Desert NewCo, GoDaddy, Files Petition with Tax Court

Desert NewCo, LLC, GoDaddy Inc., Tax Matters Partner, V. Commissioner Of Internal Revenue

Desert NewCo LLC, a partnership and the parent company of GoDaddy, has petitioned the U.S. Tax Court for help in securing $16.3 million in research and development tax credits, stating their software and product development expenses qualified for a now-expired tax break.

The company originally made this request more than two years ago but the IRS has since failed to make a decision. In response to this lacking decision, Desert NewCo filed their petition, asking the Tax Court to intervene.

Their claim indicates an expenditure of $174.8 million on research expenses in 2017 which qualified under Section 174 of the Internal Revenue Code (IRC). This resulted in an R&D tax credit claim under Section 41 in the amount of $16,256,374. The claim suggested the following:

  • The largest source of research expenses for GoDaddy came from wage, contract expenses, and computer leasing costs
  • $1 million in costs came from securing the rights to use computers to conduct qualified research
  • GoDaddy had unrealized gains in property due to interest transfers between it and GoDaddy that should have resulted in an additional $37,000 in deductions

Desert NewCo asked the IRS, in December 2020, for an administrative adjustment granting the credits on its amended 2017 return. This request was never allowed nor acted upon.

With the petition filed, the company now awaits a response to determine how these partnership items can be adjusted. The full petition highlights further details pertaining to the partnership and the company’s requests.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at or contact your usual Swanson Reed representative.

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