I am in the same position - my accountant got an opinion from a CPA who said that software development costs _must_ now be capitalized. My company sells support and maintenance contracts for some open-source software, and so the 'software development' entails updating the software to work on newer operating systems and platforms etc. Contractor programmers are paid to do this software maintenance work.
At issue seems to be the interpretation of the change introduced in Section 174(3) saying:
"(3) Software development
For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure."
Does this mean that payments to programmers to fulfill the software maintenance contract _must_ be considered R&E expenditure (and can thus not be deducted as Section 162 "Trade or business expenses" and _must_ be capitalized in terms of the amendments to Section 174).
If this is the correct interpretation of the amended law, I would expect large companies like Apple and Alphabet to be subject to this problem as well - surely
it would be material if one of their main costs (being software developer salaries) cannot be expensed from this year. Yet I have seen no comments around this from that side, either explaining suddenly higher earnings or higher taxes due.
If that is not the correct interpretation of Section 174(3), and some programming related costs are not to be considered R&E expenditure, how do I explain the reasoning to my accountant?
It would be wonderful if it were possible to integrate with this 'pointer' mechanism in a custom way for .xll add-ins too, like those made in C/C++, .NET (with Excel-DNA), Python (with PyXLL) or D (with excel-d)? There's a huge ecosystem of Excel add-ins that could benefit by access to just a few of the hooks being build for the JavaScript support.
At issue seems to be the interpretation of the change introduced in Section 174(3) saying:
"(3) Software development For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure."
Does this mean that payments to programmers to fulfill the software maintenance contract _must_ be considered R&E expenditure (and can thus not be deducted as Section 162 "Trade or business expenses" and _must_ be capitalized in terms of the amendments to Section 174).
If this is the correct interpretation of the amended law, I would expect large companies like Apple and Alphabet to be subject to this problem as well - surely it would be material if one of their main costs (being software developer salaries) cannot be expensed from this year. Yet I have seen no comments around this from that side, either explaining suddenly higher earnings or higher taxes due.
If that is not the correct interpretation of Section 174(3), and some programming related costs are not to be considered R&E expenditure, how do I explain the reasoning to my accountant?