What's Happening?
The IRS has released Revenue Procedure 2025-28, offering guidance on research and experimentation expenses under new tax laws. This procedure allows taxpayers to make elections, file amended returns, or change accounting methods for R&D expenditures. It reverses a previous requirement to amortize R&D costs over five years, allowing immediate deductions. The guidance provides transitional rules and extends the deadline for filing superseding tax returns for the 2024 taxable year.
Why It's Important?
The guidance impacts taxpayers involved in R&D activities, offering a short window to comply with new rules. It addresses controversial issues from the One Big Beautiful Bill Act, providing clarity on tax treatment for R&D expenses. The extension offers relief to entities facing tight deadlines, but the complexity of the guidance requires careful navigation to avoid penalties.
What's Next?
Taxpayers must act quickly to comply with the new guidance, with a deadline of September 15, 2025, for filing returns. The IRS may need to provide further guidance on unresolved issues, such as qualified production property criteria. Tax professionals and entities involved in R&D will closely monitor developments to ensure compliance and optimize tax benefits.
