IRS Guidance Anticipated in 2024 for R&D Amortization

The Internal Revenue Service has announced plans to issue draft regulations in early 2024 in an effort to address taxpayer questions on recent changes to research and development (R&D) amortization.

The guidance will address changes made by the 2017 Tax cuts and Jobs Act to Internal Revenue Code (IRC) Section 174 which governs the amortization of R&D expenditures. These changes removed any possibility of deducting R&D costs in full and instead required companies to amortize them over five years.

The anticipated guidance will build on a notice (Notice 2023-63) recently issued which stated the agency is working on regulations on how to amortize certain costs including software development and contracts. Additional guidance will explore foreign vs. domestic research.

In the September notice, the IRS asked for feedback on whether additional clarity is needed to better define specified research and experimental, or SRE, expenditures and how to properly allocate expenses to SRE activities or if safe harbors should be developed to address that issue.

Open questions also remain on whether there are more appropriate ways to define software development costs and if special considerations should be given to research conducted under contracts, including if special rules are needed for contracts involving foreign research, the notice said.

Taxpayers remain hopeful that these amortization requirements will be reversed. There are, as of now, two bills that have been introduced in an effort to reverse amortization requirements and support innovation in the nation. These include the bipartisan American Innovation and Jobs Act re-introduced by U.S. Senators Maggie Hassan (D-NH) and Todd Young (R-IN) and the American Innovation and R&D Competitiveness Act reintroduced by Reps. Ron Estes (R-Kansas) and John Larson (D-Connecticut).

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at or contact your usual Swanson Reed representative.

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