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KPMG article: AI reshapes software R&D tax credits, eligibility landscape

AI’s integration into software development challenges traditional R&D tax credit criteria

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january 27, 2026

As artificial intelligence (AI) and generative AI tools become increasingly integrated into software development, questions are emerging about how these technologies impact eligibility for the research and development (R&D) tax credit under section 41. Developers are now using innovative approaches such as “vibe coding” and “agentic coding” that allow them to generate and refine code using natural language, fundamentally reshaping the software development process and required skillsets.

Read a January 2026 article* prepared by KPMG LLP tax professionals that explores how the adoption of AI aligns with the four core criteria for R&D tax credit qualification: Permitted Purpose, Technological in Nature, Elimination of Uncertainty, and Process of Experimentation. The article also provides insight into how evolving methodologies may affect R&D eligibility and highlights the need for updated frameworks to address the rapidly changing environment.

* Reproduced with permission from Tax Management Memorandum. ©2026 by Bloomberg Industry Group, Inc. (800-372-1033) http://www.bloombergindustry.com

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