AICPA working group tackles capitalization of research credits (R&D) to determine business tax implications before amortization in 2022 becomes effective.
Mark Dunning and a select group of CPA colleagues at the AICPA are digging into the details on Section 174 capitalization to assess the implications of federal law changes coming down the pike. Beginning in 2022, the federal research tax credit, or R&D credit, must be amortized. Some lawmakers are pushing back with bills to reverse course before the effective date of this amortization starts. (Read more Will Congress Support U.S. Innovation by Reversing R&D Amortization in 2022?).
The AICPA working group is assessing the implications of amortizing all research expenditures in 2022 from a business tax perspective. The group is focused on a number of areas, including assessing the value of and recommendations for:
- Dispensing with Form 3115
- Identifying what is a section 174 cost, such as overhead, SG&A, software development and other costs associated with research activities
- Contract research considerations and issues that will survive whether or not 174 is delayed or repealed
- Difficulties in Rev. Proc. 2000-50 and the treatment of software expenses
The group will also design examples for taxpayers and consider a possible safe harbor for small taxpayers based on the burden of capitalizing R&D costs, tracking inventory, monitoring receivables and capitalizing R&D costs.
We’ll keep you posted on developments as the working group comes to conclusions.
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