IRS Sues to Recover R&D Credits: The Quebe Case Warning
June 22, 2026
Receiving an R&D tax credit refund feels like a win. But in United States of America v. Dennis Quebe (S.D. Ohio, 2019), the IRS did something most business owners don’t expect: it issued the refund, waited, then sued to recover every dollar plus interest.
The Quebes lost. And the reason why affects every company that has ever claimed or is considering claiming the R&D tax credit.
Dennis and Linda Quebe were the sole shareholders of Quebe Holdings, Inc. (QUI) an Ohio-based business operating through three electrical contracting companies: Chapel Electric Co., LLC, Chapel Romanoff Technologies, LLC, and Romanoff Electric Co., LLC.
In 2012, QUI hired a third-party consulting firm to evaluate its eligibility for R&D tax credits for tax years 2009 and 2010. The firm identified approximately $268,686 in estimated net R&D credits. QUI filed amended returns claiming those credits. The IRS initially issued refunds totaling over $249,000.
Then the audit began.
What Went Wrong | Why It Mattered | How to Avoid It |
The work did not qualify as research | QUI’s companies installed electrical systems from finished plans and specs created by others. No technical uncertainty. No experimentation. The four-part test was never met. | Verify every activity against the four-part test before filing. Installation of someone else’s design is not qualified research. |
Documentation was missing | The burden of proof sits with the taxpayer. QUI could not produce contemporaneous records showing who did what, when, and why it qualified. Retroactive records were not enough. | Build records as the work is performed: project logs, time allocations, technical notes. Do not reconstruct after the fact. |
Statistical sampling was rejected | The consulting firm’s sampling methodology was ruled invalid by the IRS Revenue Agent. A flawed sampling model brings down the entire credit calculation built on top of it. | Use IRS-compliant sampling methodology tied to specific business components and defensible in an audit. |
The U.S. District Court for the Southern District of Ohio granted summary judgment in favor of the United States government. The Quebes were ordered to repay $302,696.70 the full amount of the refund, plus interest as of February 2019.
The case was filed in August 2015. Litigation stretched for nearly four years. The financial and legal costs extended well beyond the dollar amount on the judgment.
The Quebe case is a blueprint for what happens when R&D credits are claimed without proper qualification, without contemporaneous documentation, and without a defensible methodology.
TaxDrone.AI was developed by National Tax Group (NTG), combining decades of tax expertise with AI-powered precision. NTG’s approach to R&D credit claims is built on the exact standards the IRS and courts demand. Every activity is evaluated against the four-part test before a dollar is claimed. Every qualified research expense is tied to specific business components and backed by contemporaneous documentation. And when statistical sampling is used, it is IRS-compliant, audit-ready, and built to withstand scrutiny not assembled after the fact.
The Quebes paid back $302,696.70. With the right process in place from the start, that outcome is entirely avoidable.
See TaxDrone.AI in Action. Get Your R&D Credit Today.
