If a programmer is building an app that isn't yet offered as a product, is that R&D?
If a programmer is maintaining an app that is offered as a product, is that NOT R&D?
It was always a sham. We were building product.
[0] This is based on working at a company that went through a brief period where we had to do extra tracking to be able to capitalize our time if it was possible, and then reading up on the matter to try and understand what the hell the purpose was. Possible I'm wrong about the matter--I've never been the one doing the finances.
The term generally includes all such costs incident to the development or improvement of a product.
What has changed is section 174 - previously all software development could be expensed (without any justification needed) and now it must be capitalized.
Bug fixing, for example, is not covered by Section 174.
tldr: if they're developing new features, it has to be capitalized; if they're doing maintenance then it can be immediately expensed
However I doubt they'd leave such an obvious loophole. Surely the IRS's definition of R&D includes all types of software development activity.
I literally just linked to the IRS' definition that says not all software development activity is included.
The gray zone comes when a bug fix actually provides a new feature (e.g. something that wasn't actually usable before).