Idaho State Tax Commission, Docket No. 1-401-911-296

Petitioner, an Idaho dental laboratory, claimed an Idaho research credit for a project it described as 'Fixed Prosthetic Production Procedural Improvements,' aimed at refining its process for producing fixed dental prosthetics such as crowns and bridges. The Audit Division had already allowed credit for other, undisputed projects; this protest concerned only the fixed-prosthetic project, which the Bureau disallowed.

Fit-Testing Analogized to Max v. Commissioner

The Tax Commission found that the core of Petitioner's claimed process was adjusting prosthetic devices based on how they fit individual patients and on feedback from dentists and patients after fitting — a process the Commission analogized to the clothing fit-testing found non-qualifying in Max v. Commissioner, T.C. Memo. 2021-37. As in that case, the Commission held that iterating a product based on individualized fit and subjective feedback, without evaluating a genuine hypothesis about an uncertain technical outcome, does not constitute a process of experimentation under IRC section 41(d)(1)(C).

Unsubstantiated Wage and Supply Estimates

The Commission further found that Petitioner's claimed wage and supply expenses for the project were based on generalized estimates rather than documentation tying specific costs to the claimed research activities, providing an independent basis for denial even apart from the fit-testing issue.

The Notice of Deficiency Determination as to the fixed-prosthetic project was affirmed.

Significance: The decision is one of relatively few Idaho research credit rulings to apply an analogy to a specific federal Tax Court precedent — Max v. Commissioner — extending that case's fit-and-feedback reasoning from apparel to dental prosthetics, and reinforcing that iterative refinement driven by individualized fit rather than technical hypothesis-testing falls outside the credit regardless of industry.