R&D Capitalization Is Here To Stay...

This whole year, founders, CFOs, and accountants have been staring down a new tax paradigm. When former President Donald Trump passed his Tax Cuts and Jobs Act in 2017, it included a five-year ticking time bomb that would completely change the way R&D expenses could be deducted. In earlier posts, we’ve outlined how changing R&D from a deductible expense to a capitalized one would cost companies of all sizes dearly on Tax Day.

There was hope that legislators could overturn this costly tax law before the 2023 tax year (and even pass a law that would undo the effect on the 2022 tax year), but the lame-duck Congress was unable to strike a deal. So, for the foreseeable future, R&D Capitalization is here to stay.

As we explained in our post “R&D Capitalization Has Arrived (For Now)—Here's What You Need To Know,” the new law changes the way R&D spend can be deducted, which completely changes the calculus for pre-revenue startups. Up until 2023, R&D spend could be deducted all at once, which allowed companies in the red to stack NOLs. Now, R&D spend must be amortized fractionally over the course of 5 or 15 years, depending on whether the expenses are domestic or international. That means, tax bills will rise and NOLs will become harder to compile; it’s bad news for innovative companies.

At Neo.Tax, we’ve been preparing for this eventuality. We view it as our duty to make taxes work for innovative companies, so we’re proud to say that Neo.Tax has the only software solution that can cover all aspects of R&D tax strategy: from credits to amortization, and everything in between.

We’re the only company on the market that specifically addresses this new tax change. Fortune 500 companies are treating this as a Big Forkin’ Deal, so it’s essential to get ahead of this before it’s too late. Get in touch today, or come to our weekly webinar to learn more about how to weather this coming tax storm!