Software Capitalization FAQ
- Parker Ennis
Find answers to common questions and better understand the methodology for calculating software R&D reports in Allstacks.
The basics
What are the benefits of tracking the portion of development committed to software R&D?
Gives visibility into the type of effort engineers are working on for two use cases:
| Tax Credit | Financial Auditing (Cap. & Amort.) |
Requirement | The Internal Revenue Code (“IRC”) | Small, unprofitable companies: depends on stage Large companies or IPO’d companies: required |
Legislation | Section 174 | US GAAP (“Generally Accepted Accounting Principles”) |
Sign Off (Most Common) | 3rd Party tax advisors working with CTO. Potentially Independent Financial Statement Auditors
| Independent Financial Statement Auditors |
Frequency | Submitted annually on Federal & State returns (where applicable); estimated quarterly with payments | Monthly |
Eligibility/Details |
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Customer Goal | Maximize defensible R&D claim. Limit exposure to IRS audit | Accuracy and presentation of the Financial Statements |
What’s the difference between capitalizable and non-capitalizable costs?
Capitalizable Development costs for internal-use software include development labor as well as third-party costs for software development or purchase.
Non-capitalizable Development costs include, but are not limited to, small bug fixes, ongoing training, and maintenance.
Is Software Capitalization included in my Allstacks app subscription already?
Software Capitalization can be enabled within the app, but requires a separate purchase. Software Capitalization can be purchased as a standalone offering or bundled in combination with a Premium tier or Enterprise tier platform purchase for a volume discount.
Walking through the process
What’s supported
Velocity based reporting
Story-point based reporting
Default salary estimates (configurable)
Splitting credit across assignees evenly
What’s not supported
Splitting credit across assignees unevenly
Data extracted from source code management tools
Direct integrations with HR systems or payroll tools are not supported
Note, we’re always looking for feedback and opportunities to improve our Software Capitalization product. If you have feedback, ideas, or specific use cases to consider, please let us know.