Here is a copy and paste from a e-mail from our CPA:

To qualify for the credit, you have to have what’s called “Qualified Research”. Qualifying research typically meet’s the following criteria ...

1. Was the research related to the development or improvement of the functionality, quality, reliability or performance of a business component (product, process, software, technique, formula or invention)? 2. Was the development technological in nature? 3. Was there technological uncertainty about either the capability or method of developing the business component or its appropriate design? 4. Was the developmental process experimental in nature?

For wages to qualify for the credit, they have to be for qualifying research activities such as –

1. Conducting or executing the qualified research (e.g., testing a manufacturing prototype) 2. Directly supervising the qualified research (e.g., managing a team of software developers) 3. Directly supporting qualified research (e.g., organizing test results on formulation trials)