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New Bill Sparks Hope for R&E Amortization

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The Tax Relief for American Families and Workers Act of 2024 is bringing new hope to the nation’s innovators. Announced by House Ways and Means Committee Chairman Jason Smith (MO-08) and Senate Finance Committee Chairman Ron Wyden (D-OR), the common sense, bipartisan, bicameral tax framework promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.

Wyden stated that his “goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done.”

Many businesses were drastically affected when the Tax Cuts and Jobs Act (TCJA) came into effect, requiring research and experimental (R&E) costs to be amortized rather than expensed. This legislation required domestic expenditure to be amortized over 5 years and foreign expenditure to be amortized over 15 years.

U.S. Senator Maggie Hassan (D–NH) originally introduced the bipartisan legislation to restore the R&D deduction. Now, in an announcement made on January 16, Hassan has released a statement on the bipartisan tax deal.

“The bipartisan deal we have reached to restore the R&D tax deduction and provide a tailored expansion of the child tax credit will help drive innovation here in America and help children and families thrive. I have been strongly pushing to incentivize American R&D since first introducing bipartisan legislation in 2020 to restore the R&D deduction, and with the clear growing bipartisan support in both the Senate and the House, I will keep working with my colleagues and the business community to get this deal done.”

A technical summary of the entire bill can be found here, and goes into detail for efforts into American Innovation and Growth as well as Tax Relief for Working Families and Increasing Global Competitiveness, amongst others.

A summary of the bill covering American Innovation and Growth follows.

Currently, R&E expenses paid or incurred in tax years beginning after December 31, 2021, are required to be deducted over a five-year period. The new provision will delay the date when taxpayers must begin deducting their domestic R&E costs until taxable years beginning after December 31, 2025. Therefore, taxpayers may deduct currently domestic research or experimental costs that are paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2026.

With the House scheduled to be in recess during the week of January 22, the earliest the House could hold a floor vote would be the week of January 29. The legislation may be a candidate for the “suspension” calendar, requiring a two-thirds majority vote for passage. The House currently is composed of 220 Republicans and 213 Democrats (with two vacant seats that had been held by Republicans). A two-thirds majority vote would require the bipartisan support of at least 286 House members.

If passed, this could bring relief to spring filers, removing amortization requirements for 2023 timely-filed Spring filers.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

IRS Releases Additional Guidance for Sec 174 Amortization Rules

The IRS released Notice 2024-12 (released December 22, 2023) to clarify a previous notice and provide guidance on the Amortization of Specified Research or Experimental Expenditures under Section 174. Simultaneously, the IRS released Revenue Procedure 2024-9, providing modified and new procedures for changing accounting methods for the capitalization and amortization of research or experimental expenses (SRE expenses), including SRE expenses allocable to section 460 long-term contracts.

The previous notice, Notice 2023-63, was released in late 2023 and provided proposed, interim guidance under the new section 174 rules that require capitalization and amortization of SRE expenses.

Notice 2024-12

Removes the requirement that a taxpayer must apply all of the proposed rules in Notice 2023-63 in order to rely on any of the rules in the notice. This means taxpayers may now choose to rely on only the proposed rules (in Notice 2023-63, as modified by Notice 2024-12) that benefit it;
Clarifies the proposed rules to determine whether a research provider under a research contract has SRE expenses, by providing that if the research provider does not bear financial risk under the contract but obtains a right to exploit or otherwise use the resulting SRE product, the research provider does not have to treat its research service costs as SRE expenses as long as the obtained right qualifies as an “excluded SRE product right.” Notice 2024-12 provides that an excluded SRE product right is a right that is separately bargained for and that arises from consideration other than the cost paid or incurred by the research provider to perform the SRE activities under the research contract.
Clarifies that rules allowing for current deduction of software development costs, as provided in Rev. Proc. 2000-50, are obsolete for costs paid or incurred in tax years beginning after Dec. 31, 2021, but remain in effect for costs paid or incurred in earlier periods.

Revenue Procedure 2024-9

Section 3 modifies the previous Revenue Procedure 2023-24 to allow taxpayers to obtain automatic consent to change their method of accounting and rely on interim guidance under Sections 3 through 8 of Notice 2023-63;
Clarifies Section 9.01(1) and (3) of Revenue Procedure 2023-24, making it consistent with Section 12 of Notice 2023-63. This provides alternative methods of accounting for software development costs.
Provides a new, automatic method change for SREs allocable to long-term contracts accounted for under the percentage of completion method (PCM). The change also allows taxpayers to choose to include either the entire amount of allocable SRE expenses in the denominator of the completion factor or only the portion that will be amortized during the contract term.

Overall, this clarification and guidance is generally good news for taxpayers. The ability to select which, if any, provisions of Notice 2023-63, as modified by Notice 2024-12, to apply is particularly advantageous.

Additionally, the IRS and Treasury still plan to issue proposed regulations providing more substantive guidance under section 174. It is anticipated that these regulations will be issued sometime in late Spring and may impact taxpayers’ treatment of SRE expenses further.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

California OTA Confirms Need for Documentation in R&D Tax Claims

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The California Office of Tax Appeals (OTA) has recently issued two opinions regarding the burden of proof taxpayers must meet to substantiate entitlement to California’s research and development (R&D) tax credit for qualified expenditures under California Revenue and Taxation Code section 23609. In both opinions, the OTA ruled in favor of the California Franchise Tax Board, holding each taxpayer failed to meet its respective burden to substantiate the R&D tax credit claimed.

It has long been stated that the burden of proof falls on taxpayers, but as a result of the complexity of the R&D tax credit, many taxpayers fail to meet this requirement. California’s R&D tax credit follows much of the same legislation as the federal and requires that taxpayers retain sufficiently detailed records to substantiate the four part test as outlined in IRC Sec 41:

the expenditures must be eligible to be treated as research expenses under Internal Revenue Code section 174;
the research must be undertaken for the purpose of discovering information that is technological in nature;
the application of the research must be intended to be useful in the development of a new or improved business component of the taxpayer; and
substantially all of the research activities must constitute elements of a process of experimentation for a qualified purpose.

Opinion 1 – Appeal of First Solar, Inc., 2023-OTA-532P (Sept. 19, 2023)

The OTA held that the taxpayer failed to meet its burden of proof. The precedential opinion noted that the taxpayer had a single, total line item for R&D expenses but did not include the audit working papers or any document itemizing the expenses that made up the total amount. The taxpayer also provided (a) a list of 15 patent applications, (b) documents relating to an IRS audit of the taxpayer for a previous tax year (the documents did not indicate the IRS examined the R&D tax credit); and (c) testimony by the taxpayer’s co-founder and Chief Technology Officer.

Opinion 2 – Appeal of Electronic Data Systems Corporation & Subsidiaries, 2023-OTA-540 (Sept. 20, 2023)

In this case, the OTA held in a non-precedential opinion that the taxpayer failed to meet its burden of proof for substantiating its claimed R&D tax credit by relying primarily on insufficient employee surveys developed after the conclusion of the research activities. The OTA stated that the provided employee surveys submitted by the taxpayer were insufficient for numerous reasons including: the employees who completed the surveys lacked relevant legal experience, there was no evidence the employees completed the surveys impartially, the employees did not provide signed statements under penalty of perjury, and the surveys did not contain contemporaneous supporting documentation from when the taxpayer conducted the research activities.

Opinions like this reinforce the need for sufficient and detailed documentation. This means both financial documentation and that which describes and substantiates development efforts. One approach is the use of a narrative which describes a project and its technical uncertainties and experimentation processes in detail. This narrative is often not enough alone. For these reasons, it is often recommended, even by the OTA, that taxpayers should work closely with their internal and external advisors on establishing and enforcing proper document retention procedures to comply with applicable R&D tax credit substantiation requirements.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

Unveiling the Innovation Odyssey: Joget, Inc.’s Remarkable Journey in Low-Code Development

Joget, Inc., the global innovator in next-generation enterprise application development, has been included in the Forrester Research report, “The Low-Code Platforms For Citizen Developers Landscape, Q4 2023”. We believe the acknowledgment underscores Joget’s impactful presence in the low-code market and its consistent efforts to redefine enterprise application development through its platform.

The report, which serves as a crucial benchmark for application development and delivery leaders, offers an overview of low-code platforms for citizen developers. It can help them understand the value of a platform, how the vendors differ, and what options there are based on company sizes and market focus.

The cornerstone of Joget’s success lies in its commitment to pushing the boundaries of low-code development. In an era where agility and efficiency are paramount, Joget has emerged as a key player, demonstrating an unwavering dedication to empowering businesses through innovative solutions.

The company’s recent recognition in the “Low-Code Platforms Landscape 2023” report is a testament to its impactful strides in the industry. This acknowledgment not only reflects Joget’s current standing but also sheds light on its continuous evolution and adaptability in the ever-changing tech landscape.

Joget has been at the forefront of democratizing app development, enabling organizations to streamline their processes and boost productivity. Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

NUtech Ventures Celebrates Trailblazing Innovations

NUtech Ventures, a nonprofit technology commercialization affiliate of the University of Nebraska, has honored the innovative researchers to highlight the accomplishments of University of Nebraska–Lincoln faculty, staff, students and partner companies at their annual Innovator Celebration.

NUtech Ventures’ recognition of pioneering researchers is a testament to the vibrant ecosystem it has cultivated. The company plays a pivotal role in bridging the gap between academic ingenuity and commercial viability, turning the spark of innovation into a flame that illuminates various industries.

The celebrated researchers span disciplines, showcasing the organization’s commitment to supporting a wide range of groundbreaking projects. From life sciences to technology and beyond, NUtech Ventures is actively fueling innovations that have the potential to reshape industries and improve lives.

“We have an incredibly broad range of research and creative activity at Nebraska that can be translated into products and services by existing and startup companies that create new jobs, grow our economy, and improve quality of life,” said Brad Roth, executive director of NUtech Ventures. “NUtech Ventures is here to serve the campus as a proud partner in this work.”

During fiscal year 2023, Husker innovators shared 105 new inventions with NUtech Ventures for evaluation. Additionally, 31 patents were issued to Nebraska researchers this year, including 24 U.S.-issued patents. NUtech executed 37 licensing agreements for the commercialization of work produced at UNL, and NUtech’s licensing revenue totaled 5.7 million dollars in fiscal year 2023 — just under $4.5 million was distributed to inventors, colleges, and the campus.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

Flying High: Bridger Aerospace’s Soaring Investments in Cutting-Edge Research and Development

Stratodynamics Shows Pomise in Unmanned Aerial Turbulence Detection

In the ever-evolving landscape of aerial firefighting and disaster response, Bridger Aerospace Group Holdings, Inc. has emerged as a key player, making headlines with its strategic investments that support their firefighting regimes. Recently, the company has announced that it has entered into a joint venture partnership to complete the purchase of four Canadair CL-215T Amphibious Aircraft recently awarded in a public tender process from the Government of Spain for €40.3 million.

The company has grown from operating a single plane to commanding a significant Air Attack and the largest Super Scooper fleet in the U.S. in less than eight years.

“Bridger’s mission is to support communities affected by wildfires wherever they occur. There is global demand for specialty aircraft like the CL-215T, and with the addition of these airframes we are positioned to operate the largest privately owned scooper fleet in the world. Our access to these aircraft represents a strategic and transformative step for Bridger and positions us to expand our customer base and create substantial revenue and cash flow growth for the next several years,” commented Tim Sheehy, Bridger’s Chief Executive Officer.

Bridger Aerospace’s investments extend beyond firefighting, encompassing disaster response and recovery as well. The company is exploring ways to leverage aerial technologies in the aftermath of natural disasters, facilitating rapid assessment and response to minimize human suffering and property damage.

The partnership will allow Bridger access to Scoopers for use in contract operations as soon as the summer of 2024. Bridger will manage the return to service upgrades of the planes while they are owned and funded by the partnership.

McAndrew Rudisill, Bridger’s Chief Investment Officer, commented, “We are excited to partner with Marathon and Avenue to co-invest in the transformative Spanish Scooper acquisition and appreciate their exhaustive efforts to close this transaction. This private capital solution eliminates the immediate need for any large near-term equity financing and helps strategically position Bridger to further diversify internationally, create exposure to the European fire season, and creates a multi-year growth trajectory for the company.”

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

$10.6M Investment Sparks Offshore Wind Revolution in New Jersey

In the dynamic realm of renewable energy, Attentive Energy is emerging as a catalyst for change, propelling New Jersey to the forefront of the offshore wind industry. The company has proposed an offshore wind farm and intends to invest $10.6 million into projects that will help to grow the industry’s supply chain and support ocean-based technology startup businesses in the state.

Attentive Energy’s recent $10.6 million investment signals a bold commitment to advancing offshore wind technologies. This substantial infusion of capital is earmarked for cutting-edge R&D initiatives that promise to redefine the efficiency and sustainability of wind energy production.

A key goal of the company is to localize and diversify the supply chain for the offshore wind industry.

Attentive Energy is proposing a wind farm 42 miles (65 kilometers) off Seaside Heights that would provide enough energy to power 600,000 homes. It would be among the farthest from shore of the wind farm projects proposed to date on the U.S. East Coast. The distance from the coast would eliminate one of the main objections voiced by opponents of offshore wind, that they don’t want to see the wind turbines from the beach.

The company aims to leverage state-of-the-art technologies to optimize energy capture, storage, and transmission, ultimately boosting the overall effectiveness of wind power as a renewable energy source.

The investment is not limited to technological advancements alone; Attentive Energy is also spearheading initiatives to enhance the overall ecosystem for offshore wind energy. Collaborations with local communities, educational institutions, and environmental organizations underscore the company’s commitment to fostering a sustainable and inclusive energy transition.

As New Jersey looks to secure its position as a renewable energy leader, Attentive Energy’s strategic investments promise not only to reshape the state’s energy landscape but also to contribute significantly to the global push for a cleaner, greener future.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

InnovaPrep Acquires Clara Biotech

InnovaPrep LLC has acquired the assets of Clara Biotech, a startup which made a name for itself by launching a first-of-its kind cancer detection in 2015.

InnovaPrep is a local leader in the biotech industry. Their detection tech focuses on biological sample collection, concentration, and preparation. The company has commercialized a collection of market-disruptive platform technologies for rapid, automated concentration of biological particles.

The acquisition will support InnovaPrep as they begin development and experimentation in a very niche field – exosomes. Clara Biotech’s technology and team are experts in exosome isolation and preparation and will support InnovaPrep to step boldly into the niche field, with a ready to go team.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

FlyGuys: Elevating Reality Data Capture with $10M Funding Boost

FlyGuys, a reality data capture company, is making waves with a successful $10 million Series A funding round. This infusion of capital is a testament to FlyGuys’ commitment to revolutionizing reality data capture and fostering job creation. The round was led by Mitchell Capital and Advantage Capital.

The Series A funding represents a pivotal moment for the company, providing the resources needed to advance its cutting-edge technologies and push the boundaries of what’s possible in reality data capture. The funding will be directed towards creating a scalable software solutions platform and strengthening the company’s nationwide influence

Reality data capture is a crucial aspect of various industries, from construction and real estate to environmental monitoring. FlyGuys’ innovative approach aims to transform this landscape, making data capture more efficient, accurate, and accessible.

The commitment to research and development not only elevates FlyGuys’ technological capabilities but also underscores its role in shaping a future where reality data capture is more accessible, efficient, and impactful across diverse sectors.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

BrokerTech Ventures Welcomes Accelerator Applications for Insurance Tech

BrokerTech Ventures have announced the opening of applications for the 2024 cohort of the BrokerTech Ventures Accelerator, marking a significant stride in reshaping the future of insurance technology. BrokerTech is the industry’s first broker-led convening platform and accelerator program.

BrokerTech Ventures’ commitment to innovation is evident in its strategic accelerator program. The initiative serves as a crucible for fostering groundbreaking ideas and solutions that have the potential to revolutionize the insurance industry. As the 2024 cohort applications open, the stage is set for a new wave of insurtech innovators to join the ranks of this dynamic accelerator.

The accelerator program provides a nurturing environment for startups to explore cutting-edge technologies, refine their offerings, and bring novel solutions to market. By actively fostering collaboration between startups and established players in the insurance industry, BrokerTech Ventures creates a vibrant ecosystem where ideas are exchanged, and innovations are accelerated. This collaborative approach not only propels the participating startups forward but also contributes to the overall evolution of the insurtech landscape.

As the applications open for the 2024 cohort, BrokerTech Ventures cements its position as a catalyst for positive change in the insurance technology sector. The 2024 cohort will be the fifth cohort and will bring in the top 20 startups in early March. The Selection Series will be a virtual event where BTV partners can dig deeper into the products, companies, and teams. Subsequently, the cohort will begin the five-week Accelerator program in April 2024. More than $500,000 in funding is at stake for the selected broker-centric, seed and early-stage startups, with each startup receiving $50,000.

The deadline for submissions is December 18, 2023. Submissions can be made here.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.