Rules
Can B2B Marketing Teams Claim R&D Tax Credits? What IRS Section 41 Covers
Most marketing work is excluded from the federal research credit. This guide shows what Section 41 rules out, where martech engineering can qualify, and what records to keep.
What to take away
- Marketing itself does not qualify for the federal research credit. Section 41 names "market research, testing, or development (including advertising or promotions)" as an excluded activity.
- Engineering work done to build or improve a product, process or software can qualify, even when the company sells marketing technology or runs a heavy martech stack.
- Every claim has to pass a four-part test, applied separately to each business component, and the taxpayer carries the burden of proof.
- Software built mainly for your own internal use faces an extra hurdle, so a custom lead-scoring tool is a harder case than a product you sell.
- Documentation decides the outcome. The IRS wants project-level records that tie wages, supplies and contract costs to specific work.
What Section 41 actually rewards
Internal Revenue Code Section 41 gives a credit for increasing research activities. The word "research" is narrow. It does not mean research in the everyday business sense, such as buyer interviews or competitor analysis. It means a process of experimentation aimed at technical uncertainty in a product, process, technique, formula, invention or piece of software.
The statute sets out four conditions in Section 41(d)(1). The expenses must be treatable as research or experimental expenses under the tax code. The work must aim to discover information that is technological in nature. The application of that information must be intended to be useful in developing a new or improved business component. And substantially all of the activities must be elements of a process of experimentation for a qualified purpose.
The IRS Audit Techniques Guide on qualified research activities describes the experimentation test as identifying an uncertainty, identifying one or more alternatives to eliminate it, and evaluating those alternatives. The work must fundamentally rely on principles of the physical or biological sciences, engineering or computer science. At least 80 percent of the research activities, measured on a consistently applied reasonable basis, must meet that test.
A qualified purpose relates to a new or improved function, performance, reliability or quality. Section 41(d)(3)(B) states that research is never treated as qualified if it relates to style, taste, cosmetic or seasonal design factors. For a marketing team, that single line rules out much of what looks like creative experimentation, including layout, tone, colour and visual treatment.
Marketing work the statute excludes
Section 41(d)(4) lists activities for which the credit is not allowed. Several apply directly to a demand team.
- Market research, testing or development, including advertising or promotions.Subparagraph (D)(iii) covers audience research, message testing and campaign promotion.
- Routine data collection.Subparagraph (D)(iv) covers gathering and cleaning contact, intent or engagement data as a normal operating task.
- Management function or technique and efficiency surveys.Subparagraphs (D)(i) and (D)(ii) cover work on how the team is run, such as a new reporting cadence.
- Adaptation of an existing business component to a particular customer's need.Subparagraph (B) covers configuring a tool or a campaign flow for one client.
- Research after commercial production begins.Subparagraph (A) means improvement work done once a product is already in commercial use is harder to claim.
- Social sciences, arts or humanities.Subparagraph (G) covers copywriting studies, brand research and similar work.
The IRS audit guide makes one point that matters for teams: the activity governs, not the intended end result. A qualifying project is not disqualified merely because a survey came first, and a campaign test is not rescued because it will eventually inform a product.
If your A/B tests on pipeline velocity or ad copy are the work you want to claim, expect the answer to be no. Those tests are market testing and promotion, which the statute names.
Where martech and engineering work can qualify
The credit is not limited to laboratories. It reaches software. A company that builds a product, platform or integration layer, and does real technical development on it, can have qualifying work inside a marketing-facing business.
Examples of work that could meet the tests, if the facts and records support it:
- An engineering team building a new data-matching algorithm for a product the company sells, with real uncertainty about whether the approach will work at scale.
- Developers creating a new integration layer between systems, where several technical designs were tried and measured against performance or reliability targets.
- A product team improving the accuracy or speed of a scoring engine that is held for sale or license.
The same people configuring a vendor's marketing automation platform generally do not qualify. Configuring off-the-shelf software involves no technical uncertainty of the kind the test requires.
Internal-use software is the hard middle ground. Section 41(d)(4)(E) excludes research on software developed primarily for the taxpayer's own internal use, with exceptions provided by regulation. The audit guide notes that taxpayers developing certain internal-use software must also meet an additional three-part "high threshold of innovation" test. A custom attribution or lead-routing tool built only for your own sales team sits in this category. Speak to a tax adviser before assuming it counts.
What counts as qualified expenses
If a project passes the tests, the credit is based on qualified research expenses. The Instructions for Form 6765 list the main categories.
| Expense | Notes from the Form 6765 instructions |
|---|---|
| In-house wages | People doing qualified research, directly supervising it, or directly supporting it. General administrative support is excluded. |
| Supplies | Supplies used in the qualified research. |
| Computer rental or lease | Computers must be off your premises, and you cannot be their operator or primary user. |
| Contract research | Generally 65 percent of amounts paid to others for qualified research. |
The instructions also explain recent changes. For tax years beginning after 2024, Section 174A allows domestic research and experimental expenditures to be deducted, or capitalized and amortised over at least 60 months. For tax years beginning after 2025, Section G of Form 6765, which reports business component information, becomes required. Filers must report at least 80 percent of qualified research expenses by business component, up to 50 components.
Small companies should read the payroll tax election in Section D. A qualified small business is a corporation or partnership with gross receipts under $5 million for the tax year. The election cannot exceed $500,000 against the employer share of social security tax and is claimed on Form 8974 with the employment tax return.
Records a marketing-adjacent team should keep
The burden is on the taxpayer to show that every Section 41(d)(1) requirement is met. The audit guide says examiners ask for a list and description of each qualifying project, and then use interviews to corroborate the records. A year-end spreadsheet built from memory is a weak answer.
Keep, for each project:
- A short description of the technical uncertainty at the start.
- The alternatives considered and how each was evaluated.
- Who worked on it, for how much time, and in what role.
- The related supplies and contract invoices.
- The result, including failed attempts.
The Form 6765 instructions point filers to Regulations section 1.41-4(d) and section 6001 on recordkeeping. If your time tracking cannot separate engineering projects from campaign operations, fix that first, the same way you would fix marketing analytics that cannot separate channels.
State credits for Boston and Chicago teams
Federal rules are the starting point, but state credits follow their own rules and forms. The Illinois Department of Revenue publishes a list of income tax credits and expirations that includes a Research and Development Credit, listed as exempt from sunset and claimed on its credit schedules. A Chicago team should confirm the current schedule and instructions before filing. Teams in Boston should check their state revenue department's own research credit guidance separately, since this article did not review it.
Common questions
Can a B2B marketing agency claim the credit for campaign testing?
Does building a custom CRM integration qualify?
Does work done by an offshore contractor count?
Can a small company use the credit against payroll tax?
Who should prepare the claim?
Official sources
- [Audit Techniques GuideCredit for Increasing Research Activities, Qualified Research Activities (IRS)](https://www.irs.gov/businesses/audit-techniques-guide-credit-for-increasing-research-activities-ie-research-tax-credit-irc-ss-41-qualified-research-activities)
