Other benefits of Frontier include dramatically cutting launch times and
website development costs, and improved user experience and search engine optimization (SEO).
This significantly decreases the
website development costs because it avoids paying for building a complete website.
Currently, there are no IRC provisions addressing
website development costs; however, Revenue Procedure 2000-50 permits the application of IRC section 174--which covers research and development expenditures--to
website development costs.
It explains how to handle
website development costs, and the tax ramifications of acquiring and disposing of a web-based business.
Website development costs ballooned to include development of software to run the website, production of content and purchase of computer hardware.
At its March 2000 meeting, the EITF reached a consensus that accounting for website development costs should follow the provisions of SOP 984.
Should website development costs 1 be expensed in a manner similar to software developed for internal use (i.e., under SOP 98-1)?
What are the likely Federal income tax consequences of Website development costs? Important factors include what was purchased, how it was delivered and invoiced, how it will be used, and exactly what has been developed or acquired.
Understanding that all factual situations are different and may lead to opposite conclusions, the following general rules should apply to most Website development costs. Purchased computer hardware should be capitalized and depreciated over five years.
Website development costs incurred in a "start-up" or business expansion situation should also be currently deductible, although treating such costs as start-up costs amortizable over 60 months, may not be an unreasonable position.
Additional operating issues (such as software development and acquisition costs, access charges, other
Website development costs and recurring operations costs) may affect any entity carrying on a trade or business, and may offer tax planning considerations.
The portion of
Website development costs that can be allocated to software is recoverable over various periods, depending on several factors, including whether it is purchased or self-developed.