I wonder what the cost of research and development will be for XOM when R&D tax credit / tax writeoffs changes start in 2022. Will XOM research and development be more expensive in the United States?
https://www.lawyers.com/legal-info/taxation/income-tax/tax-deductions-for-research-and-experimental-costs.html#:~:text=Under%20regular%20tax%20rules%2C%20R%26D%20costs%20are%20capital,over%20several%20years%20through%20amortization%20or%20a%20write-off.
Tax Options
Under regular tax rules, R&D costs are capital expenses and aren't deductible until the research project is abandoned or deemed worthless. However, if your R&D costs qualify for special tax treatment, you have the option of deducting them all in a single year or deducting the cost a portion at a time over several years through amortization or a write-off. You have to tell the IRS how you're going to treat your R&D costs by making an election on your tax return.
Current Deduction Before 2022
Most taxpayers want to deduct as much as they can in a single year, so they elect to treat R&D costs as a current business expense. This enables you deduct the entire amount in the year the costs were incurred. You may take this deduction whether or not you make any money from your research efforts during the tax year. This deduction can be particularly beneficial for start-up businesses because it allows them to deduct R&D expenditures before their business actually begins and before the R&D efforts result in revenue.
Changes Starting in 2022
The Tax Cuts and Jobs Act (TCJA), the massive tax reform law that took effect in 2018, made some big changes in the R&D tax credit. Starting in 2022, taxpayers will no longer be allowed to currently deduct R&D expenditures. Instead, they will have to amortize (deduct) them over five tax years, beginning with the midpoint of the tax year in which the specified research or experimental expenditures are paid or incurred. R&D expenses incurred outside the United States will have to be deducted over 15 years.