# What's excluded from the credit

> The eight kinds of work §41(d)(4) excludes, with internal-use software and its extra test.

Source: https://lopifi.com/learn/four-part-test-qualified-research/excluded-activities
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What activities are excluded from the R&D tax credit?** The eight kinds of work §41(d)(4) excludes, with internal-use software and its extra test.

Some work is never [qualified research](https://lopifi.com/md/glossary/qualified-research), whatever it costs and however hard it is. Section 41(d)(4) lists it, and a credit that counts any of it is a credit the IRS can take back.

| Exclusion | What it looks like at a startup |
| --- | --- |
| After commercial production | Work on a component after it has begun commercial production |
| Adaptation | Tailoring StockMatch to one customer's requirement |
| Duplication | Rebuilding an existing product from its specifications or public information |
| Surveys and studies | Market research, efficiency surveys, routine data collection, routine quality-control testing |
| Internal-use software | Software for your own back office, unless it meets extra tests |
| Foreign research | Work done outside the US, Puerto Rico and the US possessions |
| Social sciences, arts, humanities | Research into how customers feel about prices |
| Funded research | Research to the extent a customer, grant or other person funds it |

§41(d)(4): activities that are never qualified research, with the founder's version of each.

> “Any research conducted after the beginning of commercial production of the business component.”

— [IRC §41(d)(4)(A)](https://www.law.cornell.edu/uscode/text/26/41), Activities for which the credit is not allowed

> **Internal-use software.** If Northwind built StockMatch only to run its own back office, it would be [internal-use software](https://lopifi.com/md/glossary/internal-use-software), and on top of the four tests it would have to meet the high threshold of innovation: innovative, a significant economic risk, and not commercially available. Built to license to other resellers, it's held for license, so that extra test doesn't apply.

> “IUS is software developed by, or for the benefit of, the taxpayer primarily for the taxpayer’s internal use if the software is developed for use in general and administrative functions that facilitate or support the conduct of the taxpayer’s trade or business.”

— [Instructions for Form 6765 (Rev. December 2025), Research With Respect to Software](https://www.irs.gov/pub/irs-pdf/i6765.pdf) (PDF), Internal use software and the high threshold of innovation

## Where this page's rules come from

- [IRC §41(d)(4)(A)](https://www.law.cornell.edu/uscode/text/26/41) — Activities for which the credit is not allowed (statute)
- [Instructions for Form 6765 (Rev. December 2025), Research With Respect to Software](https://www.irs.gov/pub/irs-pdf/i6765.pdf) (PDF) — Internal use software and the high threshold of innovation (irs)

## Read further

- https://lopifi.com/md/accounting/rd-tax-credit

- **Track:** [R&D tax credit](https://lopifi.com/md/learn/rd-credit)
- **Part of:** [The four-part test: what counts as qualified research](https://lopifi.com/md/learn/four-part-test-qualified-research) — 6 min
- **Terms taught:** [Qualified research](https://lopifi.com/md/glossary/qualified-research), [Internal-use software](https://lopifi.com/md/glossary/internal-use-software)
- **Previous:** [The four-part test: what counts as qualified research](https://lopifi.com/md/learn/four-part-test-qualified-research)
- **Next:** [Qualified research expenses: wages, supplies and contractors, R&D credit · Lesson 3](https://lopifi.com/md/learn/what-counts-as-qualified-research-expenses)
- **The course:** https://lopifi.com/md/learn