Idaho State Tax Commission, Docket No. 0-077-816-832

Petitioner, an Idaho truss manufacturer, claimed an Idaho research credit under Idaho Code section 63-3029G for costs related to designing roof and floor trusses for customer projects. The Tax Commission's Audit Division disallowed the credit entirely, and Petitioner protested, arguing that engineering work performed for each custom truss package involved technical uncertainty and design iteration.

Failure to Substantiate a Process of Experimentation

Applying the four-part test under IRC section 41(d), the Tax Commission found that Petitioner could not produce contemporaneous documentation showing that its truss design work involved evaluating alternatives through a process of experimentation. Petitioner's representatives described the work in general terms — using truss design software to generate configurations meeting building code and customer load requirements — but offered no records of hypotheses tested, alternatives evaluated and rejected, or any systematic trial-and-error process.

The Commission also found that Petitioner failed to show that qualifying activities constituted substantially all of the work on any business component, as required by the 'shrinking back' rule, because the same undocumented approach applied uniformly across all claimed projects with no way to isolate any subset of genuinely experimental work.

The Notice of Deficiency Determination was affirmed, and the Commission determined Petitioner owed $15,156 in additional tax after crediting a previously held refund.

Significance: The decision reiterates a recurring theme across Idaho research credit protests — general descriptions of engineering judgment, without contemporaneous records tying specific design iterations to tested hypotheses, will not satisfy the process-of-experimentation requirement, regardless of how technically involved the underlying design work may be.