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Cost recovery, losses and R&D

ARTICLE | August 08, 2023 | Authored by RSM US LLP

Recent tax accounting methods guidance may assist with tax planning ideas

With the second quarter in the rearview mirror for calendar-year companies, we enter a period of finalizing 2022 tax compliance and looking ahead to tax planning for the 2023 calendar year.

Neither the courts nor the IRS in the second quarter issued major guidance related to accounting methods, but taxpayers did receive the anticipated annual update to the list of automatic accounting method changes, the obsoletion of a 65-year-old revenue ruling that allowed taxpayers to amend returns for consistency in section 174 cost treatment, and various letter rulings and advice regarding cost recovery and losses.

While not covered in detail here because it is proposed legislation that has not moved to the legislative floor, the House Ways and Means Committee released three proposed bills: the Tax Cuts for Working Families Act, the Small Business Jobs Act, and the Build it in America Act.

The Build it in America Act contains provisions to bring back the ability to expense research and experimentation expenditures for taxable years beginning in 2022 through 2025. It also resets the interest expense limitation calculation to allow the addback of depreciation, depletion and amortization for taxable years beginning in 2022 through 2025. For calendar year 2022 and tax planning into 2023, sections 174 and 163(j) continue to be top of mind for many companies.

Before recapping the recent updates from the IRS and Treasury Department, here’s a tax planning idea for companies subject to capitalization of costs under section 263A. As many companies now have spent three or more years computing section 263A capitalization under the 2018 final regulations, they may be eligible for a more streamlined cost allocation method election called the historic absorption ratio election.

Tax planning opportunity

Inventory and cost allocation planning: UNICAP and the historic absorption ratio election

Contributor:
Maureen Hansen | Manager

If I’ve learned anything by talking to people since the release of the 2018 UNICAP regulations, it is that most don’t enjoy the intricacies of inventory accounting, and they enjoy the complicated UNICAP rules even less. I used to feel similarly as I began my career outside of accounting and found the first few UNICAP projects I ever did to be—shall we say—intense.

While I Learned to Stop Worrying and Love UNICAP (apologies to Mr. Kubrick) and spend most of my time thinking about inventory, I doubt all tax professionals will find the same beauty in UNICAP that I do. If you are one of those people who don’t, moving to the historic absorption ratio (HAR) for UNICAP might help you spend a little less time thinking about inventory.

What is the HAR and why now?

The HAR is an optional election for UNICAP that generally reduces the time and effort to calculate UNICAP. Instead of calculating an absorption ratio every year from the entirety of the income statement, the taxpayer applies an average ratio from a three-year test period to ending inventory. The taxpayer must “retest” the ratio by generating a full UNICAP calculation periodically to determine if a new three-year average is necessary.

As described below, a taxpayer needs three prior years on a UNICAP method to compute the HAR ratio. With many taxpayers having adopted the section 263A regulations in 2018, 2019 or 2020, there should now be at least three prior years to pull from to compute the HAR.

How does it work?

In the year of election, the taxpayer takes the prior three years of additional section 263A costs and divides them by the section 471 costs to generate the HAR ratio. This ratio may have other components depending on the inventory methods in place.

The HAR generated from the test period is applied to section 471 costs remaining on hand at year end (generally meaning ending inventory). A taxpayer uses this ratio for five years (the year of election plus the subsequent four years) in the qualifying period. In the sixth year from election (which is the recomputation year), a taxpayer needs to compute a full UNICAP calculation using the method from the original test period.

If the newly computed ratio is within +/- 0.5% of the existing ratio, a taxpayer continues to use the HAR for the sixth year and the next five years. The taxpayer then will need to repeat the recomputation process.

What are potential benefits and detriments to the HAR?

Taxpayers considering the HAR are generally interested in reducing the administrative burden of calculating UNICAP every year, as a full UNICAP calculation is no longer necessary.

As the HAR locks in the absorption ratio, it can lead to either favorable or unfavorable outcomes compared to a full UNICAP computation each year. Taxpayers with lower absorption rates expected to increase soon can enjoy a five-year period at the prior rates. Taxpayers with high absorption ratios would have established those rates for the next five years, regardless of if those rates are expected to decrease.

As an example, taxpayers experiencing elevated levels of uncapitalized tax depreciation related to installation of new equipment for inventory production may have abnormally high ratios that may adjust downward as fewer assets are placed in service and/or bonus depreciation phases out.

Taxpayers with planned or frequent updates to their book or tax methods for inventory may not benefit from the HAR as anticipated. Depending on the inventory changes involved, the taxpayer may have to recompute and apply the test period HAR ratio under the new inventory method. This may represent a substantial administrative burden and may alter the HAR ratio unfavorably.

As an industry consideration, private equity portfolio companies may also benefit from a HAR election. If the general hold period is less than eight years and the exit structure is going to be a taxable asset acquisition (or part-taxable, part-tax-free), then that portfolio company may never encounter its retest period.

Final thoughts

A taxpayer looking to reduce their time on UNICAP compliance may benefit from electing the HAR. It would be wise, however, to consider future acquisitions, ERP upgrades and expected efficiency increases, among other things, before rushing the election in an attempt to simplify compliance.


Case law updates


Conmac Investments, Inc., T.C. Memo 2023-40 (March 27, 2023)

Summary

This decision requiring a taxpayer to return to a prior method of accounting highlights risks of unauthorized changes. Taxpayers should be careful to document and distinguish factual changes versus changes in method. If a change is determined to be change in method, requesting consent of the IRS is the path forward.

In Conmac Investments, Inc. v. Commissioner, the United States Tax Court held that a corporate taxpayer (“Taxpayer”) that owns and leases farmland made an unauthorized change in its method of accounting related to base acres rented to tenant farmers, violating section 446(e)’s consent requirement and. Notwithstanding that the unauthorized change occurred in a closed year, the court sustained an IRS-imposed method change and resulting section 481 adjustment to put the Taxpayer back on its prior method of accounting.

In Conmac, the Taxpayer acquired and leased to tenant farmers farmland that included so-called “base acres” during years ranging from 2004 to 2013. Base acres are a congressionally created right to receive farm program subsidies for the production of certain commodities from the U.S. Department of Agriculture (“base acre payments”). The right to receive the base acre payments attach to the farm rather than the farm owner.

The Taxpayer’s base acres were all farmed by tenant farmers, who in turn collected all base acre payments. Under the leases between the Taxpayer and tenant farmers, tenants paid the Taxpayer annual rent equal to twenty-five percent of the tenant farmer’s gross income from farming activities (including base acre payments received by the tenants).

Historically, the Taxpayer refrained from claiming any amortization or depreciation deductions on its farmland; however, beginning in 2009 the Taxpayer began treating certain of its base acres assets subject to amortization under section 197 (governing the amortization of certain intangible assets), claiming an amortization deduction for base acres acquired and placed in service in 2004 through 2013. The Taxpayer failed to request the IRS’ consent before adopting such treatment (e.g., through filing a Form 3115) and did not otherwise file amended returns reclassifying the base acres rented to tenant farmers as amortizable section 197 intangibles.

During an examination of the Taxpayer’s 2013 and 2014 tax returns, the IRS determined that Taxpayer’s method of accounting for its base acres was not permissible and imposed an exam-related method change on the taxpayer for 2013, including calculating a section 481(a) adjustment for amounts taken into account in the prior, closed years.

In determining whether the Taxpayer made an unauthorized change in method when it began amortizing the base acres, the Tax Court observed that a change in tax reporting attributable to a change in underlying facts is generally not a change in method of accounting. However, a change in fact requires a change in business practices, a change in economic or legal relationships, or an otherwise altered factual situation.

In applying this principle, the Tax Court determined that the Taxpayer’s change was not precipitated by a change in fact because the Taxpayer did not change its economic or legal relationship with tenant farmers through the modification of any lease agreement terms and the only economic consequence resulting from the Taxpayer’s change in treatment was the tax benefit received by Taxpayer from changing its accounting method.

The Tax Court concluded that the change in the treatment of the base acres from nonamortizable to amortizable beginning in 2009 was a change in accounting method, and, as a result, the Taxpayer should have obtained the IRS’ consent by filing a Form 3115 regardless of whether the existing method was proper or permitted.

The Taxpayer’s failure to obtain the IRS’ consent triggered the IRS’ authority to return the Taxpayer to its former method, despite the method being impermissible. As a change in accounting method, the IRS was further permitted to impose a section 481(a) adjustment relating to amounts from closed years.

The Taxpayer argued that even if it was required to file a Form 3115, the lack of prior consent is irrelevant because it related to a closed tax year. Even though not cited by the IRS or the Taxpayer, the Tax Court noted that in Commissioner v. Brookshire Bros. Holding, Inc. the Fifth Circuit held that the IRS’ challenge to a method change for which consent was never given must be for the year of the improper change and that the failure to obtain prior consent does not serve as a basis to challenge a change made in a closed year.

The Tax Court distinguished Brookshire Bros. Holding, Inc. from the facts of this case, noting that unlike the taxpayer in Brookshire Bros., the Taxpayer neither filed amended returns to reflect its change in treatment, nor did the Taxpayer adopt consistent treatment for all of its base acres. The Tax Court concluded that the Taxpayer was precluded from implementing its method change because it failed to obtain the Commissioner’s consent under section 446(e), and as such, the IRS was entitled to change the Taxpayer’s accounting method back to its prior method, notwithstanding that the method change occurred in a closed year. The court further held that under the rules of section 481, the IRS was permitted to impose a section 481 adjustment that included amounts attributable to an otherwise time barred tax year.


Treasury and IRS updates


Revenue Ruling 2023-8

Summary

This revenue ruling obsoletes prior guidance allowing taxpayers to amend tax returns to correct improper capitalization of research and development costs subject to full expensing under section 174(a) as in effect prior to amendments by the Tax Cuts and Jobs Act. Taxpayers should discuss any prior-year improper treatment of R&D costs with their tax advisor to determine the appropriate way to correct such treatment.

Learn more about the ruling

FAQ: Capitalization and amortization of R&D costs under new section 174 rules

Although Treasury and the IRS have not yet released substantive guidance on the treatment of research and development (R&D) costs under section 174, as amended by the Tax Cuts and Jobs Act (TCJA), the IRS recently issued Rev. Rul. 2023-8, obsoleting Rev. Rul. 58-74 as of July 31, 2023.

Rev. Rul. 58-74 provided that if a taxpayer previously adopted the expense method for R&D costs under section 174(a) (as in effect prior to amendment by the TCJA) but failed to deduct such costs in one or more years, the taxpayer should submit a refund claim or amended return, to claim a deduction for the costs in the year(s) omitted. Rev. Rul. 58-74 noted that once the expense method is adopted under section 174(a), the taxpayer could not change the treatment of its R&D costs without first obtaining consent of the IRS to change its accounting method for such costs. The ruling provided that without first obtaining consent, the taxpayer was not permitted to treat its R&D costs as deferred or permanently capitalized expenses; therefore, the only way to recover such previously capitalized or deferred costs is through amending or filing a refund claim for prior, open years.

Revenue Ruling 58-74 has long been an anomaly in the context of how the general accounting method rules apply. Changing a permissible or impermissible method of accounting for an item, including R&D costs, typically requires IRS consent through the filing of an accounting method change (i.e., a Form 3115); such changes generally cannot be applied retroactively through amended returns. On the other hand, an error in treatment (e.g., a mathematical error or one that does not involve the timing of recognizing an item of income or expense) must be corrected through amending prior year returns. In certain cases, Rev. Rul. 58-74 supported retroactive changes to the treatment of R&D costs that might otherwise be treated as a change in method of accounting.

In Rev. Rul. 2023-8, the IRS noted that Rev. Rul. 58-74 lacks adequate facts to correctly determine whether the taxpayer’s failure to deduct certain R&D costs constituted a method of accounting or an error. By obsoleting Rev. Rul. 58-74, Rev. Rul. 2023-8 removes the ability of taxpayers to amend returns in order to adjust an item that arguably is subject to a prospective accounting method change. Obsoleting Rev. Rul. 2023-8 may also avoid IRS challenge that a taxpayer will permanently lose the recovery of R&D costs that were improperly capitalized in closed years.

Although Rev. Rul. 58-74 has been obsoleted, the general rule for correction of errors (versus changes in method of accounting) remain unchanged. Taxpayers should discuss any inconsistencies in their established methods with their tax advisors to determine the appropriate way forward.

Revenue Procedure 2023-24

Summary

Rev. Proc. 2023-24 updates the list of automatic tax accounting method changes previously contained in Rev. Proc. 2022-14. While most existing changes are not significantly modified, the revenue procedure includes changes related to depreciation, research and development expenses, and mark-to-market elections and revocations.

Rev. Proc. 2023-24 is effective for method changes filed on or after June 15, 2023 for a year of change ending on or after Oct. 31, 2022. Taxpayers should carefully navigate these revised procedures, paying close attention to ensure compliance and to effectively manage their tax obligations.

Learn more about the ruling

Rev. Proc. 2023-24 Unveiled: Key method change updates

Private Letter Ruling 202301009

Summary

The IRS ruled that payments received from disparate sources were properly treated as separate items such that treatment of payments from one source did not affect the taxpayer’s method of accounting for payments from another source. Although the ruling itself was favorable to the Taxpayer, the PLR highlights the importance of reviewing contractual terms and conditions to determine the appropriate treatment of amounts received, including whether such amounts constitute gross income.

In PLR 202301009, the IRS ruled that a taxpayer/licensor’s established method of accounting for certain payments received from licensees was not affected by the taxpayer’s treatment of payments received from non-licensees.

The taxpayer (Taxpayer) in the PLR operated a global brand that included: (1) licensing its brand to licensees (Licensees); and (2) managing a “Brand Fund” to pay for promotional activities that benefit the Licensees. Pursuant to both the Taxpayer and Licensees’ license agreements and a “Brand Fund Agreement” between the Taxpayer and an independent “License Association” managed by the Licensees, the Taxpayer was obligated to pay a certain portion of the payments received from Licensees into the Brand Fund; amounts held in the Brand Fund were required to be used by the Taxpayer for marketing and related activity benefiting the Licensees and were subject to monitoring the Licensees.

In an earlier tax year, the Taxpayer received consent to change its accounting methods with respect to the payments received from Licensees and remitted to the Brand Fund (Licensee Payments) to a method whereby the Taxpayer would treat itself as a conduit for the Licensee Payments and exclude them from gross income for federal income tax purposes (the Consent Agreement).

The Taxpayer subsequently entered into various agreements with third parties (non-licensees), under which the Taxpayer received amounts (Non-licensee Payments) that, pursuant to the Brand Fund Agreements, were required to be placed in the Brand Fund. Initially, the Taxpayer treated itself as a conduit with respect to the Non-licensee Payments, in line with its treatment of the Licensee Payments; however, in a subsequent year, the Taxpayer and License Association agreed that the Non-licensee Payments would no longer be paid into the Brand Fund. As a result, the Taxpayer intended to begin including the Non-licensee Payments in taxable income.

In the PLR, the Taxpayer requested a ruling that the change in treatment of Non-licensee Payments represented a change in fact, rather than a change in method of accounting, which would not adversely affect the validity of the Taxpayer’s Consent Agreement relating to the Licensee Payments.

Although the IRS ultimately ruled that the Taxpayer’s change in treatment did not adversely the Consent Agreement, the IRS’ conclusion was not predicated on an underlying change in fact but rather that the Non-Licensee Payments were never part of the Consent Agreement.

The IRS noted that gross income under section 61 is generally expansive in definition and includes any undeniable accession to wealth; however, “if a taxpayer’s receipt of a payment is conditioned on a binding legal obligation to remit the payment to another . . . the taxpayer is generally deemed to be a mere conduit of those funds and is not required to include the payment in income.” While the Licensee Payments may have been received on the condition that the Taxpayer remit the payments to the Band Fund, the restrictions on the Non-Licensee Payments were imposed by the Brand Fund Agreements, not by the third-party payors who owed the Payments to the Taxpayer. As such, the Non-Licensee Payments were never covered by the Consent Agreement and a change in treatment of such payments would therefore have no impact on the Consent Agreement.

Although the ruling is arguably favorable to the Taxpayer in that it confirms that the earlier Consent Agreement is still valid, the IRS’ discussion implies that the Taxpayer never should have treated itself as a conduit for the Non-licensee Payments because the Taxpayer’s obligation to remit such payments to the Brand Fund was not a condition to it receiving the Payments.

Chief Counsel Advice 202304009

Summary

The IRS ruled that costs to acquire a priority review voucher (PRV), which may either be used by a pharmaceutical company to expedite a New Drug Application with the Food and Drug Administration or held for investment or future sale, must be capitalized upon acquisition, with recovery dependent on how the PRV is ultimately used. Pharmaceutical companies that acquire and hold PRVs should consult with their tax advisors to determine the proper treatment of the associated costs, including whether an accounting method change is recommended.

Priority review vouchers (PRVs) were created by Congress to incentivize pharmaceutical companies to invest and develop new therapies and treatments for certain neglected and rare diseases. A PRV may be awarded by the Food and Drug Administration (FDA) to any pharmaceutical company that applies and receives approval of a New Drug Application (NDA) for a new drug that treats a targeted condition. These vouchers are valuable assets to pharmaceutical companies as they entitle the holder to an expedited review of a future NDA by the FDA. Alternatively, the holder of a PRV may choose to sell the PRV to another pharmaceutical company, rather than use the PRV itself. PRVs do not expire and can be transferred an unlimited number of times before use. Thus, a pharmaceutical company can acquire a PRV and: (1) use the PRV immediately to expedite an NDA; (2) redeem the PRV at a future time for an expedited NDA; or (3) hold the PRV for resale to another pharmaceutical company.

In CCA 202304009, the IRS ruled that regardless of the intent in acquiring and holding a PRV, the PRV is an intangible asset subject to capitalization under section 263(a) and Treas. Reg. §1.263(a)-4 (governing the treatment of certain costs to acquire or create intangible assets); however, the proper method of recovering costs to acquire a PRV depends on whether the PRV is held for future use by the taxpayer or for sale.

Under Treas. Reg. § 1.263(a)-4, a taxpayer must capitalize amounts paid or incurred to acquire certain intangible assets, including, among other items: (1) amounts paid to a government agency to obtain rights under a franchise or other similar right granted by the government agency; and (2) amounts paid to acquire a separate and distinct intangible asset. Additionally, a taxpayer must capitalize amounts paid or incurred to facilitate the acquisition of such rights. Amounts are treated as facilitative when they are paid or incurred in the process of investigating or otherwise pursuing the transaction.

According to the CCA, an NDA is a franchise subject to the capitalization rules of Treas. Reg. § 1.263(a)-4 because the NDA represents a government-provided right to market and sell a product in a defined area. In cases where a PRV is used to expedite the FDA review of an NDA, the IRS reasoned that the costs to acquire the PRV are properly treated as transaction costs that facilitate the creation of such right.

Where a taxpayer acquires a PRV with the intent to hold the PRV for sale rather than to apply it to a future NDA, the CCA similarly concludes that the costs are subject to capitalization under Treas. Reg. § 1.263(a)-4, this time as a cost to acquire a separate and distinct intangible asset. Thus, in either case, a taxpayer must capitalize amounts paid or incurred to acquire a PRV.

Although the cost to acquire a PRV are subject to capitalization regardless of the underlying reason for acquiring and holding the asset, the CCA concludes that recovery of the cost is dependent on the intent in holding the asset.

In cases where the PRV is held for future use by the taxpayer, the CCA concludes that the cost to acquire the PRV may either be amortized as part of the related NDA, or, if the NDA is ultimately not approved by the FDA, recovered as a loss under section 165. The CCA provides that a PRV is not depreciable or amortizable by itself because it is not by itself an amortizable section 197 intangible asset and it is not subject to depreciation under section 167 because it has an unlimited useful life.

However, an NDA is a section 197 intangible asset; as such, if used to expedite an NDA review, the PRV can be recovered under section 197 as part of the amortization of the NDA. In this case, the taxpayer would amortize the PRV over 15 years beginning in the month the NDA is approved. If the NDA is not granted by the FDA, the taxpayer can deduct the loss under section 165 in the taxable year that the NDA is abandoned, provided no loss disallowance rules come into play.

Alternatively, should the taxpayer acquire the PRV for resale or investment, the CCA concludes that the taxpayer would recover its costs only upon disposition of the PRV.

Although the CCA predicates recovery on the intent in holding the PRV, ultimate use of the PRV is what will ultimately determine the recovery of the associated cost. Changing the treatment of costs to acquire PRVs likely requires an accounting method change; taxpayers that hold PRVs should discuss the impact of the CCA with their tax advisors.

Private Letter Ruling 202318008

Summary

The IRS’ ruling highlights the provisions in section 460 that require a taxpayer to utilize a long-term contract method of accounting, even if the subject matter of the contract is not the item being constructed. If the taxpayer must manufacture or construct an item to fulfill its obligations under the contract, the fact that the taxpayer is not required to deliver the item to the customer is not relevant. While this ruling is only applicable to the taxpayer’s specific facts, it may provide insight to how the IRS will interpret similar or analogous situations.

In this letter ruling, taxpayer and its customer entered in a services agreement that covered at least a period covering more than one taxable year. As part of the agreement, the taxpayer received title to facilities related to the services being provided and customer retained title to the underlying land. The agreement included an easement granting the taxpayer access to the customer’s property to fulfill contractual services and allowed the customer to mandate relocation of facilities if customer so desired.

When the customer exercised this right, they established a new contract requiring taxpayer to relocate the facilities to remove an item owned by the customer situated within taxpayer’s premises. The contract outlines the work the Taxpayer must perform, including partial demolition of a building, construction for the extension of the building and an adjacent building, and relocation and installation of equipment. The contract for this construction work provides that the payments are intended to reimburse taxpayer for its costs.

After examining the facts, the IRS ruled that this contract for construction qualified as a long-term contract under section 460.

Chief Counsel Advice 202325007

Summary

In what appears to be a first-of-its-kind advice, the IRS ruled on the application of the disaster loss election to worthless stock deductions claimed with respect to the stock of three controlled foreign corporations (CFCs).

The CCA expresses the IRS’ position that taxpayers cannot attribute the worthlessness of stock in a CFC to the COVID-19 disaster and thus cannot use the provisions of section 165(i) to accelerate the timing of the loss deduction. The IRS makes clear that the use of section 165(i) is geographically restricted, and the statute cannot be construed as including holdings of domestic taxpayers related to overseas companies.

While heavily redacted, it appears the taxpayer in the CCA (Taxpayer) experienced certain closures in the United States to comply with government mandates imposed because of COVID-19. The reduced cash flow resulting from this event caused a decrease in payments from the Taxpayer to its CFCs and eventually to the CFCs’ insolvency. This, in turn, caused the Taxpayer to deem its investment in the CFCs worthless. The Taxpayer then invoked section 165(i) to claim a worthless securities deduction with respect to its shares of stock in the CFCs in the year prior to the year the Taxpayer deemed the stock worthless. This claim was timely made on the Taxpayer’s federal income tax return for the prior year, in accordance with section 165(i)(1).

In the ILM, the IRS acknowledged that the events in question occurred during the COVID National Emergency period as declared by the President of the United States under the Stafford Act. The IRS does not explicitly opine on whether the loss was attributable to the COVID-19 disaster but appears to tacitly acknowledge that such a loss may qualify as a disaster loss under section 165(i). However, the IRS concluded that the loss related to CFC stock cannot satisfy section 165(i)’s requirements because it did not occur within the disaster area, which is defined as the area so determined to warrant assistance under the Stafford Act.

The IRS noted that no existing authority directly opines on where a loss sustained with respect to stock in a CFC occurs for purposes of section 165(i). Accordingly, to evaluate the location of the economic loss may require consideration of several business metrics. While in some contexts a shareholder’s residence is important, the IRS emphasized its poor fit with the clear congressional intent to cover a specific geographic area.

The IRS explored various indicators examining agents may use to identify the location of a loss tied to a foreign corporation’s stock, including income-generating assets, customers, employees, or revenue streams. In this case, no substantial part of the CFCs’ revenues came from U.S. customers. Other potential metrics like income-generating assets, employees, and revenue streams were all located or took place outside the United States. Consequently, the losses experienced by the Taxpayer should not be treated as having occurred within the disaster area. The IRS examined the legislative intent and policy reasons for section 165(i), finding that it is meant to provide relief by “alleviating the financial impact of damages resulting from a physical disaster that is geographically confined.”

The COVID-19 disaster created a somewhat novel situation for section 165(i) deductions. In CCA 202325007, the IRS highlighted that prior disasters eligible for an accelerated deduction under section 165(i) were typically linked to specific, tangible events, like hurricanes, floods, or droughts, resulting in clearly defined geographic disaster zones. This aligns with the Congressional intent behind section 165(i), which aims to provide relief by mitigating the financial burden caused by physically and geographically confined disasters. However, in the Taxpayer’s case, these precedents are less useful as the disaster was not physical and the loss was not clearly assignable to a particular location. The IRS appears to acknowledge that the COVID-19 disaster may give rise to disaster losses that are deductible under section 165(i) but does not directly conclude in this manner.

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This article was written by Kate Abdoo, Ryan Corcoran, Justin Silva and originally appeared on 2023-08-08.
2022 RSM US LLP. All rights reserved.
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