26 U.S. Code § 174 - Research and experimental expenditures
A taxpayer may treat research or experimental expenditures which are paid or incurred by him during the taxable year in connection with his trade or business as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction.
A taxpayer may, without the consent of the Secretary, adopt the method provided in this subsection for his first taxable year for which expenditures described in paragraph (1) are paid or incurred.
The method adopted under this subsection shall apply to all expenditures described in paragraph (1). The method adopted shall be adhered to in computing taxable income for the taxable year and for all subsequent taxable years unless, with the approval of the Secretary, a change to a different method is authorized with respect to part or all of such expenditures.
The election provided by paragraph (1) may be made for any taxable year, but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). The method so elected, and the period selected by the taxpayer, shall be adhered to in computing taxable income for the taxable year for which the election is made and for all subsequent taxable years unless, with the approval of the Secretary, a change to a different method (or to a different period) is authorized with respect to part or all of such expenditures. The election shall not apply to any expenditure paid or incurred during any taxable year before the taxable year for which the taxpayer makes the election.
This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.
This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).
This section shall apply to a research or experimental expenditure only to the extent that the amount thereof is reasonable under the circumstances.
2014—Subsec. (a)(2)(A). Pub. L. 113–295, § 221(a)(31), amended subpar. (A) generally. Prior to amendment, text read as follows: “A taxpayer may, without the consent of the Secretary, adopt the method provided in this subsection for his first taxable year—
“(i) which begins after December 31, 1953, and ends after August 16, 1954, and
“(ii) for which expenditures described in paragraph (1) are paid or incurred.”
Subsec. (b)(2). Pub. L. 113–295, § 221(a)(32), struck out “beginning after December 31, 1953” after “for any taxable year”.
1989—Subsecs. (e), (f). Pub. L. 101–239 added subsec. (e) and redesignated former subsec. (e) as (f).
1988—Subsec. (e)(2). Pub. L. 100–647 substituted “section 59(e)” for “section 59(d)”.
1986—Subsec. (e)(2). Pub. L. 99–514 substituted “section 59(d)” for “section 58(i)”.
1982—Subsec. (e). Pub. L. 97–248, § 201(d)(9)(B), substituted “Cross references” for “Cross reference” in heading, designated existing provisions as par. (1), and added par. (2).
1976—Subsec. (a)(2)(A). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (a)(2)(A)(i). Pub. L. 94–455, § 1901(a)(30), substituted “August 16, 1954” for “the date on which this title is enacted” after “ends after”.
Subsecs. (a)(3), (b)(1), (2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as an Effective Date note under section 55 of this title.
For applicability of amendment by Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
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- Credit for Increasing Research Activities : 2017-05-05
- Extension of Time for Making Certain Elections : 2013-06-13
- Other Definitions and Special Rules : 2013-06-13
- Election to Amortize : 2012-09-07
- Research and Experimental Expenditures : 2012-09-07
- Section 59 e : 2012-09-07
- Other Definitions and Special Rules : 2009-02-20
- Limitations on Credit or Refund Barred v. Not Barred : 2009-02-20
- From Amortization to Current Deduction : 2002-08-23
- Amortization of Goodwill Certain Other Intangibles : 2002-02-15
- Capital Expenditures Deductible v. Not Deductible : 2002-02-15
- From Amortization to Current Deduction : 1999-12-03
- From Current Deduction to Amortization : 1999-08-27
- From Amortization to Current Deduction : 1999-07-02
- From Amortization to Current Deduction : 1999-06-18
- From Amortization to Current Deduction : 1999-05-28
- From Amortization to Current Deduction : 1999-01-22
- From Current Deduction to Amortization : 1999-01-15
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