you may claim the credit.

(Keep in mind that claiming and actually qualifying are not necessarily the same thing.)

-Stan






 
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