Internal Revenue Code · 26 U.S.C.
§ 174. Amortization of research and experimental expenditures
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 174
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 4, 1976 by Pub. L. 94–455
- Last amended
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 8 dated changes in the source credit
- Length
- 4 subsections · 513 words · about 2 min to read
- Defines
- 1 term
- Cross-references
- cites 3; cited by 13 Code sections and 23 other regulations
- Regulations
- 4 issued under this section
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)).
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.
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).
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.
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.
(Aug. 16, 1954, ch. 736, 68A Stat. 66; Pub. L. 94–455, title XIX, §§ 1901(a)(30), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1769, 1834; Pub. L. 97–248, title II, § 201(d)(9)(B) formerly § 201(c)(9)(B), Sept. 3, 1982, 96 Stat. 420, renumbered § 201(d)(9)(B), Pub. L. 97–448, title III, § 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; amended Pub. L. 99–514, title VII, § 701(e)(4)(D), Oct. 22, 1986, 100 Stat. 2343; Pub. L. 100–647, title I, § 1007(g)(5), Nov. 10, 1988, 102 Stat. 3435; Pub. L. 101–239, title VII, § 7110(d), Dec. 19, 1989, 103 Stat. 2325; Pub. L. 113–295, div. A, title II, § 221(a)(31), (32), Dec. 19, 2014, 128 Stat. 4042; Pub. L. 115–97, title I, § 13206(a), Dec. 22, 2017, 131 Stat. 2111; Pub. L. 119–21, title VII, § 70302(b)(1), July 4, 2025, 139 Stat. 191.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 174
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 3 other sections
- § 41(d)(4)(F) Credit for increasing research activities
- § 167 Depreciation
- § 611 Allowance of deduction for depletion
Cited by 13 Code sections
- § 56(b)(2)(A)(ii) Adjustments in computing alternative minimum taxable income
- § 168(i)(11) Accelerated cost recovery system
- § 170(e)(4)(B)(v) Charitable, etc., contributions and gifts
- § 263(a)(1)(B) Capital expenditures
- § 263A(c)(2) Capitalization and inclusion in inventory costs of certain expenses
- § 368(a)(2)(F)(viii) Definitions relating to corporate reorganizations
- § 469(c)(5) Passive activity losses and credits limited
- § 543(d)(4) Personal holding company income
- § 864(g)(2) Definitions and special rules
- § 993(d)(2)(C) Definitions and special rules
- § 1016(a)(14) Adjustments to basis
- § 1202(e)(2)(B) Partial exclusion for gain from certain small business stock
- § 1298(e)(1) Special rules
Cited in 23 regulations not issued under it
- § 1.41-2 Qualified research expenses.
- § 1.41-4 Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003.
- § 1.41-4A Qualified research for taxable years beginning before January 1, 1986.
- § 1.41-7 Special rules.
- § 1.162-1 Business expenses.
- § 1.163(j)-1 Definitions.
- § 1.167(a)-6 Depreciation in special cases.
- § 1.167(a)-14 Treatment of certain intangible property excluded from section 197.
- § 1.199A-9 Domestic production gross receipts.
- § 1.263(a)-6 Election to deduct or capitalize certain expenditures.
- § 1.263A-1 Uniform capitalization of costs.
- § 1.263A-9 The avoided cost method.
- § 1.280C-3 Disallowance of certain deductions for qualified clinical testing expenses when section 28 credit is allowable.
- § 1.446-1 General rule for methods of accounting.
- § 1.460-5 Cost allocation rules.
- § 1.469-4 Definition of activity.
- § 1.469-4T Definition of activity (temporary).
- § 1.704-1 Partner's distributive share.
- § 1.818-2 Accounting provisions.
- § 1.861-17 Allocation and apportionment of research and experimental expenditures.
- § 1.936-6 Intangible property income when an election out is made: Cost sharing and profit split options; covered intangibles.
- § 1.993-4 Definition of producer's loans.
- § 1.1016-5 Miscellaneous adjustments to basis.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 119–21Parts changed in 2025: (a) (a)(2)(B) (b) (d)
- Amended by Pub. L. 115–97
- Amended by Pub. L. 113–295Parts changed in 2014: (a)(2)(A) (b)(2)
- Amended by Pub. L. 101–239Parts changed in 1989: (e)
- Amended by Pub. L. 100–647Parts changed in 1988: (e)(2)
- Amended by Pub. L. 99–514Parts changed in 1986: (e)(2)
- Amended by Pub. L. 97–448
- Amended by Pub. L. 97–248Parts changed in 1982: (e)
- Enacted by Pub. L. 94–455Parts changed in 1976: (a)(2)(A) (a)(2)(A)(i) (a)(3)
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter B Computation of Taxable Income
- Part VI ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
Nearby sections
- § 170 Charitable, etc., contributions and gifts
- § 171 Amortizable bond premium
- § 172 Net operating loss deduction
- § 173 Circulation expenditures
- § 174 Amortization of research and experimental expenditures
- § 174A Domestic research or experimental expenditures
- § 175 Soil and water conservation expenditures; endangered species recovery expenditures
- § 176 Payments with respect to employees of certain foreign corporations
- § 177 Repealed
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2025—Subsec. (a). Pub. L. 119–21, § 70302(b)(1)(A)(i), substituted “a taxpayer’s foreign research or experimental expenditures” for “a taxpayer’s specified research or experimental expenditures” in introductory provisions.
Subsec. (a)(2)(B). Pub. L. 119–21, § 70302(b)(1)(A)(ii), substituted “over the 15-year period” for “over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F)))”.
Subsec. (b). Pub. L. 119–21, § 70302(b)(1)(B), substituted “Foreign” for “Specified” in heading and “foreign research” for “specified research” in text and inserted before period at end “and which are attributable to foreign research (within the meaning of section 41(d)(4)(F))”.
Subsec. (d). Pub. L. 119–21, § 70302(b)(1)(C), substituted “foreign research or experimental expenditures” for “specified research or experimental expenditures” and inserted “or reduction to amount realized” after “no deduction”.
2017—Pub. L. 115–97 amended section generally. Prior to amendment, section consisted of subsecs. (a) to (f) relating to treatment of research and experimental expenditures as expenses, amortization of certain research and experimental expenditures, expenditure for the acquisition or improvement of land or property, ore and mineral deposit exploration expenditures, limitation to reasonable research expenditures eligible, and cross references, respectively.
2014—Subsec. (a)(2)(A). Pub. L. 113–295, § 221(a)(31), amended subpar. (A) generally. Prior to amendment, text read as follows: “A taxpayer may, without the consent of the Secretary, adopt the method provided in this subsection for his first taxable year—
“(i) which begins after December 31, 1953, and ends after August 16, 1954, and
“(ii) for which expenditures described in paragraph (1) are paid or incurred.”
Subsec. (b)(2). Pub. L. 113–295, § 221(a)(32), struck out “beginning after December 31, 1953” after “for any taxable year”.
1989—Subsecs. (e), (f). Pub. L. 101–239 added subsec. (e) and redesignated former subsec. (e) as (f).
1988—Subsec. (e)(2). Pub. L. 100–647 substituted “section 59(e)” for “section 59(d)”.
1986—Subsec. (e)(2). Pub. L. 99–514 substituted “section 59(d)” for “section 58(i)”.
1982—Subsec. (e). Pub. L. 97–248, § 201(d)(9)(B), substituted “Cross references” for “Cross reference” in heading, designated existing provisions as par. (1), and added par. (2).
1976—Subsec. (a)(2)(A). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (a)(2)(A)(i). Pub. L. 94–455, § 1901(a)(30), substituted “August 16, 1954” for “the date on which this title is enacted” after “ends after”.
Subsecs. (a)(3), (b)(1), (2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Amendment by Pub. L. 119–21 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2024, except amendment by section 70302(b)(1)(C)(ii) of Pub. L. 119–21 shall apply to property disposed, retired, or abandoned after May 12, 2025, subject to election for retroactive application by certain small businesses and election to deduct certain unamortized amounts paid or incurred in taxable years beginning before Jan. 1, 2025, see section 70302(e), (f) of Pub. L. 119–21, set out as an Effective Date note under section 174A of this title.
Effective Date of 2017 Amendment; Applicability of Change in Method of Accounting
Pub. L. 115–97, title I, § 13206(b), Dec. 22, 2017, 131 Stat. 2112, provided that:
“The amendments made by subsection (a) [amending this section] shall be treated as a change in method of accounting for purposes of section 481 of the Internal Revenue Code of 1986 and—“(1) such change shall be treated as initiated by the taxpayer,“(2) such change shall be treated as made with the consent of the Secretary, and“(3) such change shall be applied only on a cut-off basis for any research or experimental expenditures paid or incurred in taxable years beginning after December 31, 2021, and no adjustments under section 481(a) shall be made.”
Amendment by Pub. L. 115–97 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2021, see section 13206(e) of Pub. L. 115–97, set out as a note under section 41 of this title.
Effective Date of 2014 Amendment
Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.
Effective Date of 1989 Amendment
Amendment by Pub. L. 101–239 applicable to taxable years beginning after Dec. 31, 1989, see section 7110(e) of Pub. L. 101–239, set out as a note under section 41 of this title.
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as an Effective Date note under section 55 of this title.
Effective Date of 1982 Amendment
Amendment by Pub. L. 97–248 applicable to taxable years beginning after Dec. 31, 1982, see section 201(e)(1) of Pub. L. 97–248, set out as a note under section 5 of this title.
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.
Allocation or Apportionment to Sources Within United States of Research and Experimental Expenditures Paid or Incurred for Research Activities Conducted in United States; 2-Year Program
Pub. L. 97–34, title II, § 223(a), Aug. 13, 1981, 95 Stat. 249, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “In the case of the taxpayer’s first 2 taxable years beginning within 2 years after the date of the enactment of this Act [Aug. 13, 1981], all research and experimental expenditures (within the meaning of section 174 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) which are paid or incurred in such year for research activities conducted in the United States shall be allocated or apportioned to sources within the United States.”