IRS offers guidance on R&D expensing changes under OBBBA

The Internal Revenue Service has provided guidance on how to deal with the restoration of full expensing of research and development costs under the One Big Beautiful Bill Act.

The OBBBA, which President Trump signed into law on July 4, rolls back the requirement under the Tax Cuts and Jobs Act of 2017 to amortize R&D costs over five years starting in 2022 instead of being able to deduct them fully in the first year. 

Revenue Procedure 2025-28 instructs taxpayers on how to make various elections, file amended returns, or change accounting methods for research or experimental expenditures as provided under section 70302 of the OBBA, officially known as Public Law 119-21.  

The new guidance, which the IRS posted Thursday, also provides transitional rules, modifies Revenue Procedure 2025-23, List of Automatic Changes, and grants an extension of time for partnerships, S corporations, C corporations, individuals, estates and trusts, and exempt organizations to file superseding 2024 federal income tax returns. 

The revenue procedure also provides 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. 

For a taxable year starting during 2024 and ending prior to 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 the new revenue procedure.