26 U.S.C. § 174 — Amortization of research and experimental expenditures

(a) In general: If a taxpayer has "foreign research or experimental expenditures" for a tax year, two rules apply. First, the taxpayer normally can't deduct these costs right away. Second, instead the taxpayer must: (A) treat the costs as capital costs, and (B) deduct them a little at a time, evenly, over 15 years, starting at the midpoint of the year the costs were paid or incurred. (b) Foreign research or experimental expenditures: This term means research or experimental costs the taxpayer pays or incurs during the year, connected to the taxpayer's trade or business, that count as "foreign research" under section 41(d)(4)(F). (c) Special rules: (1) Land and other property: This section does not apply to money spent to buy or improve land. It also doesn't apply to buying or improving property used in the research, if that property already qualifies for a depreciation deduction (section 167) or a depletion deduction (section 611). But depreciation and depletion allowances on that property still count as research expenditures for this section. (2) Exploration expenditures: This section doesn't apply to money spent to find out whether ore, minerals, oil, or gas deposits exist, and where and how much there is. (3) Software development: Money spent developing software counts as a research or experimental expenditure. (d) Treatment upon disposition, retirement, or abandonment: If the taxpayer disposes of, retires, or abandons property tied to these expenditures while still amortizing them, that event does not create any extra deduction or reduce the amount realized. The 15-year amortization deduction keeps going anyway.