KROST Quarterly: The Technology Issue - Volume 4, Issue 2 by KROST

VOLUME 4, ISSUE 2

KROST QUARTERLY M A G A Z I N E

THE TECHNOLOGY ISSUE NONFUNGIBLE TOKENS: APPLICATIONS, TECHNOLOGIES, AND OUTLOOK 5 POWERFUL & INNOVATIVE SOFTWARE TOOLS FOR YOUR TEAM

DISRUPTION AND INNOVATION:

STREAMLINING CLIENT ACCOUNTING SERVICES (CAS)

THE EFFECT OF UPCOMING CHANGES TO IRC SECTION 174 ON THE SOFTWARE DEVELOPMENT INDUSTRY WWW.KROSTCPAS.COM KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

KROSTCPAs.com

CONTENTS

Volume 4, Issue 2 / July 2021 Offices Pasadena (Headquarters) West LA Woodland Hills Phone: (626) 449-4225 Fax: (626) 449-4471 Principals Gregory A. Kniss, CPA Managing Principal Lou Guerrero, CPA, MBT Jason C. Melillo, CPA Jean Hagan

Nonfungible Tokens: Applications, Technology, and Outlook

2021 Tax Planning for Tech Companies: Employee Retention and R&D Credits

By Paren Knadjian

Guest Contributor: Mike Kniss

So Sum Lee, CPA Douglas Venturelli, Esq. Richard Umanoff, CPA, MBA Christopher H. Gaynor, CPA, MS Stacey R. Korman, CPA, MST Production, Copy, and Design Bethany Wolfe, Editor-in-Chief Anna Chen, Editor Diana Vu, Graphic Designer Mayra Silva, Assistant Editor Jackie Do, Assistant Editor

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All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

5 Powerful & Innovative Software Tools For Your Team Guest Contributor: Justin Glim

Disruption and Innovation: Streamlining Client Accounting Services (CAS) By Sossi Bekarian, CPA and Peter Minaian

The Effect of Upcoming Changes to IRC Section 174 on the Software Development Industry Guest Contributor: Tetyana Guguchkina

THE TECHNOLOGY ISSUE KROST Quarterly is a digital publication released by KROST CPAs & Consultants headquartered in Pasadena, California. Established in 1939, this full-service Certified Public Accounting and Consulting firm serves clients across a variety of industries. With a focus on recognizing opportunities and creating value, KROST equips clients with tools to make better business and financial decisions for the future.

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INTRODUCING KROST’S TECHNOLOGY TEAM Paren Knadjian, M&A and Capital Markets Practice Leader, leads the technology industry group at KROST. As a former CEO and COO of two SaaS companies, and with over 20 years of experience in technology, Paren knows what it means to have trusted advisors when trying to navigate a complex and fast-evolving landscape of innovation, disruption, and opportunity. Our team of dedicated experts has unique experiences to better serve clients across a multitude of technology verticals. From adtech to artificial intelligence and fintech to virtual reality, our seasoned professionals have the pleasure of assisting incredibly innovative companies in reaching their financial goals.

LEARN MORE 

Our team produces regular KROST Insights posted to our website. This issue will highlight some of the hot topics in the technology industry including Client Accounting Services (CAS), Nonfungible Tokens, the Effect of Upcoming Changes

to IRC Section 174 on the Software

Development Industry, and more. Receive KROST news right to your inbox! To subscribe, click here.

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

Greg Kniss, CPA Managing Principal

TECHNOLOGY Team at KROST 360° Service Model

Paren Knadjian Practice Leader M&A and Capital Markets

Robert Gosart, CPA Director - Tax

•

Mergers & Acquisitions

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Raising Capital & Debt Financing

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Transaction Support & Due Diligence

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R&D Tax Credits

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Tax Planning & Compliance

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Accounting Support & Acting CFO

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Financial Modeling & Reporting

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Internal and External Audits

Experience You Can Trust Our Sector Expertise •

AdTech & Marketing Tech

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Application & Productivity Software

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Artificial Intelligence & Machine Learning

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Big Data

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Cryptocurrency/Blockchain

Sossi Bekarian, CPA

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Cybersecurity

Senior Manager Accounting

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E-Commerce

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EdTech

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FinTech

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HealthTech

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Internet of Things

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IT Consulting and Outsourcing

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Mobile

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SaaS

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Social & New Media

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Virtual Reality & Augmented Reality

Steve Chhuor, CPA Manager Assurance & Advisory

“The experienced, multi-disciplined teams at KROST can provide tax, accounting, M&A, and consulting services specific to the technology industry, as well as a holistic approach to tackling multiple challenges as a true partner in the development of your business.”

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

NONFUNGIBLE TOKENS: APPLICATIONS, TECHNOLOGY, AND OUTLOOK

By Paren Knadjian | Practice Leader - M&A and Capital Markets

n the cryptocurrency world, a token is the denomination of currency, in the same way as the dollar is the denomination of the US national currency. It represents a tradable asset that has value. All fiat currencies1 and almost all tokens are fungible – i.e., each unit has the same value and is interchangeable. One US Dollar is worth the same as another US Dollar. One Bitcoin is worth the same as another Bitcoin, and they are interchangeable. Because of their fungible nature, cryptocurrency tokens can be used to purchase goods and services. In the broader use of blockchains, tokens can represent more than currency. There are security tokens (i.e., units of ownership in a business), reward tokens, and utility tokens. In most cases, these tokens are also fungible. However, a nonfungible token ("NFT") has a unique value and is not interchangeable with another NFT. NFTs are growing in popularity, partly due to the global rise in the legitimacy of cryptocurrencies and because NFTs are a viable way to ensure trusted and authenticated ownership using blockchain technology.

APPLICATIONS – ART In the world of art, the NFT is proof of authenticity and ownership of a piece of digital art. It is the equivalent of a certificate of authenticity in the physical art world. The artist still retains the copyright and reproduction rights, as it is with physical artwork. Artists who want to sell their work as NFTs must mint digital tokens by uploading and validating their information on a blockchain. Doing so usually costs anywhere from $40 to $200. They can then list their piece for auction on an NFT marketplace. The most expensive NFT to date is "Everydays: The First 5,000 Days" by Beeple, which was sold by Christies, a traditional art auctioneer, for $69 million. It was a compilation of 5,000 pieces of Beeple’s work. His work, "CROSSROAD," was bought on the online Nifty Gateway marketplace for $6.66 million. Beeple is the pseudonym of digital artist Mike Winkelmann. 4

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Many contemporary artists are attracted to NFTs for three reasons: 1. Greater accessibility to the market 2. Proof of ownership 3. Unique forms of monetization While traditional art sales require gaining access to a legacy network of art dealers and auction houses, digital sales driven by NFTs, give lesser-known digital creators access to a wider market than previously possible. The blockchain infrastructure underpinning NFTs allows for a recognized and secure pathway to legitimately "own" a digital asset, enabling buyers to feel more comfortable participating in the digital art market. Another advantage of NFTs is that they can incorporate smart contracts, which allow creators to earn royalties on future transactions involving their work.

APPLICATIONS – COLLECTIBLES Much of the foundation for the current NFT collectibles craze began in 2017 with the launch of the blockchain game CryptoKitties. This game allowed users to buy and sell the rights to digital cats, each with its unique appearance, personality, and family history. In the years since, numerous NFT marketplaces have sprung up—most notably the launch of NBA Top Shot in October 2020, which has already secured $390 million in sales of NBA moments such as dunks, blocks, and famous highlights. NBA Top Shot is managed by Dapper Labs, a developer of an online platform intended to offer games built upon blockchain technology.

Many of these marketplaces deal in niche areas of interest. However, those with wider brand recognition, such as the NBA, are betting that the mass appeal of their brands will boost the legitimacy and value of their marketplace and related assets. The most valuable NFT collectible to date was the sale of Twitter founder Jack Dorsey's first-ever tweet, which was sold on the online Valuable platform for $2.9 million to a Malaysia-based businessman. Mr. Dorsey donated the money to charity. The tweet, which said "just setting up my twttr," was first published on March 21, 2006. Will NFTs replace physical collectibles such as baseball cards? The digital ecosystem’s maturity—along with cryptocurrencies’ explosive growth—suggests that this will, indeed, be the trend.

TECHNOLOGY NFTs can easily be minted, a process whereby the creator of a digital asset attaches a blockchain-backed token to the asset. During an NFT purchase, information pertaining to the transaction—such as sale date, purchase amount, and participants—is securely stored on a digital blockchain ledger. The purchased token then acts as a virtual deed of ownership, giving the individual the rights to resell the NFT but not the rights to the underlying content. For example, an owner of an NFT cannot resell the content in other forms, such as by printing digital artwork on a T-shirt. Furthermore, the original content creator has the right to remove, alter, or otherwise destroy the digital existence of the original work.

EVERYDAYS: THE FIRST 5,000 DAYS

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

The Ethereum blockchain mints the majority of NFTs primarily due to its superior infrastructure for handling these types of assets. It uses a standard called ERC-721. Creators gravitate to Ethereum for a variety of reasons: the simplicity and security of proving ownership history, the difficulty of stealing ownership, the ability to trade NFTs peer-to-peer, and the portability of Ethereum products. Portability allows NFT owners to easily sell their assets on a variety of Ethereumbacked platforms. Even so, prohibitive transaction fees and the high energy use of Ethereum have sent some creators looking for alternatives, such as the recently created Flow blockchain. However, it is quite difficult to transfer NFTs across competing blockchains, making the portability of ownership an issue that needs a long-term solution.

OUTLOOK Given that Ethereum is the primary blockchain standard backing these tokens, the recent explosion of NFT-related interest and transactions has increased Ethereum usage. As a result, energy consumption associated with verifying blockchain transactions on Ethereum has climbed sharply. The total energy utilization of the Ethereum network is comparable to the annualized energy usage of Slovakia.2 This has raised legitimate concerns about increasing carbon emissions, even though some of this energy consumption comes from renewable, clean energy. Other blockchain standards, such as Flow, claim to use less energy to verify transactions. Ethereum’s developers are developing a proof-of-stake framework that should be less carbon-intensive, but there is no clear adoption timeline. Given the ever-increasing international focus on decarbonization, the voracious energy appetite of NFTs could prove to be a costly impediment toward widespread adoption. Economists, analysts, and day traders alike are vexed with the perceived high value of NFTs and cryptocurrency, as many question speculative value versus true fair market value. Undoubtedly, news of tougher regulatory oversight, climate concerns, and overheating economies will make them a volatile asset. NFTs enable a unique form of digital ownership with a broad variety of uses and opportunity for owners from initial sale to future royalties. 

1 2

Fiat currency is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. “Ethereum Energy Consumption Index,” Digiconomist, March 24, 2021.

"Given that Ethereum is the primary blockchain standard backing these tokens, the recent explosion of NFT-related interest and transactions has increased Ethereum usage."

CONTACT PAREN 

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

Award Winning Firm Since 1939

Rising to the challenge KROST receives new accolades from Accounting Today 2021 ACCOUNTING TODAY TOP 100 FIRMS 2021 ACCOUNTING TODAY FASTEST-GROWING FIRMS IN THE US 2021 ACCOUNTING TODAY REGIONAL LEADERS ON THE WEST COAST

"It means a great deal to us to receive these awards from Accounting Today. It has been a difficult year for our entire industry. The pandemic forced many of us to change our strategies and shift priorities. Despite the circumstances, we were fortunate to be able to grow our firm and rise to the challenges of 2020." – Greg Kniss, Managing Principal at KROST

2021 TAX PLANNING FOR TECH COMPANIES:

EMPLOYEE RETENTION AND R&D CREDITS Guest Contributor: Mike Kniss Manager - Research & Development Tax Credit Services

n 2021, technology companies have a unique opportunity to claim both R&D Tax Credits for qualified research and Employee Retention Tax Credits (ERTC) for maintaining employees during the pandemic, with one key exception. As part of 2021 tax planning, tech companies looking to claim these valuable credits should consider how the benefits are calculated, as both are wage-based federal incentives. The ERTC was first introduced as part of the Coronavirus Aid Relief and Economic Security (CARES) Act in 2020 to incentivize employers to keep employees on payroll during the pandemic. The enactment of the Consolidated Appropriations Act (CAA) provided clarity on the interplay of R&D Tax Credits, ERTC, and Paycheck Protection Program (PPP) loans. Fortunately, the CAA clarified that PPP loan expenses do not impact federal R&D Tax Credit claims. However, while ERTC can be claimed in conjunction with R&D Tax Credits, any wages used in calculating the ERTC must be excluded from the R&D credit claim. It is never too early to begin year-end planning for the current tax year. Being proactive will ensure benefits are maximized by claiming all applicable incentives. It is crucial that taxpayers revisit their eligibility for ERTC, as the credit was modified and extended through the end of the year as part of the CAA and the American Rescue Plan Act (ARPA).

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

2021 UPDATES 1.

The ERTC was extended from its initial end date of January 1, 2021, to January 1, 2022. As such, eligible taxpayers can take advantage of this benefit for an additional year.

Qualification is easier for 2021 under the gross receipts test. For 2020, taxpayers must have experienced a 50% decline in any quarter compared to the same quarter in 2019. In 2021, taxpayers can qualify with a 20% decline in gross receipts compared to the same quarter in 2019. For taxpayers that did not experience these declines, they can still qualify under the government-mandated shutdown rules.

Credit amounts were also increased. In 2020, taxpayers can qualify 50% of the first $10,000 in wages and qualified healthcare costs for the year, bringing the total creditable amount for the year to $5,000 per employee. In 2021, that amount increases to 70% of the first $10,000 per quarter for a maximum amount of $28,000 per employee.

ASSESS ELIGIBILITY FOR R&D TAX CREDITS AND ERTC Companies in the technology sector that experienced supply shortages or experienced sharp declines in gross receipts should explore the ERTC to see if they are eligible for this refundable credit. The ERTC, coupled with the R&D tax credit, can create an influx of capital, helping navigate many taxpayers out of the pandemic. Technology companies who have not assessed eligibility for R&D Tax Credits and ERTC should do so immediately. 

"While ERTC can be claimed in conjunction with R&D Tax Credits, any wages used in calculating the ERTC must be excluded from the R&D credit claim."

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KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

POWERFUL & INNOVATIVE

Software Tools For Your Team Guest Contributor: Justin Glim Manager - Green Building Tax Incentive Services

oday, more than ever, companies are looking for powerful tools to make decisions and drive innovation during these uncertain times. In some instances, innovation is needed to keep track of sales or tasks while working from home. However, in other cases, it may be needed to streamline a process that has taken too long for too many years. Regardless of which situation your company is in, here are five potential solutions that may also be useful to your team.

1 SALESFORCE This customer relationship management (CRM) service is among the most popular in the world – and perhaps for a good reason. It provides a one-stop solution for managing contacts, identifying potential sales opportunities, and tracking sales revenue. However, these capabilities are only scratching the surface of what is possible with Salesforce. The platform also includes Trailhead, a website that provides tutorials and literature on how to become an intermediate user of their platform.

2 MONDAY If your team is looking for a simpler solution for managing tasks remotely, Monday may be a potential solution. This platform helps users delegate tasks, track deadlines, and collaborate with teammates through an online or mobile web application. The service is straightforward to grasp, and its user interface is arguably cleaner than its competition (e.g. Asana).

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

3 POWER BI Power BI has gained significant momentum over the past serveral years, as it is more common in offices across the country. Its growing popularity is linked to its ability to display and filter data in an intuitive user interface. It can provide better insight into areas of inefficiency to improve processes and realization. Power BI is also a Microsoft product, so there is some continuity and familiarity with the product itself and its licensing.

4 MICROSOFT POWER AUTOMATE Previously called Microsoft Flow, Microsoft Power Automate is also part of Microsoft’s “Power Apps” family of products. This service allows users to create their own automations, called “workflows,” to do anything from sending notifications to project reviewers to creating Excel reports from Outlook inboxes.

5 AUTOMATION ANYWHERE Finally, although it is arguably a lesser-known tool than Microsoft Power Automate, Automation Anywhere is a more powerful alternative to automation outside the Microsoft ecosystem. Automation Anywhere can pick up wherever Power Automate leaves off. Microsoft Power Automate specializes more in automations related to the Microsoft Office suite.

These solutions are a great way to streamline processes, yet it is important to weigh whether they are even feasible for your team. It can be tempting to dive deep into the newest technology without effectively weighing the long-term cost-benefit for dedicating resources to them. After all, we live in a quickly changing world and do not want to be left behind for failing to embrace change. But if appropriately vetted, these tools truly have the power to take your processes and communication to the next level. 

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KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

DISRUPTION AND INNOVATION: Streamlining Client Accounting Services (CAS) By Sossi Bekarian, CPA | Senior Manager - Accounting

By Peter Minaian | Staff - Accounting

he COVID-19 pandemic forced many businesses to adapt and make significant changes to their practices. Executive and public health orders directed the public to stay home except for permitted work, local shopping, or other permitted errands.1 Various businesses were forced to either shut down or significantly alter their business structures. Many were not prepared to withstand a disruption of this magnitude because areas of their operations, including accounting, required employees and executives to rely on software and data maintained manually and locally. Innovation was essential to adapt to the new way of life. In order to adapt to this new model, companies should consider making these three changes: 1. Convert desktop accounting software to the cloud or online, 2. Eliminate manual data entry with third-party apps that integrate with the software, and 3. Leverage data analytics to make informed decisions based on real-time data via Client Accounting Services (CAS). Maintaining accounting software on a local server is now obsolete. To ensure individuals and businesses always have access to their books and records, KROST has assisted clients by transferring their accounting software from various versions of QuickBooks Desktop directly to QuickBooks Online. The change has provided transparency of the books and records, cloud access (hosting), access to several users simultaneously, the ability to download bank transactions automatically, and the capability to automate data-encrypted back-ups without incurring additional costs.2 QuickBooks Online has also provided the ability to restore company data and offers a mobile app for smartphone access.2

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

"Maintaining accounting software on a local server is now obsolete."

For business owners and executives, time is stretched thin with managing the day-to-day operations. Utilizing third-party apps, such as Bill.com eliminates hours of “busy work” with a paperless bill payment system that provides access anywhere (from a computer, tablet, or mobile device). KROST's CAS team monitors monthly bills, maintains electronic copies, and reconciles books on a monthly or weekly basis. With CAS, data is synced seamlessly to the accounting software, providing live metrics, analysis, and financial insights.

CLIENT ACCOUNTING SERVICES CAS can be a cost-effective way to have high-level financial reporting without hiring a team of Certified Public Accountants and accounting professionals internally. CAS allows business owners to focus on business growth while the CAS team provides the financial data needed to make informed decisions via data analytics. KROST provides analysis and details regarding the management of cash and reporting to help manage businesses in real-time.

KROST CAS SERVICES • • • • • •

Accounting Software Training Bookkeeping Controller Services Cashflow Projections Data Access Anywhere & Anytime Data Analytics

• • • • •

Electronic Bill Processing & Payments Financial Reporting Outsourced CFO QuickBooks Platform Integration Wealth Management

The COVID-19 pandemic has undoubtedly altered the day-to-day life of businesses. It has shown that manual accounting practices are a thing of the past. Making sure business disruptions are easily mitigated through innovation has become vital, especially for transparency and understanding the problems that may uncontrollably arise in the future. Transferring accounting software online and to the cloud, utilizing third-party apps, and making informed decisions via Client Accounting Services and data analytics will lead to a more promising future. Have any questions regarding CAS? KROST is here to assist. 

covid19.ca.gov

quickbooks.intuit.com

CONTACT SOSSI 

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

THE EFFECT OF UPCOMING CHANGES TO IRC SECTION 174 ON THE SOFTWARE DEVELOPMENT INDUSTRY Guest Contributor: Tetyana Guguchkina Senior Manager - Research & Development Tax Credit Services

esearch and development (R&D) and innovation have historically driven the US economy's growth and prosperity. Recent legislation, including the Tax Cuts and Jobs Act (TCJA) and the Protecting Americans from Tax Hikes (PATH) Act, has created a favorable environment for small, mid-size, and large companies to benefit from the R&D Tax Credit. Software development is one of the common industries taking advantage of the credit to increase market value and lower their effective tax rates. There are various classes of qualifying research and experimental (R&E) expenditures and activities that may be considered qualified. R&E are expenditures paid or incurred during the tax year in connection with the taxpayer’s trade or business. R&E represents research and development costs in the experimental or laboratory sense (i.e., for activities intended to discover information to eliminate uncertainty concerning the capability, method, or design for developing or improving a product or process).

IRC SECTION 174 OVERVIEW AND UPCOMING CHANGES IRC Section 174 generally includes all costs incurred in the development or improvement of a product and extends beyond “qualified research expenses” under IRC Section 41. For example, IRC Section 174 costs can include the costs of obtaining a patent. Current law in effect for R&E paid or incurred in tax years beginning before January 1, 2022 allows taxpayers to: • • •

Treat R&E expenditures as deductible expenses under IRC Section 174(a), or Elect to capitalize and amortize such expenditures over the period of no less than 60 months, starting with the month the benefit from such expenditures is realized under IRC Section 174(b), or Make an alternative election under IRC Section 59(e) to amortize the expenditures over ten years.

When it comes to software development costs, under Rev. Proc. 2000-50, they could be any of the following: • • • 14

Expensed Capitalized and amortized over a period of not less than 60 months following the date of development completion Capitalized and amortized over 36 months following the date the software is placed in service

KROST QUARTERLY VOL. 4 ISSUE 2 - THE TECHNOLOGY ISSUE

Significant changes to IRC Section 174 are coming into effect for the tax years beginning on or after January 1, 2022. The new rules will require R&E expenditures to be capitalized and amortized beginning at the midpoint of the tax year incurred, over: •

US-based software development rather than outsourcing development overseas. It may be beneficial for taxpayers to start tracking IRC Section 174 expenditures:

5 years for expenditures associated with the research conducted in the United States. 15 years if research is conducted outside the United States.

• •

Software development costs will be included in the definition of R&E expenditures under IRC Section 174 and Rev. Proc. 2000-50 will only be applicable to software acquisition costs. The new 174 rules state that R&E expenditures include “any amount paid or incurred in connection with the development of any software.”

•

Furthermore, under the new rules going into effect, if a company has abandoned capitalized R&E expenditures, they are longer allowed to write those expenditures off and must continue to amortize those expenditures. This rule is contrary to other provisions in the IRC relating to abandonment costs, such as IRC Section 165.

•

• •

Separate in-house domestic and foreign R&E costs. Identify software development expenditures, even if not currently treated as IRC Section 174 costs. Track location of the contract research and supplies used and consumed in the research. Revise contract terms to require contractors to identify the location where research is performed. Evaluate whether any of the assets currently developed in-house could be acquired. Bring more activities onshore.

We are encouraging taxpayers to get ahead of the game and start re-evaluating IRC Section 174 expenditures now, for immediate and long-term tax planning. 

EFFECT OF IRC SECTION 174 CHANGES ON IRC SECTION 41 RESEARCH CREDIT The changes to IRC Section 174 will have no direct effect on the R&D credit since the TCJA made amendments to IRC Section 41 to make sure the credit still be available for qualifying IRC Section 174 costs, regardless of capitalization. The TCJA also made confirming amendments to IRC Section 280C. Currently, under IRC Section 280C, the research credit determined for the tax year reduces IRC Section 174 expenditures unless an election is made to reduce the credit by the maximum applicable corporate tax rate (currently 21%). For tax years beginning on or after January 1, 2022, the IRC Section 280C election will be applicable only if the amount of the credit exceeds the amount allowable in the current year as a deduction. Under new capitalization and amortization rules, it will be very rare for the credit to exceed the allowable deduction. Many taxpayers could benefit from not making the IRC Section 280C election.

EFFECT OF IRC SECTION 174 CHANGES ON SOFTWARE DEVELOPMENT INDUSTRY Due to the lower amortization period (5 vs. 15 years), more software development taxpayers may invest in

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GOING GREEN FOR THE GREEN:

FEDERAL TAX INCENTIVES FOR ENERGY EFFICIENT BUILDING

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in the Media, Entertainment, and Gaming Industries

QUALIFIED BUSINESS INCOME DEDUCTION

Loan-Out Corporations:

Stacey R. Korman, CPA, MST, Brad Pauley, CPA, and Douglas A. Venturelli, Esq. lead the Sports & Entertainment Industry group at KROST

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KROST QUARTERLY MAGAZINE

For over 80 years, KROST has assisted businesses and individuals to reach their financial goals through their in-depth knowledge of Tax, Accounting, Client Accounting Services (CAS), Assurance and Advisory, M&A, KROST Business Intelligence (KBI), and Wealth Management Services. KROST also provides specialty tax services such as Cost Segregation Studies, R&D Tax Credits, Employee Retention Tax Credit (ERTC), Transfer Pricing, Green Building Tax Incentives, Repair vs. Capitalization, Fixed Asset, IC-DISC, and more.

Pasadena • Woodland Hills West Los Angeles Phone: (626) 449-4225 Fax: (626) 449-4471 KROSTCPAs.com