Bill Introduced to Repeal R&D Expense Capitalization

AAFCPAs provides the following update to clients with expenditures incurred in connection with your trade or business which represent research and development costs in the experimental or laboratory sense.

On Thursday, March 16th, Senators Maggie Hassan (D) of New Hampshire and Todd Young (R) of Indiana reintroduced a bill to repeal the required capitalization of section 174 Research & Experimental expenditures. If passed, section 174 expenses incurred in taxable years starting January 1, 2022, would revert to previous tax law and be eligible for immediate expensing. The bill currently has bipartisan support with 12 co-sponsors (5 democrats, 6 republicans, and 1 independent).

Currently, as part of the Tax Cuts and Jobs Act of 2017, businesses across the country with research and experimental expenses incurred in taxable years starting January 1, 2022, are no longer allowed to deduct the expense in year one, but instead are required to capitalize and amortize these expenses over 5 years (15 years for international related 174 expenses).

Although there is a long way to go for this bill to be enacted into law, the movement we are seeing is positive.

AAFCPA will continue to monitor this legislation and provide updates as appropriate.

If you have questions, please contact Stephen Lanza, CPA, MSA at 774.512.4171,; or your AAFCPAs Tax Partner.

About the Author

Steve provides proactive tax and business advisory services to private, closely-held businesses in a variety of industries, including: construction, manufacturing & distribution, and retail. He specializes in providing federal and state tax planning & compliance for C Corps, S Corps, partnerships & their owners. He advises clients on year-end and multi-year tax planning, including: guidance related to changing tax code; monitoring and forecasting of income and operations in order to avoid year-end surprises; historical and current year activity to ensure accuracy and completeness of federal and state filings; opportunities to maximize federal and state tax credits; and minimizing the impact of the Alternative Minimum Tax (AMT).