Domestic research expenses and tax planning for fall 2025

On Aug. 28, 2025, the IRS issued guidance in Rev. Proc. 2025-28 (the procedures) for taxpayers to make certain elections and accounting method changes provided under section 70302 of the recently enacted tax and spending legislation known as the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21).

Because the OBBBA amendments are generally effective for tax years beginning after Dec. 31, 2024, most taxpayers will not need to take action to implement the amendments until after the 2024 tax compliance season.

However, certain “small” taxpayers may implement the new law effective for tax years beginning after Dec. 31, 2021, and taxpayers with a short 2025 tax year may need to comply sooner. The following discussion addresses some time sensitive actions these taxpayers may wish to take in order to implement the favorable OBBBA domestic research expenses during the upcoming fall filing season.

Options for small taxpayers that haven’t yet filed 2024 income tax returns

In short, there are three options for the original 2024 return, including a superseding return. It is recommended that all options be modeled and reviewed in consultation with your tax advisor before proceeding.

1. Elect to retroactively apply OBBBA

1. Deduct 2024 domestic research and experimental (R&E) on an original return or on a superseding 2024 return (if eligible, as discussed below)
2. Attach the election statement
3. Do not continue to amortize 2022 and 2023 R&E on the 2024 return
4. This locks you into amending returns/ filing administrative adjustment requests (AAR) for 2023 and 2022
5. Must also retroactively apply section 280C as amended under the OBBBA (discussed below)

2. File a method change to retroactively apply OBBBA

1. Deduct 2024 domestic R&E on an original return or on a superseding 2024 return (if eligible, as discussed below).
2. Attach a statement in lieu of form 3115 to the original or superseding return, as applicable
3. Report a negative section 481(a) adjustment for the unamortized 2022 and 2023 domestic research expenses.
4. Amended returns/ AARs are also required if a taxpayer wants to make a late section 280C(c)(2) election or to elect to revoke a prior section 280C(c)(2) election, as further explained below. Otherwise, domestic research expenses are accounted for under section 280C, as amended under the OBBBA, consistent with the approach used on the originally filed return for the applicable year (reduce research credit or reduce research deductions, as appropriate).