The Indiana Department of State Revenue recently published Letter of Findings 01-20181612 (dated April 27, 2021), upholding the disallowance of a state research expense credit for the production of two enterprise level software applications. The Department found that the Indiana research expense credit claimed by the taxpayer was based on a similar federal credit, and thus to be eligible, the taxpayer must undertake “qualified research” that satisfies four requirements: (1) does the research qualify as an IRC § 174 business deduction for federal purposes, (2) is the research being undertaken to discover information that is “technological in nature”, (3) is the information intended to develop a new or improved business component, and (4) does substantially all of the research involve pursuing a process of experimentation?  The Letter of Findings determined that the taxpayer’s documentation was insufficient to meet any of the credit’s requirements, as it “simply outlined” the taxpayer’s continual maintenance of its software applications. It further explained that even assuming the taxpayer met the first three prongs of the test, the taxpayer still could not show that its activities met the “process of experimentation” required in the fourth prong.