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Upcoming regulations on Sec. 174 R&D expensing

Written on Sep 15, 2023

 The IRS and Treasury last week issued a notice describing upcoming proposed regs that will clarify the new requirement from the Tax Cuts and Jobs Act to amortize research costs. 

Released September 8, Notice 2023-63, 2023-39 IRB 1, describes the IRS and Treasury’s anticipated proposed rules instructing taxpayers how to apply the TCJA’s changes to section 174. 

The TCJA converted section 174 from a regime of immediate expensing for research and experimentation costs to one requiring five- or 15-year amortization as a way to pay for other tax cuts. The new section 174 also explicitly includes software development costs. 

As a reminder, the U.S. Senate introduced legislation, S.866, in March to enhance tax benefits for research activities.  The bill was referred to the Senate Finance Committee.  In April, the House introduced their own version, H.R.2673, called the American Innovation and R&D Competitiveness Act of 2023. 

Members of the Ohio Society of CPAs are encouraged to use our “take action” page to write their federal legislators and request action on the treatment of Section 174 research and experimental expenditures, as well as numerous expired tax provisions.     

Please request Ohio’s Congressional members to consider (1) deferring the Internal Revenue Code (IRC) Section 174 amortization requirement on research and experimental expenditures, and (2) extending retroactively the effective date to amounts paid or incurred in tax years beginning after December 31, 2025.   

The email also asks for a commitment to address the other tax provisions that have recently expired or will expire in 2023.   

Again, please use our “take action” page.  The email template is just a default, so members are encouraged to personalize their message or make any changes before sending.    

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