There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read.
The most important bits:
* Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1))
* Paragraph (c)(3) is a Special Rule that requires that all software development expenses be counted as a "research or experimental expenditure".
That's it. All software expenses must be treated as research and experimental expenses, and no research and experimental expense can be deducted instead of amortized. Ergo, all software expenses must be amortized over 5 years.
I strongly recommend reading the section before forming an opinion. It really is quite unambiguous and is unambiguously bad for anyone who builds software and especially for companies that aren't yet thoroughly established in their space (i.e. startups).
Also note that this makes Software a special case of R&D. It's the only form of R&D that Section 174 requires you to categorize as such and therefore amortize.
The OBBBA (“Big Beautiful Bill”) suspends amortization requirements for domestic R&D expenditure, and explicitly allows domestic software development as an R&D expenditure eligible for immediate expensing.
The new rules would apply from 2025 to Dec 31, 2029:
The most important bits:
* Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1))
* Paragraph (c)(3) is a Special Rule that requires that all software development expenses be counted as a "research or experimental expenditure".
That's it. All software expenses must be treated as research and experimental expenses, and no research and experimental expense can be deducted instead of amortized. Ergo, all software expenses must be amortized over 5 years.
I strongly recommend reading the section before forming an opinion. It really is quite unambiguous and is unambiguously bad for anyone who builds software and especially for companies that aren't yet thoroughly established in their space (i.e. startups).
Also note that this makes Software a special case of R&D. It's the only form of R&D that Section 174 requires you to categorize as such and therefore amortize.
[0] https://www.law.cornell.edu/uscode/text/26/174
The new rules would apply from 2025 to Dec 31, 2029:
https://www.crowell.com/en/insights/client-alerts/house-comm...