Wicor, Inc v United States (2001)


Wicor, Inc. (“Wicor”) v. United States, 263 F.3d 659 (7th Cir. 2001)

Wisconsin gas company Wicor sought to integrate a computer system, so that it could perform a number of tasks (e.g. process service orders, record meter readings, bill customers, record transactions, etc).  It hired a third party, Anderson Consulting, to assist. Most of the software previously existed, but Wicor and Anderson Consulting jointly developed an integration program.

Wicor claimed R&D Tax Credit for this integration work, which was denied. The U.S. stated that the company didn’t satisfy four requirements, that the research:

  1. wasn’t for the purpose of discovering technological information,
  2. wasn’t experimental,
  3. wasn’t innovative, and
  4. didn’t involve significant financial risk.


Discovery of Technological Information

Wicor responded that it ‘discovered technical information’ by determining the best mix of algorithms, data and rules needed. To this, the court found that the project was technological in nature, but was not undertaken to discover information. Instead, it was done to install a system that would integrate company information functions.

Experimental in Character

Wicor argued that it tested solutions and/or hypotheses, and then made improvements based on the results, until no more development was needed. Its software engineers tested a variety of hypotheses, which were later used as case studies for customers, management and consultants. However, the court stated that the development of the new software design didn’t have any uncertainty at the project’s outset. It’s the company’s burden to provide evidence of uncertainty, which it didn’t.


The contract between Wicor and Anderson Consulting said that Anderson Consulting owned the integrated computer system, but it didn’t take a copy of the source code when the project was complete. It was apparent that Anderson Consulting didn’t think the program had any other uses. This makes it seem as though the project involved adapting software for a specific use, not developing innovative software.

The company’s argument was that the innovation was its streamlined functionalities. Although it improved efficiency, Wicor failed to prove how this contributed to technological advancement.

Significant Financial Risk

Through government experts opinions, the court found that the project involved business risk (i.e. will it be done on time?). But, it didn’t have financial risk; Anderson Consulting and Wicor had both undertaken similar projects, and so were sure they could achieve this.


It’s the burden of the taxpayer (Wicor) to provide evidence that its work meets the R&D tax credit requirements. The company didn’t successfully do this. The court found that Wicor didn’t meet any of the four requirements outlined above, and so wasn’t eligible for the tax refund it had claimed.


The R&D Tax Credit is for, as stated, research and development. This means that significant development and/or innovation needs to be achieved, or at the least attempted. The four-part-test asks:

  1. Is the work technological in nature?
  2. Is there a permitted purpose?
  3. Is there elimination of uncertainty?
  4. Is there a process of experimentation?

If a company’s project doesn’t meet these requirement AND provide adequate evidence, it’s not entitled to claim the refund. Want to know more about claiming R&D tax credits? Connect with our R&D tax experts today.


Swanson Reed is one of the U.S.’s largest Specialist R&D tax advisory firms, offering tax credibility assessments, claim preparation, and advisory services. We manage all facets of the R&D tax credit program, from claim preparation & 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 www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

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