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March 9, 2022
1 min read
Status on R&D Capitalization Rules - Keeping it brief.
What? Potential changes to the R&D Capitalization rules
When? Wednesday, March 9, 2022
What should I know? The 2700+ page omnibus bill just dropped in Congress last night, March 8, and must be voted on before Friday, March 11 to avoid a government shutdown.
This bill could be the last best chance for lawmakers to repeal or delay the implementation of R&D Capitalization rules that went into effect on 1/1/2022. It has decent bipartisan support - and this bill is expected to pass without much debate as both sides want to get financial support for Ukraine out the door quickly.
Unfortunately, it appears that the R&D capitalization provisions were dropped from the bill at the last minute due to Progressive Democrats wanting to use business tax breaks as a bargaining chip to help them negotiate for extension of child tax credits and other relief to working families. There's still a chance that the R&D capitalization law will get repealed retroactively back to the beginning of the year, but we may not see that happen for at least a few more months.
I want to know more! https://rollcall.com/2022/03/08/negotiators-working-through-final-issues-on-omnibus-text/
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At Neo.Tax, we talk to scores of controllers and Heads of Tax every month. One thing is clear: the old way of filing for R&D Tax Credits has become a burdensome pain. You’d think that so many businesses moving their project management and payroll online, via software like Jira, Rippling, and Workday would simplify the filing process. But, in some ways, it’s made it harder.
The payroll and project management output is a rich dataset, but it’s also, well, voluminous. If that data is not inputted perfectly—and let’s be honest, it never is—that means it’s up to a controller or Head of Tax to sift through the mess to create the filing. Engineers need to be trained (and retrained) on the correct project tagging process, and then cajoled to sort out any inputting errors. It’s a waste of time for your filer and your engineering teams.
Which is why Neo.Tax created our AI system.
No one starts a company because they’re excited about accounting and taxes. Well, no one except the Neo.Tax founders :)
But for those other 99% of founders, here’s a cheat sheet and guide to ASC 350-40, an accounting guideline that pertains to Internal-Use Software Development Costs. Maybe you’ve never heard of ASC 350-40, but you should get to know the rule if you ever plan to go public.
