The IRS has released highly anticipated guidance on R&E expenditures. New procedures have been issued for the elections and accounting method changes related to the One Big Beautiful Bill (OBBB) Act which re-instated immediate expensing of domestic R&E expenditures. Small businesses with average annual gross receipts of $31 million or less are permitted by the OBBB Act to elect to take the R&E deductions retroactively for the years 2022 through 2024. Immediate expensing starts for all other taxpayers as of January 1, 2025.
Amended returns are required for 2022 and 2023 for small businesses. However, under Revenue Procedure 2025-28, amended returns are not required for 2024. Instead, eligible taxpayers may claim the deduction on their originally filed 2024 tax return provided these returns have not yet been submitted. For entities that have already filed their 2024 tax returns where R&E expenditures were capitalized, such as partnerships, S corporations, C corporations, individuals, trusts, estates, and exempt organizations, a superseded return may be filed by the extended due date (even if an extension was not filed) of the tax return (for many this will be September 15!).
OBBB Act states that the amended returns must be filed by July 5, 2026 if the small business wants to elect to retroactively take the deductions. Revenue Procedure 2025-28 sets forth the specific procedures for making elections, filing amended and superseded returns, and changing accounting methods for R&E expenditures.