By Kenneth H. Bridges, CPA, PFS June 2023
Historically, “research and experimentation” expenditures have enjoyed very favorable tax treatment. You could elect to deduct such expenses immediately (or capitalize and amortize if more beneficial), the expenses are not subject to the general rules requiring capitalization of start-up expenses, and you can also receive Federal and state tax credits for the expenses.
As I have discussed at greater length in previous articles, in an effort to pay for the tax cuts included in the Tax Cuts and Jobs Act legislation enacted in late 2017, Congress included a provision (first effective for 2022) which requires that R&D expenses be capitalized and amortized over 5 years (15 years for research conducted outside the U.S.) rather than deducted immediately. While Congress has not yet acted to repeal this very bad rule, thankfully the State of Georgia has enacted legislation “decoupling” from the Federal rule, whereby R&D expenses can be deducted immediately in computing Georgia taxable income.
Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP, an Atlanta-based CPA firm.
This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice. The article provides only a very general summary of complex rules. For advice on how these rules may apply to your specific situation, contact a professional tax advisor.