Idaho
Idaho State Tax Commission, Docket No. 1-588-651-008
- Year:
- 2025
- Case No.:
- Docket No. 1-588-651-008
- Court:
- Idaho State Tax Commission
- Subject:
- Idaho research credit — manufacturer sold before audit, no records available, credit denied
The Idaho State Tax Commission denied a research credit claim in full where the company had been sold before the audit began and its representatives could not produce, or even describe with specificity, any documentation supporting the roughly 200 products claimed to involve qualified research.
Download source PDFPetitioner, an Idaho manufacturer that had developed approximately 200 products since its founding, claimed an Idaho research credit as an affected business entity for the 2021 tax year. By the time of the audit, the underlying company had been sold, and the individuals representing Petitioner's interests — described in the record as 'AIF WM' and 'AIF SM' — had limited access to the company's original engineering and testing records.
No Documentation of Testing or Experimentation
The Tax Commission found that Petitioner's representatives could offer only general, high-level descriptions of the company's product development process and could not identify specific instances of laboratory testing, prototyping, or evaluation of alternative designs for any of the claimed products. When asked directly whether documentation existed to support the claimed lab testing, one representative acknowledged, 'the best answer is we don't [have documentation of lab testing].'
Given the absence of any contemporaneous records, the Commission held that Petitioner could not meet its burden under any of the four qualified research prongs, including the process-of-experimentation and substantially-all requirements, for any of the roughly 200 products at issue.
The Commission affirmed the Notice of Deficiency Determination in full, finding $23,401 in additional tax due for the 2021 tax year.
Significance: The decision is a cautionary example for successor entities and post-sale representatives — the credit's documentation burden survives a change in ownership, and the inability to produce records is treated no differently than never having generated them in the first place.