Ferroglobe USA, Inc., and Subsidiaries, Docket No.6259-25, filed 7/24/26, is another Section 41 increased research activities credit case. Here IRS applies the standard counterattack, the Section 41(b)(2)(A)(i) “wages paid or incurred to an employee for qualified services performed by such employee.” IRS says “show which employee, what services, and how much”; the magic phrase is “how much for qualified services.”

The Ferroglobers, like all or almost all employers, never had employees keep timesheets on what they were doing specifically, hence only had gross wages. Hence they replied to IRS’ interrogs (after sidestepping Branerton) with “no timesheets.” Judge Ingenuity Buch holds that to be a Rule 71(b) “not reasonably ascertainable” response. So the Ferroglobers can’t introduce post event, ballpark estimates of who did what and were paid how much for what on the trial.

“According to petitioner, its own records would not allow it to dissect the wages as requested. Therefore, if the Court would prohibit it from introducing at trial any evidence showing such a dissection, it would not be a burden on petitioner. Thus, we will grant the Commissioner’s Motion in that, if petitioner attempts to introduce at trial information showing that this response was incomplete or evasive, we will exclude such information. Petitioner should have no quarrel with this because according to petitioner, it did not maintain records from which to ascertain this information.” Order, at p. 3.

But the Ferroglobers did have some employee wage records, by job title.

“…petitioner’s own response belies, at least in part, its contention that it ‘did not maintain timekeeping records showing exactly which employee worked on each project nor the amount of time those employees spent performing services on each project. Petitioner states that it maintained records by job title. Petitioner further states that some job titles only had one employee. But nowhere in the information provided to the Court did petitioner identify those job titles for which there was only one employee. Providing this information would be at least partially responsive to the Commissioner’s interrogatory. We will order petitioner to supplement its response.” Order, at p. 3.

Taishoff says, is IRS sure it wants that information? BoP is on the Ferroglobers. Anything that proves amount of wages paid for qualified work only substantiates the amount of the credit, or at least opens a Cohan door. Isn’t it better to let the denial of substantiation stand?

Maybe IRS should call time out.