“Companies that previously said ‘Oh I don’t have to worry about this, I didn’t do R&D and never claim the credit’ now have to take it into consideration. Now almost every company has to start thinking about it.”

Managing Director Kevin M. Jacobs speaks with CFO Dive on two provisions of the 2017 Tax Cuts and Jobs Act that went into effect last year that are causing finance leaders some headaches. 

Changes were made to Sec. 163(j) of the tax code to lower how much interest expense a company can deduct by shifting the calculation of the net business interest expense deduction to 30% of earnings before interest and taxes, rather than before interest, taxes, depreciation and amortization.

The biggest change was that made to Sec. 174 of the tax code which shifted how research and experimental expenditures are calculated: money spent on developing products can no longer be immediately deducted but must be capitalized and amortized over a handful of years, with the period over which that happens tied to whether the work is done in or outside the U.S.