TaxOps Partners Jamie Overberg and Sean Espy share their expertise on R&D Credits for Software Companies in this live webinar.
R&D Credits for Software Companies
Online Only | 2.0 Credits
Tuesday, June 9 | 11:00 AM MT, 1:00 PM ET
Big Changes for Software Developers: Navigating R&D Credits in the OBBBA Era
TaxOps Partners Jamie Overberg and Sean Espy will provide businesses and their tax advisers with a practical discussion of how the R&D tax credit applies to software development activities. Topics covered include Section 41 criteria for R&D credits, credit requirements for non-internal-use software vs. internal-use software (IUS), and review new Section 174 considerations for software companies in light of the OBBBA (One Big Beautiful Bill Act).
Description
The R&D credit offers valuable benefits to all companies; however, software developers must meet specific requirements to qualify. All software must satisfy a four-part test to be eligible for the R&D credit under IRC Section 41. In addition to the four-part test for software, IUS must also satisfy a three-part high-threshold innovation test under Treasury Regulation Section 1.41-4(c)(6). For IUS, a taxpayer must establish that:
(1) The software is innovative;
(2) The software development involves significant economic risk; and
(3) The software is not commercially available for use by the taxpayer in that the software cannot be purchased, leased, or licensed and used for the intended purpose without modifications… .
Tax practitioners and software companies must also consider the OBBBA revisions to Section 174 expenses. Formerly, TCJA removed the ability to expense R&D costs and required amortization of these expenditures. Most software companies, having historically expensed these costs, were significantly impacted by this legislation. Recently, the OBBBA restored the ability to expense R&D costs. However, transitioning from the old rules to the new requirements can be complicated. Recouping these lost deductions requires deducting prior unamortized costs over 1-2 years, amending tax returns, or expensing these deductions retroactively.
Additionally, many states have decoupled from OBBBA, adding another layer of complexity to these determinations. Software developers and their tax advisers need to understand the nuances of the R&D credit and Section 174 changes to take advantage of these tax-saving opportunities.
Listen as our knowledgeable federal tax experts breaks down the requirements for the R&D credit and Section 174 expenses for software developers and their advisers.
They will cover these and other critical issues:
- The impact of OBBBA on Section 174 deductions
- Software development activities that qualify for the R&D credit
- R&D tax credit computation methods: what to consider and the history of each approach
- Preparing and collecting documentation for audit readiness
After the presentation, there will be a live question and answer session with participants to answer your questions about these important issues directly.
Instructors:
Jamie Overberg
Partner, TaxOps Minimization
With over 20 years of Research & Development (R&D) credit experience, Jamie specializes in executing and managing all aspects of the R&D tax credit as well as a wide range of tax minimization strategies and financial reporting requirements under ASC 730, ASC 740 and Fin 48. Jamie also works with 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.
Sean Espy
Partner, TaxOps Minimization
Sean brings more than 25 years of consulting experience spanning public accounting, legal, and industry settings to complex tax minimization engagements. With his experience at top tier public accounting firms, Sean brings a rare combination of technical depth and practical insight to research credit studies.
Sean specializes in the identification and implementation of Research Credit Consulting. He has successfully implemented studies across a wide range of industries, including software, manufacturing, financial services, aerospace, software, food sciences, mining, medical devices, oil and gas refining, restaurant and retail, and renewal energies.
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