Join Jamie Overberg and Stacey Roberts for CPE as they delve into how federal legislative changes to the ability to deduct R&D expenses impact state income taxes. Our R&D credit veterans will review the current federal requirement to capitalize R&D, states’ responses to these changes, best practices for deducting or amortizing R&D expenses in conforming and nonconforming states, and the state of proposed legislative corrections.
State Responses to New Section 174 Requirements for R&D: Conforming and Nonconforming States
Thursday, August 29, 2024 | 11:00 – 12:50 am MT | 1:00 – 2:50 pm ET
A live 110-minute CPE webinar with interactive Q&A
Before the Tax Act of 2017, research and development (R&D) costs were deductible. Beginning in 2022, these costs must be capitalized and amortized over five years if they are domestic expenses or 15 years if foreign. Compounding the significant increase in taxes due by businesses with R&D are the additional state taxes that could be due. States may conform to federal legislation immediately, as of a specific date, or only with specific code sections. Congress may reinstate the ability to expense R&D retroactively but states that follow federal legislation will still comply at varying dates.
In states that have not conformed, opportunities exist to expense R&D at the state level. California allows a full deduction for R&D expenditures and Tennessee has decoupled from the new Section 174 rules. Some states have different rules based on the entity type. Flow-through entities in Pennsylvania can expense R&D costs while corporations cannot. SALT advisers working with multistate entities must understand the impact of recent Section 174 revisions on state taxes.
Jamie Overberg, Partner at TaxOps Minimization and Stacey L. Roberts, CPA, State and Local Tax Director at TaxOps, will discuss how federal legislative changes to the ability to deduct R&D expenditures impact state income taxes. Our R&D credit veterans will review the current federal requirement to capitalize R&D, states’ responses to these changes, best practices for deducting or amortizing R&D expenses in conforming and nonconforming states, and the state of proposed legislative corrections.
The panel will cover these and other key issues:
- What costs are included in the definition of R&D?
- Which states are nonconforming states and how is the deduction handled in these states?
- How is a change in accounting method made under Revenue Procedure 2024-12?
- What is the current status of retroactive changes to restore the R&D deduction?
About the Presenters
Jamie Overberg
Partner
TaxOps Minimization
As a tax partner for TaxOps Minimization, Ms. Overberg specializes in executing and managing a wide range of tax minimization strategies, including all aspects of the Research and Development tax credit as well as financial reporting requirements under FAS 109 and Fin 48. In addition, she works with Section 199, Section 263A, and Section 382 analysis, calculations, and reporting. She works primarily with clients in the automotive, engineering, manufacturing, software, biotech and oil and gas sectors, and has worked on numerous R&D tax controversy engagements.
Stacey Roberts, CPA
Director, State and Local Tax
TaxOps
Ms. Roberts has been making state and local tax (SALT) less taxing for thousands of businesses over the last 25 years. As a director of the SALTovation team at TaxOps, she guides dynamic businesses through compliance and strategic planning focused on minimizing risk and strengthening tax positions. Ms. Roberts honed her specialty at Andersen Worldwide/Andersen LLP, KPMG and Deloitte before moving in-house with a Fortune 500 company to administer state and local tax. She has also led the national SALT practice at a regional firm. Ms. Roberts is a member of the Colorado Legislative Task Force Concerning Tax Policy and a frequent speaker, instructor and author on SALT issues for industry and professional organizations.
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