Union Carbide Corporation and Subsidiaries v. Commissioner of Internal Revenue

Case Updates

The Second Circuit affirmed a judgment of the tax court denying Union Carbide an R&D tax credit for supplies the company used in developing “improved,” rather than “new,” manufacturing processes.

NCLC urged the Second Circuit Court to hold that research and development tax credits be available for developing not only new and improved products, but also new and improved manufacturing processes. In this case, Union Carbide Corporation claimed R&D credits based on the development of innovative production processes. Largely denying the claim, the U.S. Tax Court drew a distinction between product and process research, severely limiting R&D tax credits available for the latter. In its amicus brief, NCLC argued that the dichotomy is unjustified, having no founding in the Internal Revenue Code or the Treasury regulations. NCLC further argued that if the Tax Court’s holding were allowed to stand, it would stifle the development of critical innovations that the R&D Tax Credit was originally created to encourage.