Tax News Update    Email this document    Print this document  

In Notice 2023-63 (Notice), released September 8, 2023, the IRS and Treasury Department have described rules that the IRS is considering for inclusion in proposed regulations under IRC Section 174, as amended by the TCJA. The guidance also covers the treatment of SRE expenditures under IRC Section 460, as well as the application of IRC Section 482 to cost-sharing arrangements that involve SRE expenditures.

IRC Section 174(a)(2) requires taxpayers to charge SRE expenditures to a capital account. Taxpayers must amortize the expenditures over five years (15 years if the SRE expenditures relate to foreign research within the meaning of IRC Section 41(d)(4)(f)), beginning with the midpoint of the tax year in which taxpayers pay or incur the SRE expenditures. IRC Section 174, as amended, applies to SRE expenditures paid or incurred in tax years beginning after December 31, 2021.

Notice 2023-63 specifically addresses definitions of certain new terms used in IRC Section 174 (e.g., SRE expenditures and midpoint) and introduces new terms and definitions (e.g., applicable [IRC Section] 174 amortization period, SRE activities, research provider and research recipient). Additionally, the Notice suggests the proposed rules would require a research provider (defined in Section 6.02(1)) to capitalize as an SRE expenditure costs of research activities that the research provider performs on behalf of a research recipient (defined in Section 6.02(2)) if the research provider retains rights to the research or has financial risk with respect to the research, regardless of how the research recipient treats the costs.

Background

Before the TCJA, IRC Section 174 allowed taxpayers to deduct research or experimental expenditures (pre-2022 R&E expenditures) in the tax year incurred. Taxpayers could also elect to capitalize and amortize these pre-2022 R&E expenditures over not less than 60 months, beginning in the month the taxpayer first benefitted from the research. A taxpayer that did not expense or capitalize and amortize IRC Section 174 pre-2022 R&E expenditures had to treat the costs as chargeable to a capital account, as IRC Section 174 did not provide any cost recovery provisions for those amounts.

The TCJA primarily modified IRC Section 174 by (1) requiring capitalization and amortization of SRE expenditures, (2) classifying all software development costs as SRE expenditures, and (3) restricting recovery of SRE expenditures until the end of the amortization period, even if the research is abandoned, retired or disposed.

SRE expenditures is a new term replacing the term "research or experimental expenditures"' but has the same meaning used in pre-TCJA IRC Section 174. SRE expenditures are defined in IRC Section 174(b) as "research or experimental expenditures which are paid or incurred by the taxpayer during [the tax] year … "

The report¹ issued by the Committee of Conference that reconciled the versions of the TCJA passed by the Senate and House of Representatives provided the following explanation for the TCJA amendment to IRC Section 174:

The Committee recognizes that research and experimentation expenditures have a useful life beyond the tax year in which the expenditures are incurred, and that the tangible and intangible property created through research and experimentation activities provide value to a business beyond a single tax year. The Committee also acknowledges that the costs of developing software closely resemble the types of research and experimental expenditures that fall within the purview of [IRC Section] 174, and therefore should be accorded similar treatment. For these reasons, the Committee believes research expenses, including software development costs, should be amortized over a period beyond the current year. Further, the Committee believes that research and experimentation expenditures that are attributable to research conducted outside of the United States should be amortized over a longer period so as to encourage research and experimental activities inside the United States.

Notice 2023-63's discussion of potential guidance

Sections 1 (Overview) and 2 (Background)

Sections 1 and 2 of Notice 2023-63 provide an overview of the Notice and background on IRC Section 174 (pre- and post-TCJA) and the treatment of software development costs under Revenue Procedure 2000-50. These sections also discuss guidance on change in method of accounting.

Section 1 informs that the Notice does not apply for purposes of determining whether expenditures are pre-2022 R&E expenditures under IRC Section 174 before the TCJA amendments. Although the Notice's guidance affects expenditures that may be treated as SRE expenditures for purposes of IRC Section 41, Section 1 notes that the Notice "is not intended to change the rules for determining eligibility for or computation of the research credit under [IRC Section] 41 or the regulations thereunder."

Section 2 provides the following definition for purposes of Notice 2023-63:

Applicable [IRC Section] 174 amortization period - the term 'applicable [IRC Section] 174 amortization period' refers to a [five]-year (60 month) period in the case of SRE expenditures attributable to domestic research or a 15-year (180 month) period in the case of SRE expenditures attributable to foreign research."

EY insight: By interpreting the statutory references to "[five]-year period" and "15-year period" to mean the corresponding number of months, Sections 2 and 3 of the Notice exclude the possibility of accelerated recovery by the occurrence of short tax years (which may have been treated as a tax year under IRC Section 441(b)(3)) during the amortization period.

Section 3 — Capitalization and amortization of SRE expenditures

Section 3 of Notice 2023-63 discusses the requirement to capitalize and amortize SRE expenditures under IRC Section 174, stating that "taxpayers must look to where SRE activities … are performed to determine whether corresponding SRE expenditures are attributable to foreign research." Section 3 also defines "midpoint" for purposes of determining when amortization begins under IRC Section 174. Section 3.05 defines "midpoint" as "the first day of the seventh month of the [tax] year in which the SRE expenditures are paid or incurred"; Section 3.06 defines "midpoint" for short tax years as "the first day of the midpoint month." For short tax years, Section 3.06 bases the amortization deduction on the number of months in the short tax year and provides guidance for a short tax year that includes part of a month. Section 3.06 also describes how a taxpayer identifies the "midpoint month" for purposes of determining when amortization begins in a short tax year (delineating between a short tax year with an even or odd number of months) and includes an example.

Section 4 — Scope of IRC Section 174

Section 4 of Notice 2023-63 provides interim guidance for determining whether expenditures are SRE expenditures subject to capitalization and amortization under IRC Section 174. Section 4.02 states that the terms used in the Notice have the same meaning as terms used in Treas. Reg. Section 1.174-2 unless the Notice provides otherwise. Section 4.02(3) defines the term "research or experimental expenditures," as used in the cross reference of the term SRE expenditures, as "expenditures that (a) satisfy the requirements under [Treas. Reg. Section] 1.174-2 to be research or experimental expenditures, or (b) are paid or incurred in connection with the development of any computer software (as provided in [S]ection 5 of this [N]otice), regardless of whether such expenditures are research or experimental expenditures under [Treas. Reg. Section] 1.174-2."

Section 4.02(4) defines SRE activities as "(a) software development activities described in [S]ection 5.03 of this [N]otice, or (b) research or experimental activities described in [Treas. Reg. Section] 1.174-2 (that is, activities in the experimental or laboratory sense intended to discover information that would eliminate uncertainty concerning the development or improvement or appropriate design of a product or a component or subcomponent of a product)."

Section 4.03(1) includes a non-exhaustive list of examples of the types of costs that are SRE expenditures and Section 4.03(2) includes a list of costs that are neither permitted nor required to be treated as SRE expenditures.

The Notice includes the following examples as types of costs that are SRE expenditures:

• Labor costs of employees and contractors who perform, supervise or directly support SRE activities
• Costs of materials and supplies used or consumed in the performance of SRE activities or in the direct support of SRE activities
• Cost recovery allowances (e.g., depreciation) of property used in the performance of SRE activities or in the direct support of SRE activities
• "Costs of obtaining a patent, such as attorneys fees expended in making and perfecting a patent application"
• Certain operation and management costs (e.g., rent, utilities, insurance, taxes, repairs & maintenance) for facilities and other assets used in the performance of SRE activities or in the direct support of SRE activities
• Travel costs for the performance of SRE activities or the direct support of SRE activities

The Notice excludes the following items from SRE expenditures:

• General and administrative service department or function costs that only indirectly support or benefit SRE activities (e.g., payroll, human resources, accounting)
• Interest costs on debt to finance SRE activities
• Costs incurred for non-development computer software activities
• Costs to input content into a website
• Website hosting costs paid to an internet service provider
• Costs to register trademarks or internet domain names
• Costs listed in Treas. Reg. Section 1.174-2(a)(6)(i)-(vii) (quality control testing, efficiency surveys, management studies, consumer surveys, advertising and promotions, the acquisition of another's patent, model, production or process, or research in connection with literary, historical, or similar projects)
• Amortization of SRE expenditures
• Amortization of research or experimental expenditures paid or incurred in tax years beginning before January 1, 2022

EY insight: The specific exclusion of general and administrative service departments or functions that indirectly support or benefit SRE activities is a helpful clarification for taxpayers. The phrase used in the statute, "any amount paid or incurred in connection with … ," could have been interpreted very broadly. Many costs (general and administrative, interest, amortization of SRE expenditures), however, are neither permitted nor required to be treated as SRE expenditures, regardless of whether they may be incident to SRE activities or paid or incurred in connection with software development activities.

Section 4.03(3) describes how a taxpayer determines the allocable amount of costs to SRE activities and suggests that the allocation method must be based on "a cause-and-effect relationship" or "another relationship that reasonably relates the costs to the benefits provided to the SRE activities." The section notes that allocation methods might differ based on the type of cost, but the allocation method used for any particular type of cost must be applied consistently. The section identifies labor allocation on the basis of total time on SRE activities over total time performing all services as meeting the allocation method requirements. The section also identifies using a square footage ratio to allocate facility costs as meeting the allocation method requirements. To provide additional clarity for taxpayers, the section provides a comprehensive example of methods of allocation for costs incurred in a variety of types of departments.

Section 4.04 provides a consistency requirement for the treatment of SRE expenditures under subtitle A of the Internal Revenue Code. Specifically, the section states, "[SRE] expenditures may not be treated as ordinary and necessary expenses under [IRC Section] 162 or capitalized under [IRC Section] 195, [IRC Section] 263(a), [IRC Section] 263A, or [IRC Section] 471. The amortization deductions arising from such SRE expenditures must also be allocated and apportioned consistent with the rules under [Treas. Reg. Sections] 1.861-8 and 1.861-17."

Section 5 — Software development

Section 5 of Notice 2023-63 describes guidance for determining whether certain activities constitute software development for purposes of IRC Section 174(c)(3). Section 5.01 defines "computer software" consistent with the definitions used in Revenue Procedure 2000-50 and Treas. Reg. Section 1.197-2(c)(4)(iv). This section also defines the term "upgrades and enhancements" to mean "modifications to existing computer software that result in additional functionality (enabling the software to perform tasks that it was previously incapable of performing), or materially increase speed or efficiency of the software."

Section 5.03 identifies a non-exhaustive list of activities that are treated as software development for purposes of IRC Section 174, including:

• Planning the development (or upgrades and enhancements)
• Designing the computer software (or upgrades and enhancements)
• Building a model of the computer software (or upgrades and enhancements)
• Writing the source code and converting it to machine-readable code
• Testing the computer software (or upgrades and enhancements) and making necessary modifications to address defects identified during testing (but only until certain events occur)
• Producing the product master(s) (if the computer software is developed for sale or licensing to others)

Section 5.04 applies the principles of Section 5.03 to upgrades and enhancements made to purchased computer software, but identifies the following activities as not constituting software development under IRC Section 174:

• Purchase and installation of purchased computer software, including configuration to make the software compatible with the business and reengineering the business to make it compatible with the purchased software
• Any planning, designing, modeling, testing or deployment activities related to the purchase and installation of purchased software

Section 5.05 identifies activities associated with software development projects that are not software development for purposes of IRC Section 174 and identifies which activities relate to software developed by a taxpayer for use in its trade or business and which relate to software developed for sale or licensing to others. For software developed for use in the taxpayer's business (or upgrades or enhancements to that software), activities that are generally not software development include:

• Training
• Maintenance activities after the software is placed in service that do not give rise to upgrades and enhancements (e.g., corrective maintenance to debug, diagnose and fix programming errors)
• Data conversion activities
• Installation activities

For software developed for sale or licensing to others (or upgrades or enhancements to that software), activities that are generally not software development include:

• Marketing and promotional activities
• Maintenance activities that do not give rise to upgrades and enhancements
• Distribution activities
• Customer-support activities

EY insight: The Notice provides the IRS's first general guidance on what activities the IRS believes are "software development" activities. The guidance is helpful in that it also describes activities that would not be considered "software development" under IRC Section 174(c)(3) (e.g., maintenance activities such as debugging, which do not give rise to upgrades and enhancements). The definition of "upgrades and enhancements" uses the phrase "materially increase speed or efficiency," which is subjective in nature and could become a source of disagreement between IRS examiners and taxpayers.

Section 6 — Research performed under contract

Section 6 provides guidance for determining whether costs paid or incurred for research performed under contract are SRE expenditures under IRC Section 174. This section of Notice 2023-63 includes several new terms for applying these interim rules. For taxpayers that are the "research recipient," the section refers to the existing regulations, Treas. Reg. Section 1.174-2(a)(10) and (b)(3), for governing principles.

The Notice defines "research recipient" as a party that contracts with a "research provider" to (a) perform research services for the research recipient with respect to an "SRE product," or (b) develop an SRE product that the research recipient acquires from the research provider. A "research provider" is a party that contracts with a research recipient to (a) perform research services for the research recipient with respect to an SRE product, or (b) develop an SRE product that the research recipient acquires from the research provider. An SRE product is defined as "any pilot model, process, formula, invention, technique, patent, computer software, or similar property (or a component thereof) that is subject to protection under applicable domestic or foreign law." Know-how that is not subject to legal protection does not constitute an SRE product of the research provider under these rules.

Section 6.02(3) defines the term "financial risk" as the research provider's risk of suffering a financial loss from the research's failure to produce the desired SRE product.

Section 6.04 addresses the treatment of costs paid or incurred by research providers (defined in Section 6.02(1)). A research provider must treat its research costs as SRE expenditures if it bears financial risk under the terms of the contract with the research recipient. A research provider also must treat its research costs as SRE expenditures if it has a right to use any resulting SRE product in its trade or business or otherwise exploit any resulting SRE product through sale, lease or license (regardless of whether the research provider bears financial risk).

Whether the research provider must treat its costs as SRE expenditures is unrelated to whether the research recipient must treat its costs as SRE expenditures. A research provider will not be treated as having rights to use or exploit the SRE product if that right is conditioned on obtaining approval from an unrelated party to the agreement. Section 6.05 provides an example of the rules for research performed under a contract.

EY insight: The rule in Section 6.04 provides welcome clarity that a research provider is not required to capitalize costs solely due to the nature of its activities. The example in Section 6.05 illustrates the result if the taxpayer (a) does not bear financial risk and (b) does not retain the right to use or exploit the results of its research services.

Section 7 — Disposition, retirement or abandonment of property

The TCJA added a new sub-section (d) to IRC Section 174, which prevents taxpayers from taking deductions of SRE expenditures on account of the disposition, retirement or abandonment of property for which those SRE expenditures are paid or incurred. Therefore, taxpayers generally cannot recover costs before the end of the applicable IRC Section 174 amortization period.

Section 7.04 of Notice 2023-63 provides two specific rules under IRC Section 174(d) on the disposition, retirement or abandonment of SRE property in the context of a corporate cessation. The application of these two rules, which are mutually exclusive, turns on whether the cessation arises in a transaction described in IRC Section 381(a).

If a corporation ceases to exist for federal income tax purposes in a transaction or series of transactions described in IRC Section 381(a), the acquiring corporation will continue to amortize the distributor or transferor corporation's unamortized SRE expenditures over the remainder of the distributor or transferor corporation's applicable IRC Section 174 amortization period, beginning with the month of transfer.

EY insight: Notice 2023-63 allows a transferee to succeed to a transferor's unamortized SRE expenditures, even though those expenditures are not listed as an attribute in IRC Section 381(c).

If a corporation ceases to exist for federal income tax purposes in a transaction or series of transactions to which IRC Section 381(a) does not apply, the corporation may deduct the unamortized SRE expenditures in its final tax year. This rule does not apply, however, if a principal purpose of the transaction(s) described in the Notice is to claim a deduction for the unamortized SRE expenditures.

Notice 2023-63 makes clear that a disposition of SRE property (including in the context of an applicable asset acquisition under IRC Section 1060(c) or an IRC Section 351 transaction) does not trigger an acceleration of the deduction of the transferor's unamortized SRE expenditures, nor does it permit the use of the unamortized SRE expenditure in computing the transferor's gain or loss on the transfer.

Until further guidance is issued, the general rule disallowing accelerated recovery of the property's unamortized SRE expenditure applies to (a) property of a partnership that is a party to a merger, consolidation, division, or liquidation, or that otherwise terminates, or (b) property that is contributed to, distributed from or transferred by a partnership.

EY insight: Although IRC Section 174(d) refers to "property" as the object to which its rule applies, the Notice does not clarify whether the treatment of unamortized costs that are not related to "property" is similar. For example, if a taxpayer incurs SRE expenditures from a failed research project, would the unamortized SRE expenditures from that failed research project be considered "property" for purposes of IRC Section 174(d)? The examples illustrating the rules in Section 7 begin with a premise that the taxpayer incurs SRE expenditures for "property" that can be sold.

Forthcoming is another EY Tax Alert that will focus more specifically on Section 7 of Notice 2023-63 and its impact on transactions. This Alert will consider the impact of Notice 2023-63 on reorganizations under IRC Sections 355 and 368(a)(1)(D), transactions for which asset basis is relevant (e.g., IRC Section 382), transactions within a consolidated group and transactions implicating the aforementioned anti-abuse rule. It also will consider the interaction of the general clear-reflection-of-income standard with the operation of Notice 2023-63.

Section 8 — Long-term contracts under IRC Section 460

Section 8 would modify the IRC Section 460² regulations to address the treatment of SRE expenditures when computing income under the percentage-of-completion method (PCM). Under the PCM, as explained in Notice 2023-63, "the portion of the contract price a taxpayer must report in a tax year corresponds to the ratio of incurred allocable contract costs to total estimated allocable contract costs." Allocable contract costs, under Treas. Reg. Section 1.460-5(b)(2)(vi), include research or experimental costs (other than "independent research and development expenses," which is defined broadly as "any expense incurred in the performance of research or development" but excludes (a) costs that are directly attributable to a particular long-term contract in existence when the expenses are incurred, or (b) costs under an agreement to perform research and development).

Notice 2023-63 observes that the inclusion of allocable SRE expenditures incurred in a tax year in the numerator of the ratio, without a corresponding deduction for such costs, results in a "mismatch of contract price and contract costs [that] is inconsistent with the contemplated operation of the PCM."

EY insight: The "mismatch" between contract income and contract costs that Treasury and the IRS identify in Notice 2023-63's discussion of the operation of the PCM is replete throughout the operation of IRC Section 174, as amended by the TCJA. Presumably, as the change to the statute was expected to raise $120 billion in revenue between 2022 and 2027,³ it was intended to generate greater taxable income for taxpayers that incur SRE expenditures. For example, a research provider (as defined in Section 6.02(1) of Notice 2023-63) that must capitalize and amortize research costs under IRC Section 174 would report its revenue from research services when earned or paid but could not claim a corresponding current deduction of incurred SRE expenditures (and would be subject to the same type of "mismatch").

Section 8.03 announces that Treasury and the IRS intend to issue proposed regulations that would limit the inclusion of SRE expenditures in the PCM ratio by including amortization of SRE expenditures (and not the amount incurred in the tax year) and would treat the amortization as "incurred" for purposes of determining the percentage of the contract completed.

Section 9 — Cost sharing regulations under Treas. Reg. Section 1.482-7

Section 9 of Notice 2023-63 addresses the effect of IRC Section 174 on Treas. Reg. Section 1.482-7 cost sharing arrangements and provides interim guidance to taxpayers on proposed regulations that will revise Treas. Reg. Section 1.482-7(j)(3)(i). Section 9 also includes three examples illustrating anticipated revisions to the cost sharing regulations.

Treasury Reg. Section 1.482-7(j)(3)(i) addresses the character of cost sharing payments between controlled participants and illustrates how a participant's deductible intangible development costs (IDCs) are reduced to the extent it is owed payments by another participant. Per the Notice, Treasury and the IRS anticipate issuing proposed regulations that will replace the current regulatory text with rules providing that cost sharing payments owed to a participant reduce (a) the category of IDCs borne directly by that participant that must be charged to a capital account; and (b) the category of IDCs borne directly by that participant that are not described in Section 9.03(a) of the Notice and are deductible.

The Notice also illustrates the ordering principle of how cost sharing payments from the payor reduce the payee's IDCs, depending on whether the IDCs are:

• Required to be charged to a capital account under IRC Section 174
• Deductible for federal tax purposes
• An arm's-length rental charge for land and tangible property

The Notice clarifies that cost sharing payments are first allocated against costs that are (a) SRE expenditures under IRC Section 174 and costs that are deductible for federal tax purposes; and (b) IDCs allocated (to the extent an excess exists) to costs representing an arm's-length rental charge.

The three examples in Section 9 illustrate the anticipated revisions to Treas. Reg. Section 1.482-7(j)(3)(i) and most importantly highlight the ordering principle for allocating cost sharing payments. The examples also show how taxpayers that are in cost sharing arrangements and conduct research and development from within and outside the United States will amortize these expenses annually over a five-year or 15-year period, depending on (a) the relative amounts of costs incurred inside and outside the United States and (b) the relative size of the participants' share of the reasonably anticipated benefits.

EY insight: Taxpayers subject to the cost sharing rules under IRC Section 482 should review Notice 2023-63 and assess whether the anticipated revisions to Treas. Reg. Section 1.482-7(j)(3)(i) align with how they are capitalizing IDCs under IRC Section 174.

Section 10 — Applicability dates

Section 10.01 announces Treasury and the IRS's intent to publish proposed regulations, consistent with the rules described in the Notice, that would be effective for tax years ending after September 8, 2023. Section 10.01 also permits taxpayers to choose to apply the rules in Sections 3 through 9 of Notice 2023-63 for tax years beginning after December 31, 2021, "provided the taxpayer relies on all the rules in [S]ection 3 through 9 of this [N]otice and applies them in a consistent manner." Taxpayers may not, however, rely on the rules in Section 7 for SRE expenditures paid or incurred for property that is contributed to, distributed from or transferred from a partnership.

Section 10.02 discusses Treasury and the IRS's intent to provide procedures for taxpayers to obtain automatic consent to change their method of accounting to comply with Notice 2023-63 and permits taxpayers to rely on Section 7.02 of Revenue Procedure 2023-24 (the list of automatic method changes) for that purpose until further guidance is issued. Section 10.02 notes that guidance is also anticipated that will address situations in which taxpayers have previously changed their method of accounting to comply with IRC Section 174, as amended by the TCJA, but whose treatment of SRE expenditures is not entirely consistent with Notice 2023-63.

Section 11 — Request for comments

Section 11 contains a request for comments on the guidance in Notice 2023-63 and on topics that are not covered under Notice 2023-63. Much of the request relates to whether simplified methods, safe harbors or special methods are needed for particular circumstances.

One request for comment asks if industry standards or definitions under the Accounting Standards Codifications of the Financial Accounting Standards Board should be used to determine activities that are software development activities, costs that are software development costs or the definition of computer software for purposes of IRC Section 174. The request also asks for examples of costs that are and are not software development costs.

Additionally, the request asks:

• Whether the rules for determining whether a party to a research contract has SRE expenditures should be similar to rules excluding funded research under IRC Section 41(d)(4)(H)
• If special rules are needed for contracts with the government or contracts with related foreign research providers and recipients
• Whether other factors should be considered in determining whether a party to a research contract has SRE expenditures

The request also asks for additional comments on the extent to which SRE expenditures should be included for purposes of IRC Section 460.

Regarding items not addressed in Notice 2023-63, the request for comments identifies the following as issues that Treasury and the IRS are continuing to study:

• Whether general requirements for record retention under Treas. Reg. Section 1.6001-1 are adequate for purposes of substantiating expenditures under IRC Section 174
• Whether the definition of "pilot model" should be amended
• Whether and how IRC Section 59(e) applies to IRC Section 174 expenditures

The Notice asks for comments on these and other issues (e.g., treatment of the unamortized SRE expenditures for property of a partnership in certain transactions; whether there should be special rules for start-up companies or small taxpayers; how IRC Sections 56(b)(2)(A) and 280C interact with IRC Section 174).

Notice 2023-63 states that written comments should be submitted by November 24, 2023, although Treasury and the IRS will consider comments submitted after this date. The Notice provides procedures for submitting comments.

Section 12 — Effect on other documents

Section 12 states that, "[a]s a result of the TCJA amendments to [IRC Section] 174 and the rules in [S]ections 3 through 5 of this [N]otice, [S]ection 5 of [Revenue Procedure] 2000-50 (which provided accounting treatment similar to IRC Section 174, as in effect prior to 2022, for costs of developing computer software) is obsolete."

Implications

Notice 2023-63 provides insight into the direction Treasury and the IRS intend to go in the proposed regulations, the technical issues that they believe are the most pressing to resolve, and their view of Congress' intent in amending IRC Section 174. Because the potential rules described in Notice 2023-63 are not required to be applied retroactively, and the forthcoming proposed regulations will not apply to tax years ending on or before September 8, 2023, taxpayers can continue relying on prior law for tax years ending on or before September 8, 2023.

———————————————

Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor

———————————————

ENDNOTES

¹ See H.R. Rep. 115-409, at 282 and S. Prt. 115-20, at 160.

² IRC Section 460 includes rules for accounting for income from long-term contracts.

³ JCX-67-17 (Dec. 18, 2017) (Estimated Budget Effects of the Conference Agreement for H.R. 1, the "Tax Cuts and Jobs Act")