The guidance in question can be found here: https://www.irs.gov/pub/irs-drop/n-23-63.pdf

There was previous discussion of these rules on HN here: https://news.ycombinator.com/item?id=35614313

To very briefly summarize, these rules force certain research expenses to be treated under Section 174 and thus capitalized and amortized over a period of 5 years, instead of under Section 162 (ordinary and necessary business expenses) which are immediately deducted in the year they occur.

Part of the issue is the extremely broad classification of "research expenses". Notably, it classifies virtually all software development as research, as well as the proportional share of all overhead/fringe expenses. It also changes the treatment of contracted research activities (note that includes software). This has a hugely negative impact for early-stage startups, contract research firms (i.e. SBIR companies), and independent software developers.

To construct a basic example:

  Revenue:  $100k 
  Expenses: $100k (developer salaries)
  Net operating income:  $0
  Taxable income: $100k - 0.1x100k = $90k (first year deduction is 10% of SREs)