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Jim Gadwood Discusses Accounting Method Change for R&E Expenditures in Tax Notes

"More Procedural Guidance on Research Expensing May Be Needed"

Tax Notes

Jim Gadwood was quoted in Tax Notes regarding Revenue Procedure 2023-8, which allows taxpayers to use the automatic accounting method change procedures to capitalize research and experimentation (R&E) expenditures for 2022. While R&E expenditures were previously currently deductible, the 2017 Tax Cuts and Jobs Act (TCJA) required taxpayers to capitalize and amortize R&E expenditures starting in 2022. The TJCA made clear that the change from currently deducting to capitalizing was an accounting method change. Gadwood said the revenue procedure resolves uncertainties taxpayers had about whether they would have to follow the non-automatic change procedures by the end of 2022 to request Internal Revenue Service consent to implement this accounting method change.