IRS issues R&D tax credit guidance in Rev. Proc. 2025-28 on August 28, 2025. Many of the issues and unanswered questions from OBBA have been addressed in this Rev. Proc.
Key Highlights:
- Most Taxpayers can file “Superseding 2024” returns to take the positions described in the OBBA or Rev. Proc. In lieu of an amended return, even if they did not file an extension.
- Small businesses (gross receipts under $31M for 2025) filing timely returns on or
before November 15, 2025, will “be deemed” to have elected OBBBA treatment if
they deduct R&D expenses on the return. Thus, no need to deduct §174A expenses per OBBBA on an “amended return”. - IRC §280C(c)(2) Elections to take the reduced credit on “late elections (or
revocations)” are permitted adjusting the relationship between R&D deductions and credits. This will require an amended Form 6765 and a statement providing certain information elections. - Domestic vs. Foreign Expenses. Domestic R&D: Immediate deductions or
capitalization available under OBBBA for tax years beginning in 2025. Foreign R&D: Pre- and post-2025 tax year expenses must be capitalized under OBBBA, though method changes are available to align with compliance.
Although rather complex, these changes provide taxpayer-favorable changes and will allow most to take the R&D credit without the whipsaw of non-deductibility of §174A expenses.
Please contact the Archer Lewis team to assist with addressing any client situations you might have related to this guidance.
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