The Shift from Expensing to Amortization
Understanding Section 174: The mandatory capitalization rules that changed how US businesses handle R&D expenses.
Current Status: Effective for tax years beginning after Dec 31, 2021, you can no longer deduct 100% of R&D costs immediately. You must amortize them over 5 years (Domestic) or 15 years (Foreign).
Amortization Impact Simulator
Enter your annual R&D spend to see how the deduction is spread out over time compared to the old immediate deduction method.
Note: Domestic R&D uses a half-year convention in Year 1.
5-Year Amortization Schedule (Domestic)
The Compliance Landscape
The interaction between Section 174 and Section 41 (The Credit) creates a complex environment. While the credit lowers taxes, Section 174 defines the "bucket" of costs that must be spread out.
Immediate Expensing
- • Deduct 100% of R&D costs in Year 1.
- • Lower taxable income immediately.
- • Simpler accounting treatment.
Mandatory Amortization
- ✓ Capitalize costs; deduct over 5 years (Domestic).
- ✓ Higher taxable income in Year 1.
- ✓ Includes indirect costs (overhead, rent, utilities).
What Counts as Section 174?
Click the items below to reveal if they typically fall under the Section 174 "Amortization Bucket".
Strategic Next Steps
1. Cost Segmentation
Identify all costs. You must distinguish between "Section 41 eligible" (direct research) and "Section 174 required" (broader scope).
2. Cash Flow Modeling
Consult a tax strategist. Model the multi-year impact. The tax hit is front-loaded, which affects estimated quarterly payments.
3. Software Review
Analyze software costs. Review specific activities against Rev. Proc. 2000-50 to separate maintenance from SRE expenditures.
The Comprehensive Guide to IRC Section 174: Legislative Evolution, Economic Impact, and Strategic Compliance Under the One Big Beautiful Bill Act
Executive Summary
The United States federal tax system has long utilized the Internal Revenue Code (IRC) to incentivize economic behaviors deemed beneficial to the national interest. Among these incentives, few have been as enduring or as critical to the nation’s competitive stance in the global technology landscape as the treatment of Research and Experimental (R&E) expenditures. Section 174 of the IRC, historically a mechanism for the immediate deduction of innovation costs, underwent a profound transformation with the Tax Cuts and Jobs Act (TCJA) of 2017, only to be radically restructured again by the “One Big Beautiful Bill Act” (OBBBA) in 2025.
This report provides an exhaustive analysis of Section 174, tracing its statutory origins, its contentious modification under the TCJA, and its restoration and reform under the OBBBA. It explores the intricate relationship between Section 174 amortization, Section 162 business expenses, and the Section 41 Research and Development (R&D) Tax Credit. Through a detailed examination of legislative texts, IRS Revenue Procedures (specifically Rev. Proc. 2025-28), and judicial precedents, this document elucidates the compliance obligations and strategic opportunities now facing U.S. taxpayers. By integrating technical definitions with practical examples—ranging from software development to manufacturing innovation—the report aims to serve as a definitive resource for tax professionals, corporate finance executives, and policy analysts navigating the post-2025 R&D tax landscape.
1. The Meaning and Importance of Section 174
1.1 Legislative Intent and Economic Theory
The fundamental meaning of Section 174 lies in its classification of research expenditures not as capital investments that depreciate over time, but as current operational costs that are essential to the continuity of a trade or business. Enacted originally in 1954, Section 174 was designed to eliminate the uncertainty that plagued taxpayers regarding the deductibility of research costs. Prior to its enactment, businesses faced significant ambiguity: were research costs ordinary and necessary expenses deductible under Section 162, or were they capital expenditures to be capitalized into the basis of a resulting asset? If the research failed, when could the cost be recovered? Section 174 resolved this by offering a statutory safe harbor, allowing taxpayers to elect either immediate deduction or amortization over a period of not less than 60 months.1
The economic importance of this provision cannot be overstated. By allowing immediate expensing, the federal government effectively subsidized the risk of innovation. When a company spends a dollar on uncertain research, the government “pays” for a portion of that risk through the reduction in tax liability. This lowers the after-tax cost of capital for R&D projects, encouraging firms to undertake high-risk, high-reward ventures that they might otherwise avoid. This mechanism aligns with the macroeconomic theory that technological progress is a primary driver of long-term economic growth. Consequently, Section 174 became a pillar of U.S. industrial policy, fostering the growth of the aerospace, pharmaceutical, and software industries.3
1.2 The Shift to Capitalization: A Revenue-Driven Policy
The Tax Cuts and Jobs Act (TCJA) of 2017 fundamentally altered this dynamic. In an effort to broaden the tax base and offset the revenue loss from lowering the corporate tax rate to 21%, Congress amended Section 174 to mandate the capitalization of all R&E expenditures effective for tax years beginning after December 31, 2021. This change required domestic research to be amortized over five years and foreign research over 15 years. The “meaning” of Section 174 shifted from an incentive to a revenue raiser, effectively taxing companies on income they had already reinvested in development. This policy change, widely criticized by industry groups, created a significant cash-flow burden for research-intensive firms, particularly startups that operated at a book loss but found themselves with taxable income due to the disallowance of R&D deductions.5
1.3 The Restoration Under OBBBA: Meaning Reclaimed
The enactment of the OBBBA in July 2025 restored the original intent of Section 174, albeit with a modern, protectionist twist. By introducing Section 174A, which permits the immediate expensing of domestic R&E expenditures, Congress reaffirmed the importance of incentivizing American innovation. However, by retaining the 15-year amortization requirement for foreign research, the new law underscores a clear policy preference for on-shoring intellectual property development. The “meaning” of the statute is now bifocal: it is a carrot for domestic activity and a stick for foreign outsourcing. This duality makes Section 174 not just a tax compliance issue, but a central component of corporate location strategy and supply chain management.7
2. Contextualizing Section 174 Within Federal Tax Law
To fully understand the operation of Section 174, it must be contextualized against other provisions of the Internal Revenue Code, particularly Section 162 (Trade or Business Expenses) and Section 41 (Credit for Increasing Research Activities).
2.1 Section 174 vs. Section 162: The “In Connection With” Standard
A critical distinction exists between the deductibility standards of Section 162 and Section 174. Section 162 allows for the deduction of ordinary and necessary expenses incurred in “carrying on” a trade or business. This “carrying on” standard implies that the business must already be operational and generating revenue. In contrast, Section 174 applies to expenditures incurred “in connection with” a trade or business.
The Supreme Court, in Snow v. Commissioner (1974), established that the “in connection with” standard of Section 174 is significantly broader than the “carrying on” standard of Section 162. This distinction is vital for startups. A pre-revenue company developing a new product may not yet be “carrying on” a trade or business sufficient to deduct expenses under Section 162, but it can deduct its development costs under Section 174. This allows startups to accumulate Net Operating Losses (NOLs) during their development phase, which can be carried forward to offset future profits.6
Table 1: Comparison of Section 162 and Section 174
| Feature | Section 162 | Section 174 |
| Applicability | “Carrying on” a trade or business | “In connection with” a trade or business |
| Timing | Deductible when business is active | Deductible even in pre-revenue/startup phase |
| Scope | Ordinary/Necessary expenses (Marketing, Admin) | Research & Experimental expenditures in the laboratory sense |
| Software | Deductible only if operational/maintenance | Development costs explicitly included (post-TCJA) |
| Relation to R&D Credit | Not directly linked | Is the statutory basis for Qualifying Research Expenses (QREs) |
| Treatment 2022-2024 | Immediate Deduction | Mandatory Capitalization (5 or 15 years) |
The friction between these two sections became acute during the mandatory capitalization period (2022–2024). Taxpayers sought to reclassify costs as Section 162 expenses to avoid the 5-year amortization of Section 174. However, the IRS maintains a strict interpretation that if a cost is for the elimination of uncertainty or software development, it must be treated under Section 174, regardless of the taxpayer’s preference.6
2.2 Section 174 and Section 41: The Funnel of Qualification
The relationship between Section 174 and the Section 41 R&D Tax Credit is best understood as a funnel. Section 174 is the wide opening of the funnel, capturing a broad array of costs associated with the development process. Section 41 is the narrow spout, allowing a tax credit only for a specific subset of those costs.
The Four-Part Test of Section 41:
To qualify for the R&D credit, an activity must meet four criteria:
- Section 174 Test: The expenditure must be eligible for treatment under Section 174.
- Technological in Nature: The activity must rely on the principles of physical or biological science, engineering, or computer science.
- Permitted Purpose: The activity must intend to create a new or improved business component (product, process, software, formula).
- Elimination of Uncertainty: The activity must seek to eliminate uncertainty regarding capability, method, or design.11
Cost Inclusion Differences:
While Section 174 includes indirect costs such as overhead (rent, utilities, depreciation of lab equipment) and essentially all software development costs, Section 41 is restricted to “Qualified Research Expenses” (QREs), which are limited to:
- In-house wages for researchers and direct supervisors.
- Supplies used in the conduct of research (excluding capital assets).
- 65% of contract research expenses paid to third parties.
Therefore, a company will always have a higher Section 174 expense number than its Section 41 QRE number. For example, a software company might have $2 million in Section 174 expenses (including rent for the server room and allocable overhead) but only $1.2 million in Section 41 QREs (wages and cloud computing costs). This distinction became painful in 2022, as companies had to capitalize the larger Section 174 amount while only receiving a credit on the smaller Section 41 amount.3
3. The Definition of R&E Expenditures: Scope and Nuance
The IRS regulations under Section 1.174-2 provide the definitive guidance on what constitutes a research or experimental expenditure. Understanding these definitions is critical for compliance, especially given the differing treatment of domestic versus foreign research under the OBBBA.
3.1 The “Uncertainty” Requirement
Expenditures qualify under Section 174 if they are for activities intended to discover information that would eliminate uncertainty concerning the development or improvement of a product. Uncertainty exists if the information available to the taxpayer does not establish the capability or method for developing or improving the product or the appropriate design of the product.12
This definition encompasses both “blue sky” research (attempting to discover something entirely new) and “applied” research (attempting to improve an existing product’s performance, reliability, or quality). Crucially, the success of the project is irrelevant. Section 174 applies to the attempt to eliminate uncertainty, not the achievement of a solution. Thus, costs associated with failed projects (“dry holes”) are fully subject to Section 174 treatment. Under the TCJA rules (2022-2024), these failed project costs could not be written off upon abandonment but had to continue amortizing—a harsh rule that the OBBBA modified only for foreign research dispositions post-May 2025.7
3.2 Software Development: A Statutory Absolute
The TCJA added Section 174(c)(3), stating that “any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.” This statutory inclusion effectively removed the “uncertainty” requirement for software. If an activity is “software development,” it is automatically a Section 174 cost.2
IRS Notice 2023-63 provided interim guidance on this definition, distinguishing between “development” and “maintenance.”
- Development: Designing, coding, and testing new functions, features, or upgrades. This includes the conversion of legacy systems where new code is written.
- Maintenance: Activities that do not give rise to upgrades and enhancements, such as debugging to return software to its original operational state or configuring off-the-shelf software without modifying the underlying code.
For companies in the SaaS (Software as a Service) sector, this creates a heavy documentation burden. Every sprint and ticket must be categorized: is this a bug fix (Section 162, fully deductible) or a feature enhancement (Section 174, potentially amortizable if foreign)?.17
3.3 Exclusions from Section 174
The regulations also specifically exclude certain activities from Section 174 treatment, which allows them to be deducted immediately under Section 162. These exclusions include:
- Quality Control Testing: Routine testing of materials or products for quality control.
- Efficiency Surveys and Management Studies: Activities related to operational efficiency rather than technological development.
- Consumer Surveys and Market Research: Costs incurred to determine consumer preference or market feasibility.
- Literary or Historical Research: Research that is not technological in nature.
- Acquisition of Another’s Patent: Purchasing an existing patent is a capital expenditure amortizable under Section 197, not Section 174.2
4. The One Big Beautiful Bill Act (OBBBA): A New Era
The enactment of the OBBBA in July 2025 marked a pivotal moment in U.S. tax policy, reversing the mandatory capitalization regime for domestic research that had been in place since 2022.
4.1 Section 174A: Domestic Expensing
The OBBBA introduced Section 174A, which explicitly allows for the immediate deduction of “domestic research or experimental expenditures” paid or incurred in taxable years beginning after December 31, 2024.
- Definition of Domestic: The expenditure must be for research conducted within the United States, Puerto Rico, or any possession of the United States.
- Elective Capitalization: While expensing is the default, Section 174A(c) allows taxpayers to elect to capitalize domestic R&E expenditures and amortize them over a period of not less than 60 months. This election is binding for the year made and all subsequent years unless revoked with IRS consent. This option is strategically valuable for companies with expiring tax credits or NOLs who wish to manage their taxable income levels.7
4.2 The Foreign Research Penalty
The OBBBA retained the TCJA’s treatment of foreign research. Expenditures attributable to research conducted outside the U.S. must be capitalized and amortized ratably over a 15-year period. This creates a significant tax wedge between domestic and foreign engineering talent.
- Example: A U.S. company hiring a developer in London for $150,000 incurs a cost that provides only a $10,000 deduction in the first year ($150k / 15 years), whereas hiring a developer in Austin, Texas, for the same amount provides a $150,000 deduction.
- Basis Recovery on Disposition: The OBBBA amended Section 174(d) regarding foreign research. For property disposed of, retired, or abandoned after May 12, 2025, no deduction is allowed for the unamortized basis. Instead, the amortization must continue for the remainder of the 15-year term. This effectively locks in the tax penalty for offshoring research, even if the offshore project is a failure.2
4.3 Retroactive Relief for Small Businesses
A cornerstone of the OBBBA is the retroactive relief provided to “Eligible Small Businesses.” These are defined as taxpayers with average annual gross receipts of $31 million or less for the three-taxable-year period ending with the prior tax year, who are not tax shelters.9
The Retroactive Mechanism:
Eligible small businesses can elect to apply Section 174A retroactively to tax years beginning after December 31, 2021. This allows them to amend their 2022, 2023, and 2024 tax returns to fully deduct the domestic R&E costs that were previously capitalized.
- Impact: This provision effectively erases the adverse impact of the TCJA capitalization era for small businesses. It will likely result in substantial tax refunds for startups that paid income tax during those years due to the disallowance of their R&D expenses.
- Deadline: The election must be made within one year of the enactment of the OBBBA, typically by filing amended returns by July 2026.21
4.4 Accelerated Recovery for Large Taxpayers
Taxpayers who do not meet the small business definition cannot amend their prior year returns. However, the OBBBA provides a mechanism to recover the “stranded” basis of their 2022–2024 domestic capitalized costs.
- Transition Rule: For domestic R&E expenditures paid or incurred during the 2022–2024 period, taxpayers can elect to deduct the remaining unamortized basis in the first taxable year beginning after December 31, 2024 (i.e., the 2025 return).
- Alternative Two-Year Spread: Alternatively, taxpayers can elect to deduct the remaining basis ratably over two years (2025 and 2026). This option helps smooth the impact on financial statements and tax attributes.23
5. Procedural Guidance: Navigating Rev. Proc. 2025-28
The IRS issued Revenue Procedure 2025-28 on August 28, 2025, to provide the administrative framework for implementing the OBBBA’s changes. This guidance is essential for tax practitioners filing returns in late 2025 and 2026.
5.1 Mechanics of the Small Business Election
For eligible small businesses, Rev. Proc. 2025-28 offers flexibility.
- Amended Returns: Taxpayers can file amended returns (Form 1040-X or 1120-X) for 2022 and 2023 to claim the retroactive deduction.
- Superseding Returns for 2024: For the 2024 tax year, if the original return deadline has not passed (including extensions), taxpayers can file a “superseding” return. The Rev. Proc. grants an automatic extension, treating returns filed by the extended due date as superseding returns, which replace the original filing entirely. This avoids the administrative complexity of an amendment.25
- Statement Requirement: The election is made by attaching a statement titled “Filed Pursuant to Section 3.03 of Rev. Proc. 2025-28” to the return, detailing the taxpayer’s name, ID number, and the applicable years.26
5.2 Automatic Method Changes
For large taxpayers adopting the new Section 174A expensing method and the accelerated recovery of prior costs, the Rev. Proc. authorizes an automatic change in method of accounting.
- Waiver of 5-Year Scope Limitation: Typically, taxpayers cannot change their accounting method for the same item more than once in five years. Rev. Proc. 2025-28 waives this limitation, acknowledging that the legislative volatility compelled taxpayers to change methods repeatedly.1
- Modified Section 481(a) Adjustment: The recovery of the 2022–2024 basis is handled through a modified Section 481(a) adjustment. Unlike a standard adjustment which might be spread over four years, this negative adjustment (deduction) is taken entirely in the year of change (2025) or over two years as elected.29
6. Interaction with the R&D Tax Credit (Section 41) and Section 280C
One of the most complex areas of R&D tax law is the interaction between deductions and credits. The OBBBA restores the traditional pre-TCJA planning dynamics.
6.1 The Double-Dip Rule (Section 280C(c))
To prevent a taxpayer from receiving a double benefit (a deduction and a credit) for the same dollar of expense, Section 280C(c) requires that the Section 174 deduction be reduced by the amount of the Section 41 credit claimed.
- Example: A company has $1,000,000 in R&D expenses and claims a $100,000 credit. Under the standard rule, it can only deduct $900,000 of expenses ($1,000,000 – $100,000 credit).
6.2 The Reduced Credit Election
Taxpayers can avoid reducing their deduction by electing under Section 280C(c)(3) to take a reduced credit. The credit is reduced by the maximum corporate tax rate (21%).
- Example: The company elects the reduced credit. It gets a credit of $79,000 ($100,000 x 79%) but retains the full $1,000,000 deduction.
Strategic Shift Under OBBBA:
During the mandatory capitalization era (2022–2024), reducing the deduction was less painful because the deduction was amortized over five years. Therefore, many companies stopped making the reduced credit election to maximize current cash flow from the gross credit.
With the return of immediate expensing in 2025, the Section 174 deduction is once again fully valuable in the current year. Consequently, it generally becomes advantageous to make the reduced credit election again to preserve the full 100% immediate deduction.22
6.3 Retroactive 280C Elections for Small Businesses
A significant trap exists for small businesses making the retroactive election. If they claimed the gross credit in 2022 (because the deduction was amortized), but now amend the return to claim immediate expensing, they would be forced to reduce their deduction by the full gross credit—potentially creating taxable income or reducing their NOL.
Rev. Proc. 2025-28 solves this by allowing a late Section 280C election. Small businesses amending their 2022–2024 returns can retroactively elect the reduced credit, ensuring that their newly restored deduction remains intact.30
7. State Tax Implications
Federal tax changes do not automatically flow through to state tax returns. The impact of the OBBBA on state tax liability depends on each state’s conformity method.
7.1 Rolling vs. Static Conformity
- Rolling Conformity States: States like Massachusetts and New York generally conform to the IRC as currently enacted. For these states, the OBBBA’s immediate expensing should apply automatically, simplifying compliance.
- Static Conformity States: States like California, Texas, and Florida conform to the IRC as of a specific fixed date (e.g., January 1, 2024). Unless these states pass specific legislation to adopt the OBBBA provisions, taxpayers in these jurisdictions may face a decoupling scenario. They might expense costs for federal purposes but continue to amortize them for state purposes, requiring complex schedule M adjustments.14
7.2 Specific State Decoupling
Some states explicitly decoupled from the TCJA’s Section 174 capitalization rules early on.
- Tennessee: Enacted legislation in 2022 to allow immediate expensing, decoupling from the federal mandate.
- Wisconsin: similarly allowed continued expensing.
- California: Generally conforms to the IRC as of 2015, meaning it never adopted the TCJA capitalization rules and has allowed expensing throughout the 2022–2024 period.
For these states, the OBBBA brings federal law back into alignment with state law, eliminating the need for favorable state-side adjustments.14
8. Detailed Examples and Case Studies
To illustrate the practical application of these rules, we examine three distinct taxpayer scenarios.
Case Study 1: The Pre-Revenue Biotech Startup (Small Business)
Profile: “BioGen Inc.” is developing a new drug. It has $0 revenue and incurred $5 million in domestic R&D expenses in each of 2022, 2023, and 2024.
- Pre-OBBBA: BioGen capitalized these costs. It had a growing deferred tax asset but limited NOLs.
- Post-OBBBA Action: BioGen meets the $31M gross receipts test. It files amended returns for 2022 and 2023 and a superseding return for 2024.
- Result: It retroactively expenses $15 million. This creates a massive NOL carryforward of $15 million (plus other expenses). While this doesn’t generate a cash refund (since it paid no tax), it significantly increases the NOL asset available to offset future profits or to be monetized in an acquisition. BioGen also makes the late 280C election to ensure its payroll tax credit (claimed under the startup provision) doesn’t reduce this NOL unnecessarily.21
Case Study 2: The Mid-Sized Software Firm
Profile: “AppDev Corp” has $100 million in revenue. It spent $10 million on domestic software development in 2022, 2023, and 2024. It capitalized these costs.
- Unamortized Basis: By the end of 2024, it has roughly $24 million in unamortized basis from these three years.
- 2025 Activity: It spends $12 million in 2025.
- Post-OBBBA Action: AppDev is too large for retroactive relief. It adopts the new method for 2025 (expensing $12 million). It also elects the accelerated recovery for the $24 million legacy basis.
- Result: In 2025, AppDev deducts $36 million ($12M current + $24M legacy). This likely wipes out its taxable income for the year, creating a tax holiday and a potential NOL carryback or carryforward.23
Case Study 3: The Global Manufacturer
Profile: “GlobalMfg” has domestic engineering teams and a testing facility in Germany.
- Expenses: $50 million domestic, $10 million foreign annually.
- Post-OBBBA Action: GlobalMfg expenses the $50 million domestic cost in 2025. However, it must capitalize the $10 million German testing cost and amortize it over 15 years.
- Strategic Shift: The tax director advises the CTO to move the testing facility to Puerto Rico. Since Puerto Rico is considered “domestic” under Section 174A, shifting the $10 million spend there would convert it from a 15-year asset to an immediate deduction.7
9. Next Steps: Clarification and Compliance Strategy
The reintroduction of Section 174 expensing is a major opportunity, but it requires immediate and precise action. Taxpayers and their advisors should take the following steps to clarify their position and maximize the utility of the new law.
Step 1: Segmentation of Costs
Taxpayers must rigorously segment their R&E expenditures.
- Geographic Segmentation: Implement accounting codes to track “Domestic” vs. “Foreign” labor and contractor spend. Verify the physical location of remote workers.
- Activity Segmentation: Distinguish between “Software Development” (Section 174) and “Software Maintenance” (Section 162). Proper classification of maintenance costs can remove them from the 174 bucket entirely, avoiding any potential foreign capitalization issues and simplifying 280C calculations.18
Step 2: Modeling the Elections
Do not assume that immediate expensing is always the best answer.
- Accelerated Recovery: Model the impact of taking the full legacy deduction in 2025 vs. spreading it over 2025-2026. If the corporate tax rate is expected to rise in 2026, or if Section 382 limitations apply, the spread might be superior.
- Small Business Retroactivity: Assess the administrative cost of amending three years of returns against the cash benefit of the refund. For some firms with small tax liabilities, the professional fees for amending might outweigh the refund.24
Step 3: Review Section 280C Strategy
Revisit the Section 280C reduced credit election for the 2025 tax year. With the 100% deduction restored, the reduced credit election is likely the mathematically optimal choice for most domestic taxpayers. Failure to make this election on a timely filed return is irrevocable and could lead to unnecessary tax leakage.22
Step 4: State Tax Analysis
Conduct a nexus study to determine state conformity. Identify states where the federal Section 174A deduction will be disallowed or modified. Prepare estimated tax payments for 2025 that reflect these disparities to avoid underpayment penalties.32
By following these steps, organizations can move beyond the confusion of the TCJA era and leverage Section 174 as it was intended: as a powerful engine for American innovation and growth.
Table 2: Summary of Actionable Items by Taxpayer Type
| Taxpayer Type | 2022-2024 Action | 2025 Action | Key Risk |
| Small Business (<$31M) | Amend returns to retroactively expense & claim refunds. | Expense current costs. Make late 280C election. | Missing the 1-year amendment window (July 2026). |
| Large Corp (Domestic) | No amendments. Elect accelerated recovery (1 or 2 years) in 2025. | Expense current costs. Elect 280C reduced credit. | Creating an unusable NOL due to Section 382 limits. |
| Large Corp (Global) | No amendments. Recover domestic basis only. | Expense domestic. Capitalize foreign (15 years). | Misclassifying foreign contractors as domestic. |
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What is the R&D Tax Credit?
The Research & Experimentation Tax Credit (or R&D Tax Credit), is a general business tax credit under Internal Revenue Code section 41 for companies that incur research and development (R&D) costs in the United States. The credits are a tax incentive for performing qualified research in the United States, resulting in a credit to a tax return. For the first three years of R&D claims, 6% of the total qualified research expenses (QRE) form the gross credit. In the 4th year of claims and beyond, a base amount is calculated, and an adjusted expense line is multiplied times 14%. Click here to learn more.
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