Impact of IRC Section 174 on Tax Planning for SaaS Scale-Ups
In this session, Travis and Ray will spend an hour providing an overview of IRC Section 174 and its role in shaping tax planning for R&D-intensive businesses. Moss Adams will briefly cover Section 174’s background, explain its current rules, and discuss its relevance to software companies, while highlighting the R&D credit, payroll tax credit for startups, and potential legislative shifts on the horizon.
A few discrete topics that Moss Adams will cover include:
- Background and Basics of Section 174: How it shifted from immediate expensing to 5-year amortization for domestic R&D and 15-year for foreign R&D, and what that means for deductions today.
- Section 174 and Software Companies: How it mandates capitalization of software development costs, and what falls under its scope.
- Pending Legislation and Outlook: Current efforts to change Section 174, possible retroactive effects, and factors that could influence reform by 2026.
- R&D Tax Credit (Section 41): How it pairs with Section 174 to provide immediate tax relief, and what qualifies.
- Payroll Tax Credit for Startups: How early-stage or loss-making companies can use R&D credits to offset payroll taxes, with steps to apply.
- Strategic Implications: How Section 174 can influence your tax position and planning, tailored to your company’s financial profile.
The goal is for you all to leave the session with a better understanding of Section 174, the R&D credit, and other tax considerations, helping you ask smarter questions and work more effectively with your tax advisors.
By way of background, Travis Riley is a Principal at Moss Adams and, since 2006, has driven significant tax savings through R&D tax credits for clients nationwide. A leader in his firm’s R&D practice, he serves diverse industries—technology, life sciences, manufacturing, food, agriculture, and professional services—across all 50 states. Travis represents clients in federal and state tax exams and appeals, drawing on extensive experience. Staying current with the tax code, regulations, case law, and guidance, including Sections 41 and 174, he adapts strategies to evolving rules. His comprehensive approach bolsters claims, aiding companies in navigating complex R&D incentives.
Ray Esquivel is a Director at Moss Adams and has worked in public accounting since 2001. He has specialized in R&D tax credit services since 2010 and provides clients with a deep understanding of the technical rules applicable to each client’s circumstances when calculating their R&D credits. He also delivers large-scale federal specialty tax projects and offers assistance with defending these credits upon examination. Ray serves both small and large companies in a wide range of sectors: software, pharmaceutical, e-retail, semiconductor, and utilities.
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