Georgia and Indiana Latest States to Decouple from Federal Section 174 Amortization Requirement
As taxpayers continue to wonder if there will be a repeal or delay for the federal Section 174 amortization requirement, more states are taking action and passing legislation to decouple from this tax provision. For federal income tax purposes, taxpayers must begin amortizing their Section 174 specified research and experimental costs over five years for domestic research and 15 years for foreign research to determine their federal taxable income for tax years beginning after December 31, 2021. Last week, Georgia and Indiana both enacted tax legislation that updated their Internal Revenue Code conformity dates, but also specifically decoupled from the Section 174 amortization requirement. This will allow taxpayers in these states to fully deduct their research and experimental costs when determining their state tax liability and is retroactive for the 2022 tax year. Georgia and Indiana join other states, such as Wisconsin, Tennessee, and others, that are allowing full research and experimental deductions and providing welcome relief for taxpayers. We will continue to monitor this as well as other Section 174 news and provide updates as they arise.
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David Seibel is an engineering senior manager for the R&D Tax Credit Practice. He combines his knowledge of tax law with his engineering expertise to maximize companies’ research credits and reduce their overall tax burdens.
David ensures clients are receiving studies that meet the highest level of quality. He conducts fieldwork, produces detailed technical calculations, and builds narratives that accurately reflect each company’s research and experimentation activity.