Tax Reform Series 32 – Research and Experimental Expenditures


Plain Language of Change:

  • In tax years beginning after December 31, 2021, amounts paid or incurred for most research expenditures are amortized ratably over 5 years
  • The prior rule which allowed taxpayers to currently deduct research and experimental expenditures is eliminated.
  • Any amount paid or incurred in connection with the development of any software is treated as a research or experimental expenditure for purposes of this amortization provision
  • A 15-year amortization period now applies to research or experimental expenditures which are attributable to foreign research
  • A taxpayer must continue to amortize its research or experimental expenditures even if the property with respect to which the expenditures were paid or incurred is disposed, retired, or abandoned during the amortization period. No deduction of the unamortized portion of the expenditures is allowed

Detailed Analysis of Research and Experimental Expenditures

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