IRS Section 174: Change in R&D Treatment
#Finance
“The Times They Are a-Changin”!
For a number of years, businesses enjoyed the privilege of deducting research and development expenses to minimize taxable income. However, with the enactment of a provision from the 2017 Tax Cuts and Jobs Act, the costs related to research and development activities must be spread over an extended period — five years for costs from domestic activities and even longer for costs incurred overseas.
What does this mean for technology companies? In the short term, this adjustment implies that companies can deduct a reduced amount immediately. Hence, an increased income and consequently higher tax costs.