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FAQ: Capitalization and amortization of R&D costs under new section 174 rules

Changes affect software development and federal, state and international taxes

Apr 24, 2023
Tax policy Consumer goods M&A tax services Mergers & acquisition Media & entertainment R&D tax credit Credits & incentives Life sciences Asset management Business acquisition Manufacturing Accounting methods Federal tax Professional services Private equity Government contracting International tax
Financial services Technology industry Business tax State & local tax

The required capitalization and amortization of research and development costs under the new section 174 rules are proving problematic, costly, and confusing for many middle market companies—especially those in industries and sectors heavily engaged in R&D and software development, such as life sciences and technology.

To help you better understand how the new rules affect your business, see below for the answers to frequently asked questions about the changes to section 174 and their ramifications for a wide range of tax and accounting issues.

Basics of the new tax treatment of R&D expenses under section 174

Identification and treatment of R&D expenses

Software development

State and local tax

International tax

Legislative processes, administrative guidance, and advocacy

See related insights

Want to understand how the changed law affects you?

Find out how RSM can provide guidance for your mandatory capitalization of research and experimental expenditures. Learn more with our insights to bring the issues into focus.

Want to learn more key implementation considerations in Section 174?

Join us for a webcast where RSM tax professionals Dave Kautter, Justin Silva, Christian Wood, and Danielle Kaufman will cover material that will help your organization understand the impact of this law change so you can prepare properly.