The U.S. Treasury and IRS issued on Thursday proposed regulations that would clarify tax code policies on when firms are able to deduct expenses for research and experimentation.
“Today’s proposed rules provide the tax certainty necessary to reward businesses that invest in innovation,” Assistant Secretary for Tax Policy Mark J. Mazur said. “Research and development are critical to addressing the challenges we face as a nation, and we will continue to pursue opportunities to clarify the tax code in a way that promotes economic growth and job creation.”
The proposed rules would designate that subsequent actions taken by the business with the resulting product will have no effect on the eligibility of R&E expenditures for a deduction, if the expenditures otherwise qualify as such. The proposal also clarifies how the rules are applied to production costs and depreciable property, as well as define the term “pilot model.”
Additionally, the proposed regulations would apply to any tax year ending on or after the Treasury publishes its adoption of the rules in the Federal Register.
Comments on the proposed regulations will be accepted for 90 days, after which time the IRS will review the comments and seek to finalize the rules.