Page 12 - JoFA_Jan_Apr23

TAX

five years, or 15 years if the expenditures relate to Claybon suggested the solution may lie in simple
foreign research. (For more, see “Amortizing R&E and clear communication with clients.
Expenditures Under the TCJA,” JofA, Nov. 2022.) “It is important to have a well-thought-out strat-
Ernst & Young’s National Department prin- egy of identifying research costs,” she said. “Whether
cipal and former U.S. Treasury attorney-adviser research results in a failure or success is not relevant
Alexa Claybon believes it’s a problem CPAs must to whether the costs are included in research costs
tackle head-on, particularly given the propensity capitalized under Sec. 174.”
for confusion. Multiple attempts, attracting bipartisan support,
“On both spectrums, CPAs must be careful not to have been made in Congress to delay or repeal R&E
exaggerate expenses. There’s also a tendency to equate amortization. However, at the time of this writing,
research expenses to credit expenses, so being careful Congress has yet to pass legislation on the mat-
and deliberate with your clients about what this ter, and a lack of regulatory guidance leaves many
means is vital,” Claybon said. questions unanswered (see the AICPA letter to IRS
This change will affect a variety of industries. Associate Chief Counsel Holly Porter, “Comments
Minimizing research expenses will be a vital strat- on Research & Experimental Expenditures Under
egy to offset the loss of current deductions caused Section 174” (May 26, 2022)).
by the requirement to amortize expenses over as “CPAs must undertake diligent and thorough
long as 15 years. analysis,” Claybon said. “There may even be some
“Manufacturing will be hit hardest. Yet this avenues where the taxpayer won’t have to amortize.
issue affects several industries, so CPAs need to be However, it’s very subtle, and taxpayers’ accountants
extremely careful in their advice,” Claybon warned. must think it through.” ■

Demonstrate your

expertise with an

AICPA credential.

If you have a specialized interest, you can build on
the value you offer your clients, firm or organization
by adding an AICPA Advisory Services credential.
We offer six in a variety of specializations to
increase your opportunities, credibility and earning
power. And inspire trust and confidence!

Learn more at aicpa.org/credentials

© 2021 Association of International Certified Professional Accountants. All rights reserved. 2103-62839

2103-62839 Credential Ads_CMYK.indd 2 4/29/21 9:48 AM