The Senate Vote & Section 174 Expense Capitalization

On August 1^st, the Senate voted against the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) by a vote of 48-44. The bill, which previously passed the House overwhelmingly 357 to 70, would have restored crucial research and experimentation (“R&E”) deductions for taxpayers, as well as other tax relief for businesses. Specifically, if passed, the new provisions would have allowed taxpayers to immediately deduct R&E costs, delaying the capitalization requirement for domestic R&E expenses until December 31, 2025. However, as a result of the Senate’s vote, taxpayers will continue to be required to capitalize and amortize IRC § 174 R&E costs for tax years ending after December 31, 2021 over five or fifteen years, depending on whether research is domestic or foreign.

Looking Forward

The 119th Congress may revisit potential legislation related to provisions of H.R. 7024 following the election or during the new session in January of 2025. However, with a substantial portion of the Tax Cuts and Jobs Act provisions set to expire at the end of 2025, the focus will likely be on new legislation.

In the meantime, with the taxpayer requirement to capitalize and amortize R&E expenditures remaining in effect, working with CTI’s seasoned professionals will help you navigate qualification and quantification of expenses necessary to comply with the current tax code.
If you have any questions, contact CTI today.