# Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003.
**AGENCY:**
Internal Revenue Service (IRS), Treasury.
**ACTION:**
Correcting amendment.
**SUMMARY:**
This document contains corrections to final regulations (TD 9786) that were published in the *Federal Register* on Tuesday, October 4, 2016 (81 FR 68299). The final regulations provided guidance regarding the application of the credit for increasing research activities.
**DATES:**
This correction is effective November 3, 2016 and is applicable on or after October 4, 2016.
**FOR FURTHER INFORMATION CONTACT:**
Martha Garcia or Jennifer Records of the Office of Associate Chief Counsel (Passthroughs and Special Industries) at (202) 317-6853 (not a toll-free number).
**SUPPLEMENTARY INFORMATION:**
**Background**
The final regulations (TD 9786) that are the subject of this correction are under section 41 of the Internal Revenue Code.
**Need for Correction**
As published, the final regulations (TD 9786) contain errors that may prove to be misleading and are in need of clarification.
**List of Subjects in 26 CFR Part 1**
Income taxes, Reporting and recordkeeping requirements.
**Correction of Publication**
Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:
**PART 1—INCOME TAXES**
**26 CFR Part 1**
*Paragraph 1.* The authority citation for part 1 continues to read in part as follows:
**Authority:**
26 U.S.C. 7805 * * *
**26 CFR Part 1**
*Par. 2.* Section 1.41-4(c)(6)(viii) is amended by:
a. Revising the fifth sentence of *Example 14* paragraph (ii).
b. Revising the fifth sentence of *Example 17* paragraph (i).
The revisions read as follows:
§ 1.41-4
(c) * * *
(6) * * *
(viii) * * *
**Example 14.**
* * *
(ii) * * * If X's research activities related to the development or improvement of Subset B constitute qualified research under section 41(d), without regard to section 41(d)(4)(E), and the allocable expenditures are qualified research expenditures under section 41(b), X may include $6,250 (25% × $25,000) of the software research expenditures of Subset B in computing the amount of X's credit, pursuant to paragraph (c)(6)(vi)(C) of this section.
**Example 17.**
* * *
(i) * * * The ability to use the idle employees' computers would save X significant costs because X would not have to buy new hardware to expand the computing power. * * *
Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration).