The IRS released the revenue procedure (Rev. Proc. 2025-28) that outlines the steps for making certain elections under
the
One, Big, Beautiful Bill Act (OBBBA) for domestic research or experimental
expenditures.
This revenue procedure modifies those under Section 446 of the Internal
Revenue Code and Section 1.446-1(e) for obtaining the IRS Commissioner's automatic consent to change methods of accounting
for research or experimental expenditures under Section 174, as in effect after amendment by the Tax Cuts and Jobs Act (TCJA) and before the amendment in OBBBA.
According to Journal of Accountancy, the revenue procedure amends Rev. Proc. 2025-23, List of Automatic Changes, and provides more time for partnerships, S corporations, C corporations, individuals, estates and trusts, and exempt organizations to file superseding federal income tax return for 2024.
This revenue procedure will also offer procedures for making elections under Section 174A(c) to amortize domestic
research or experimental expenditures paid or incurred in taxable years beginning after Dec. 31, 2024. The IRS said that, for a taxable year starting in 2024 and ending before Sept.15, 2025, for which the due date (excluding any extension) for the return of tax for such taxable year was before Sept. 15, 2025 (2024 taxable year), section 8 of this revenue procedure grants an automatic extension of time to file superseding tax and information returns applying the provisions of this revenue procedure.
The IRS also outlined the treatment of research or experimental expenditures under the Tax Cuts and Jobs Act (TCJA) . For
expenditures paid or incurred in taxable years starting after Dec. 31, 2021,
TCJA Section 174 requires taxpayers to charge SRE expenditures to capital account and
allows amortization deductions of such capitalized expenditures ratably over a five-year
period in an instance of SRE expenditures attributable to domestic research, or a 15-year
period in the case of SRE expenditures attributable to foreign research (within the
meaning of § 41(d)(4)(F)), starting with the midpoint of the taxable year where such
expenditures are paid or incurred.
The procedures in sections 7.01 and 7.03 of Rev.
Proc. 2025-23, 2025-24 I.R.B. 1476, as modified by this revenue procedure, offer automatic changes in method of accounting for research or experimental expenditures
under TCJA Section 174 for amounts paid or incurred in taxable years beginning before
Jan. 1, 2025.
According to Journal of Accountancy, an eligible partnership, S corporation, C corporation, individual, trust, estate, or exempt organization that had timely filed a tax return (without regard to the extension offered by this revenue procedure) might file a superseding tax return, and offer Schedules K-1, as applicable, before the extended due date's expiration.