# 26 U.S.C. § 174: Amortization of research and experimental expenditures Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 174(a)(1). ## § 174(a) In general In the case of a taxpayer’s foreign research or experimental expenditures for any taxable year— **§ 174(a)(1)** except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and **§ 174(a)(2)** the taxpayer shall— **§ 174(a)(2)(A)** charge such expenditures to capital account, and **§ 174(a)(2)(B)** be allowed an amortization deduction of such expenditures ratably over the 15-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred. ## § 174(b) Foreign research or experimental expenditures For purposes of this section, the term “foreign research or experimental expenditures” means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer’s trade or business and which are attributable to foreign research (within the meaning of section 41(d)(4)(F)). ## § 174(c) Special rules **§ 174(c)(1) Land and other property.** This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures. **§ 174(c)(2) Exploration expenditures.** This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas). **§ 174(c)(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. ## § 174(d) Treatment upon disposition, retirement, or abandonment If any property with respect to which foreign research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction or reduction to amount realized shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures. ## Regulations - [Treas. Reg. § 1.174-1](/26/reg/1.174-1.md): Research and experimental expenditures; in general. (interprets § 174) - [Treas. Reg. § 1.174-2](/26/reg/1.174-2.md): Definition of research and experimental expenditures. (interprets § 174) - [Treas. Reg. § 1.174-3](/26/reg/1.174-3.md): Treatment as expenses. (interprets § 174) - [Treas. Reg. § 1.174-4](/26/reg/1.174-4.md): Treatment as deferred expenses. (interprets § 174) ## Final rules - [79 FR 42193](https://www.federalregister.gov/documents/2014/07/21/2014-16956/research-expenditures) (2014): Research Expenditures - [FR Doc. 94-24153](https://www.federalregister.gov/documents/1994/10/03/94-24153/research-or-experimental-expenditures) (1994): Research or Experimental Expenditures ## Leading cases - [Kantor v. Commissioner, 998 F.2d 1514 (9th Cir. 1993)](https://www.courtlistener.com/opinion/611598/sharon-d-kantor-robert-e-kantor-v-commissioner-of-internal-revenue/) - [Harris v. Commissioner, 16 F.3d 75 (5th Cir. 1994)](https://www.courtlistener.com/opinion/6248/harris-v-commissioner/) - [Snow v. Commissioner, 416 U.S. 500 (1974)](https://www.courtlistener.com/opinion/109019/snow-v-commissioner/) ## Connections Cites: § 41 Credit for increasing research activities; § 167 Depreciation; § 611 Allowance of deduction for depletion Cited by: § 56 Adjustments in computing alternative minimum taxable income; § 168 Accelerated cost recovery system; § 170 Charitable, etc., contributions and gifts; § 263 Capital expenditures; § 263A Capitalization and inclusion in inventory costs of certain expenses; § 469 Passive activity losses and credits limited; § 864 Definitions and special rules; § 993 Definitions and special rules; § 1016 Adjustments to basis; § 1202 Partial exclusion for gain from certain small business stock; § 1298 Special rules ## Amendments - 1954-08-16: [Act Aug. 16, 1954, ch. 736](/26/act/1954-ch736.md), 68A Stat. 66 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1769 - 1982-09-03: [Pub. L. 97-248](/26/act/97-248.md), 96 Stat. 420 - 1983-01-12: [Pub. L. 97-448](/26/act/97-448.md), 96 Stat. 2400 - 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2343 - 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3435 - 1989-12-19: [Pub. L. 101-239](/26/act/101-239.md), 103 Stat. 2325 - 2014-12-19: [Pub. L. 113-295](/26/act/113-295.md), 128 Stat. 4042 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2111 - 2025-07-04: [Pub. L. 119-21](/26/act/119-21.md), 139 Stat. 191