Financial Services Impacted by New R&D Capitalization Requirements

This blog was authored by my colleague Sean Croteau, a director in our federal tax strategies group.

There are new rules requiring the capitalization of Section 174 costs that apply across many industries, including financial services. Banks, insurance companies, and other players in the financial services space often spend significant resources on research and development (R&D), generally related to software development costs. Prior to 2022, these costs were expensed without much, if any analysis or review. Things have changed dramatically, as required by the Tax Cuts and Jobs Act. Companies must now capitalize and amortize United States based R&D costs over five years and foreign research costs over 15 years.

This new requirement can have a significant cash tax impact in 2022 and beyond. See the full article with the link below for more information on this important capitalization change impacting companies conducting R&D.

A Costly Situation for Businesses: Section 174 Capitalization is Here : 2023 : Articles : Resources : CLA (CliftonLarsonAllen) (claconnect.com)