Section 174 requirements continue to plaque businesses, causing significant changes for taxpayers of all sizes in how they identify assets and account for expenses. Join TaxOps’ Jamie Overberg as she shares some challenges and best practices for complying with the rules in this CPE.

Meeting Section 174 Capitalization Requirements

Identifying Assets, Applying Rev Proc 2023-11 for Automatic Changes, Current IRS Audit Trends

March 21, 2024 | 1:00 – 2:50 pm EDT

A live 110-minute CPE webinar with interactive Q&As

Early Registration Discount Deadline February 23, 2024

This webinar will discuss identifying Section 174 assets, the revised capitalization requirements, making the method change requirement in the second year, and the current state of IRS R&D audits. Our notable panel will provide advice on transitioning to the revised guidelines for businesses and tax advisers.

Description

Included in the Tax Act of 2017 was a requirement to amortize Section 174 expenses, generally over five years, beginning in 2022. The initial problem is defining and identifying these assets, which are defined under Section 1.174-2 as “… expenditures incurred in connection with the taxpayer’s trade or business which represent research and development costs in the experimental or laboratory sense… . Whether expenditures qualify as research or experimental expenditures depends on the nature of the activity to which the expenditures relate, not the nature of the product or improvement being developed… .” The definition of qualifying assets is broad; the nature of the activity in which the asset is used dictates whether or not it is a Section 174 expense.

Making the transition has been a burden for many. Many businesses have and will continue to recognize significant income due to the change, while practitioners must grasp how to effectively make the transition. The IRS has released Revenue Procedure 2023-11, updated with 2023-24 and more recently 2024-9 to thoroughly confuse everyone. Further complicating matters, IRS has notices 2024-12 and 2023-63. Practitioners working with companies engaging in research and experimental activities need to understand the new R&D requirements.

Listen as our panel of R&D experts explains the latest guidelines and how to transition to the new reporting requirements.

Outline

  • Background: R&D policy changes
  • Review of implementation for 2022 tax year
  • Evaluating recognition changes for 2023 tax year
  • Revenue Procedure 2024-9 for automatic method change
  • 174 computation

Benefits

The panel will review these and other key issues:

  • Steps to facilitate the transition to capitalizing R&D expenditures
  • Implementing an accounting method change after the initial year under all Revenue Procedures and Notices
  • Identifying business activities and assets subject to the revised capitalization requirements

Faculty

Jamie Overberg
Partner
TaxOps Minimization

As a tax partner for TaxOps Minimization, Ms. Overberg specializes in executing and managing a wide range of tax minimization strategies, including all aspects of the Research and Development tax credit as well as financial reporting requirements under FAS 109 and Fin 48. In addition, she works with Section 199, Section 263A, and Section 382 analysis, calculations, and reporting. She works primarily with clients in the automotive, engineering, manufacturing, software, biotech and oil and gas sectors, and has worked on numerous R&D tax controversy engagements.

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