Specifically, that law firm says...

> Startups unable to utilize the credit under Section 41 should consider whether an amortizable expense under Section 174 or an immediate deduction under Section 162 is more appropriate.

So, their interpretation seems to be that you have three options.

Right. And 'unable to utilize' I think just is about the credit being non-refundable. EG, if are otherwise already showing a loss, then you don't want to use the credit. If you have reportable income, then the R&D credit might be beneficial.

Though, I'm not sure you can split the credit or carry any forward, etc. Every tax situation is different.

Under the previous law it was not a mutually exclusive choice, you could deduct the R&E expense under Section 174 and also claim the R&D credit under Section 41.

Under the current law you can no longer do both, if you want to take the R&D credit you have to instead amortize the R&E expense under Section 174.

Or from the other comments in this thread it sounds like you can maybe skip the R&D credit and then continue to deduct the R&E expense under Section 162. But it's not clear (to me anyway) whether Section 174 supercedes Section 162 in the case of software development costs, in which case you might no longer be allowed to apply Section 162.

I was reading elsewhere that it doesn't supersede, rather S 162 can't be used by 'startups.' Startup meaning the business hasn't actually started selling anything. So if you're generating sales related to the software, then S 162 applies.

I read that too but it seems like speculation and I'm not sure it's correct, see my other comment here: https://news.ycombinator.com/item?id=34634335

I had no idea this is how it worked. The previous system sounds too good to be true as a Canadian.