As we noted in our prior blog post, the IRS recently released long-awaited procedures for elections and accounting method changes under the One Big Beautiful Bill (OBBB) Act, which reinstated immediate expensing of domestic R&E expenditures. The IRS is expected to issue updated guidance on Research and Experimental (R&E) expense following the recently issued guidance in Rev. Proc. 2025-28.
Under the OBBB Act, small businesses—those with average annual gross receipts of $31 million or less—may elect to retroactively deduct R&E expenses for tax years 2022 through 2024. For all other taxpayers, immediate expensing begins January 1, 2025. The IRS Office of Chief Counsel is expected to clarify that small taxpayers may:
- File an original or superseded 2024 return to make a change in method of accounting for R&E expenses.
- Deduct the full amount of unamortized R&E expenses from 2022 and 2023 on the 2024 return.
- Do this by attaching a statement to the return.
- Form 3115 will not be required.
For many affected taxpayers—particularly partnerships and S corporations—the deadline to file the original or superseded 2024 return in order to fully deduct 2022 and 2023 R&E expenses in 2024 is September 15, 2025.
Summary of the options for small taxpayers with unamortized amounts of R&E from 2022, 2023, and 2024:
- Full Catch-Up in 2025 (same as large taxpayers)
Deduct all unamortized R&E expenses from 2022–2024 on the 2025 return. - 50/50 Split (same as large taxpayers)
Deduct 50% of unamortized 2022–2024 R&E expenses on the 2025 return and the remaining 50% on the 2026 return. - File 2024 Under “Old” Rules, Then Amend
Capitalize and amortize R&E on the 2024 return.
File amended returns for 2022, 2023, and 2024 to remove amortization and fully deduct that year’s R&E expenses.
Amended returns must be filed by July 5, 2026; many 2022 amended returns are due by March 15, 2026.
- File 2024 Without Deducting Prior Amortization, Then Amend
File 2024 return (original or superseded by the extended due date, even if no extension was filed).
Deduct 2024 R&E expenses in full but exclude amortization from 2022 and 2023.
Amend 2022 and 2023 returns by July 5, 2026 (with many 2022 returns due March 15, 2026) to remove amortization and fully deduct that year’s R&E expenses.
- File 2024 with Accounting Method Change
File 2024 return (original or superseded by the extended due date, even if no extension was filed).
Deduct all unamortized R&E expenses from 2022 and 2023 plus the full 2024 expenses.
No amended returns required.
- Continue Capitalizing and Amortizing
Retain the existing amortization method going forward.
Special Considerations for BBA Partnerships
Small partnerships subject to the Bipartisan Budget Act (BBA) that wish to avoid filing Administrative Adjustment Requests (AARs) can generally use Options 1, 2, 5, or 6 above.