IRS Section 174 Threatens Government Contractors and the SBIR Program
As you may or may not know, the IRS has proposed new guidelines for Section 174. In very basic terms, the enforcement of these guidelines directs all businesses to capitalize any Research and Development expenses over 5 years, including labor. The impact of not being able to claim R&D expenses would create a tremendous tax liability that most small businesses aren’t prepared to cover. The business casualties of these new guidelines would be immeasurable.
ReliAscent encourages all government contractors and grantees to reach out to their Senators and Representatives and ask that they aggressively defend small businesses against these guidelines. Senators can be found and contacted using this page: https://www.senate.gov/senators/senators-contact.htm, and House members using this page: https://www.house.gov/representatives/find-your-representative.
ReliAscent is also providing a template letter for anyone’s use, which is available for download here.
The Small Business Technology Council is an excellent organization that is keeping a very close eye on this issue and keeps its members updated regularly (they also sent a letter to Congress in March of 2023). SBTC also partners with the National Small Business Association on the matter. You can directly email Congress regarding Section 174 using another template/prepared message from the NSBA’s website as well, found here: https://www.votervoice.net/NSBA/Campaigns/102581/Respond.
This law not only endangers or effectively ends the SBIR/STTR programs, but it could send thousands of small businesses into bankruptcy in just a few months. So, the time to make your voice heard is now!