Articles
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Failed Senate 174 R&D Tax Law Vote on August 1st: What’s Next & How to Survive
August 20, 2024
The Senate vote on August 1st to restore R&D expensing failed. This article offers an analysis regarding when a 174 law fix is likely to occur. It highlights the impact on and importance of the professional innovation sector and its effect on the greater economy. It examines the Treasury's notices on 174 through the lens of the recent Supreme Court ruling overturning the Chevron deference that up until now agencies have enjoyed. Post Chevron, the regulations have to meet a higher bar that the notices fail to reach. A fresh look at 174 offers safety for engineer-to-order companies. Best practices are offered.
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R&D Tax Law: An Unanswered Question & New Insights
-By Jenna Tugaoen, Rick Kleban, and James Bean
June 3, 2024
There has been extensive commentary on the TCJA’s Section 174 amendment over the last 3+ years, but diligent analyses remain scarce due to limited resources in the accounting industry. This article assesses the assumption that Section 174 overrules all other code sections, such as Cost of Goods Sold. The conclusion is TCJA did not change the historical interplay between Section 174 and other code sections. In short, 174 does not override all other sections of the code, most notably, Cost of Goods Sold.
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Public Comment Regarding Notice 2023-63
-By Rick Kleban, Jenna Tugaoen, April Ponto, and James Bean
Submitted to the Internal Revenue Service, October 27, 2023
Treasury Notice 2023-63 was issued on September 8, 2023. In its public comment submission, Sycamore highlights that the notice contradicts congressional intent, has significant economic consequences, and misinterprets the purpose and application of Section 174. Importantly, the notice’s approach could stifle innovation, which calls for a re-evaluation to better align with the intended objectives of Section 174.
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New 9/8/23 IRS Guidance on 174: Some Silver Linings
-By Rick Kleban, Jenna Tugaoen, and James Bean
September 16, 2023
The new rules proposed by the IRS on Section 174 have caused great confusion and concern among Small Business Innovation Research (SBIR) companies. Specifically, SBIR businesses are faced with having to amortize its 174 expenses (Research & Experimentation). The silver lining is that the IRS changed the rules for Section 174 to such an extent that many will have amortization amounts that is 80% to 90% less than expected.
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The Full Accounting of 174 R&D Amortization Costs
-By Rick Kleban and James Bean
August 16, 2023
Changes to Section 174, which were implemented due to the passage of the TCJA, took effect in 2022 and are new to even veteran CPAs. Because Section 174 was never intended to determine a taxpayer’s tax return, the proper accounting methods are not well understood, and as a result, overstated, says Rick Kleban and James Bean of Sycamore Growth Group.
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Deciphering the IRS’s Two Tax Code Sections for R&D Expenses
-By Rick Kleban and James Bean
Published in Bloomberg Tax, June 21, 2023.
Understanding Section 174 and Section 41 of the tax code can help reduce compliance risks and avoid exposing clients to penalties during an audit, says Rick Kleban and James Bean of Sycamore Growth Group.
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Changing Research Tax Break Rules Will Harm Fewer Than Predicted
-By Rick Kleban, Daniel Reinier, and James Bean
Published in Bloomberg Tax, September 19, 2022
Changes to Internal Revenue Code Section 174 that took effect early this year have raised concerns, but most companies shouldn’t see a major upheaval to their tax picture, say Sycamore Growth Group’s Rick Kleban, Dainel Reinier, and James Bean.