first published week of:   04/24/2023

Software Firms Across U.S. Facing Massive Tax Bills That Threaten Tech Startup World Survival

by Eric Rosenbaum

Congress failed to extend a key tax provision last year allowing companies to fully expense research & development costs in the year incurred, a blow to big corporations that had lobbied for it.

Across the software development field, founders are experiencing an income tax season that has become an existential threat to their company’s survival. Software startups say they were blindsided by shocking tax bills as a result of a change in law related to research and development costs, and if Congress does not provide a retroactive fix, business failures will spread throughout the industry.

The root of the issue is the inability of lawmakers to extend a key tax provision that had bipartisan support at the end of last year that allows for full expensing of research and development costs under Section 174 of the tax code. That did not come out of nowhere, and was a big disappointment to major corporations that had lobbied for the measure. But for many small business owners who often wear multiple hats, don’t have lobbying arms or relationships with big four CPA firms, the change to require R&D amortization over a period of five years first became known this spring when accountants showed them the massive tax bills they owed the government.

 Read full story at CNBC…

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