Subject: Important Update for Tax Year 2023
We have been closely monitoring the legislative developments in Congress, and a bill is on the verge of
being passed that will have a direct impact on the treatment of taxes. Specifically, the bill proposes the
following:
– The repeal of Section 174 of the Internal Revenue Code. This section currently requires businesses to
capitalize R&D expenses, spreading the deduction over several years. If the bill is passed as expected, for
the tax year 2023, businesses will no longer be required to capitalize their R&D expenses. Instead,
companies will be able to deduct these expenses in the year they are incurred. This change could lead to
significant tax savings and affect your company’s financial planning and budgeting.
– Extension of 100-percent bonus depreciation for qualified property placed in service after December
31, 2022, and before January 1, 2026. The provision retains 20-percent bonus depreciation for property
placed in service after December 31, 2025, and before January 1, 2027, as well as for specified plants
planted or grafted after December 31, 2025, and before January 1, 2027.
– Extension of Allowance for Depreciation, Amortization, or Depletion in Determining the Limitation on
Business Interest. — Under the proposed law, the 30% limitation on business interest will be based on
the pre-2022 standard which did not reduce taxable income by depreciation and amortization. This could
substantially increase the amount of business interest deductible in 2022 through 2026.
– Employee Retention Tax Credit With regard to the Employee Retention Credit (ERC), this bill would
implement a new deadline requiring all ERC claims to be filed by January 31, 2024.
While this news is promising, it is important to note that the bill has not yet been finalized. Our team is
vigilantly tracking its progress and will provide you with updates as they become available. In the
meantime, we recommend beginning to prepare for this potential change in tax treatment. This may
involve revising your tax planning strategies and considering the impact on your financial statements.
We understand that changes in tax law can be complex and sometimes overwhelming. Our team is here
to help you navigate these changes and ensure that your business is positioned to take full advantage of
any new tax benefits.
Thank you for your continued trust in our services. We are committed to supporting your business
through these changes and ensuring your tax strategy is optimized for your success.
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