174 R&E Expenses & Amortization

In 2017 as a part of the Tax Cuts and Jobs Act (TCJA), Congress passed a provision that required all taxpayers to begin amortizing their Section 174 Research & Experimental (R&E) expenses over a 5-year period using a half-year convention starting with tax years 2022.  This Congressional-authorized provision goes against taxpayers and its sole purpose was to help Congress balance the Congressional Budget Office (CBO) score back in 2017, and while there is overlap with Section 41 R&D Tax Credits, Section 174 R&E is a completely separate and independent Code section.

Since Congress has yet to provide a “174” Fix”, all taxpayers need to determine their Section 174 R&E Expenses carefully to ensure that both the current amortization requirements are followed and optimal interplay with Section 41 R&D Credits are achieved.