On September 8, the Internal Revenue Service (IRS) released Notice 2023-63, providing much anticipated guidance on the application of Section 174. The Notice addresses key issues for handling specified research or experimental (SRE) expenditures that are capitalized and amortized in accordance with the Tax Cuts and Jobs Act (TCJA) changes to Section 174.  Taxpayers can apply the rules of Notice 2023-63 to tax years ending after September 8, 2023, or apply these rules to an earlier tax year beginning after December 31, 2021.

Brooks Nelson, Partner and Strategic Tax Leader, and Sarah McGregor, Tax Director are joined by Tax Credit and Incentive Advisory Partners, Martin Karamon and Ron Wainwright, to discuss Notice 2023-63 and how this interim guidance clarifies certain questions about the application of Section 174.

Listen to learn more about: 

• 05:03 – Section 174 background
• 07:54 – Who should pay attention to Notice 2023-63
• 12:00 – Key terms in Notice 2023-63 
• 15:40 – What Notice 2023-63 says about funded research 
• 18:05 – Guidance on software development definition and activities
• 21:01 – Effective dates and open questions under Notice 2023-63

Related Guidance

• Recent Legislation and Section 174 Updates
• Section 174 New Requirements and Its Impact on Technology Companies
• Section 174 Research & Software Development Costs – A Guide to Compliance
• R&D Update: What’s Going On With Section 174?