The Current State of R&D: Internal Revenue Code Section 174 and Other Updates

While Congress and the IRS sort out the tax treatment of R&D expenses, taxpayers are burdened with uncertainty and increased tax bills.

Taxpayers expanding or improving their businesses through research and development (R&D) activities can claim federal and state tax benefits such as tax credits and sales tax benefits. At the same time, they are penalized for those same activities through delayed deductions for R&D expenditures. Even if taxpayers do not claim credits, they may be required to capitalize R&D expenses and delay deductions for up to fifteen years.

This resource summarizes the current legal framework for treating research and development expenses as of July 22, 2024.

The subjects covered are:

• Research and Development Tax Credit Impact
• Capitalization of R&D expenses under IRC section 174
• Administrative guidance related to IRC section 174
• Proposed changes to Form 6765
• Current legislation update related to IRC section 174
• Summary of recent court case implications

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