The Tax Cuts and Jobs Act of 2017 (TCJA) included a change to the treatment of research and experimental (R&E) expenses under Sec. 174 of the Internal Revenue Code. Beginning January 1, 2022, the TCJA requires taxpayers to capitalize previously deductible R&E expenses. The change provides a ratable amortization period of five years for R&E conducted in the U.S. and 15 years for non-U.S. activity beginning at the midpoint of the tax year incurred. This dramatic shift in the tax treatment of R&E expenses has important consequences for the artificial intelligence (AI) industry.

Read More