Both houses of the U.S. Congress continue to dance around the idea of reversing provisions in the Tax Cuts and Jobs Act (TCJA) Section 13206 amended section 174 that require companies to immediately amortize research and experimental (R&E) expenditures.
Both houses of the U.S. Congress continue to dance around the idea of reversing provisions in the Tax Cuts and Jobs Act (TCJA) Section 13206 amended section 174 that require companies to immediately amortize research and experimental (R&E) expenditures. Since our last report earlier in the year, little progress has been made.
Congress has consistently introduced legislation that would reverse the capitalization component of 174(a) as written in TCJA. Under TCJA, beginning January 1, 2022, all companies — from multi-billion-dollar corporations to small business owners — began capitalizing section 174 expenses, spreading the amortization of those expenses over five years (or 15 years for foreign expenses). These changes hit first quarter estimates.
So, while Congress’ intent to reserve this amortization provision is clear, the law is not. Business taxpayers must continue to follow the letter of the law and amortize R&E expenses until the law is changed. Refer to the following for the current state of 174 capitalization and contact your TaxOps Min advisor with further questions.
- Major Changes in §174 Amortization Hit Q1 Estimates in 2022
- Jamie Overberg Letter to IRS Requesting Guidance on Section 174(a)
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