R&D Expensing is Back: What Businesses Need to Do Now

Your Implementation Guide to the One Big Beautiful Bill

With the One Big Beautiful Bill now signed into law, businesses and tax advisors must act quickly to capitalize on its new provisions. While existing guidance is brief and formal IRS instructions are still pending, tax experts across the country are already strategizing based on expected timelines and procedures the IRS may announce, especially around retroactive R&D relief. This guide outlines the key updates and immediate action steps to consider and prioritize.

Key Implementation Areas

Section 174A R&D Expensing Permanently Restored

• Applies to tax years beginning January 1, 2025 
• Taxpayers may elect:
  • Full deduction in the year incurred
  • 10-year amortization
  • 60-month recovery period
• Until further IRS guidance is released, many taxpayers will need to file a form 3115 to take advantage of the new 100% expensing rules. ABGi can help you confirm whether you need the form

Retroactive Relief for Small Businesses

• Eligibility: Businesses with under $31 million in average gross receipts
• Relief: Amend 2022 and 2023 returns to claim full R&D expensing and make updated §280C elections

Two Small-Business Scenarios to Know:

1. Previously Filed with Amortized R&D and §280C Election: If your business amortized R&D expenses and included a §280C election, the new law permits amended returns to reflect full expensing and update prior elections—within one year of the law’s enactment (by July 4, 2026).
2. Did Not Claim or Amortize R&D on Original Filing: You may still qualify for retroactive relief, but the IRS could set a much shorter deadline—potentially 45–60 days—for making a late §280C election. Delaying action could jeopardize refund eligibility.

Act Now: The amendment window will be linked to the July 4 enactment date, and final deadlines are not yet confirmed. Early preparation is essential.

ABGi’s Position: We are actively supporting both scenarios and will update clients as soon as the IRS and Treasury release formal procedures.

Planning Options for Larger Businesses

• Eligibility: All businesses can elect either full expensing or amortization under the new Section 174A framework beginning in 2025.

Two Large-Business Scenarios to Evaluate:

1. For firms already operating under amortization: These businesses can continue or shift to full expensing in 2025. Modeling cash flow and tax outcomes now will help determine which path is most advantageous.
2. For firms on extension (e.g., filing by September 15 or October 15, 2025): Retroactive relief for 2022–2023 may not be available, but forward-looking Section 174A elections and documentation strategies are critical.
• Act Now: Preparing documentation and accounting policies ahead of 2025 implementation ensures compliance and positions your company to maximize deductions.
• ABGi’s Position: Our tax modeling and strategy team is helping clients determine the most beneficial treatment under the new law—and we’re ready to support your transition.

Additional Provisions to Monitor

• Section 179D phase-out begins for buildings starting construction after June 30, 2026
• SALT deduction cap raised temporarily to $40,000 through 2030
• 100% bonus depreciation extended through 2029 for qualified property
• IRS and Treasury guidance expected in Q3 - Q4 of 2025

Action Checklist (Target Deadline: Mid-August)

The next several weeks are pivotal for tax and financial strategy. Whether you’re a small business eligible for immediate retroactive benefits or a larger firm preparing for 2025, the time to act is now.

ABGi is proactively preparing for the expected amendment window and will update clients immediately once the IRS releases formal instructions. This is not something to wait on—accurate R&D documentation, tax modeling, and amended return preparation take time. Acting now ensures you’re positioned to file quickly and avoid missing out due to IRS-imposed or conservative planning deadlines.

ABGi’s R&D team is ready to assist. Schedule an Appointment Today. 

📩 Stay Ahead of Tax Policy Shifts
Not on our update list? Sign up here to receive ABGi’s insights directly in your inbox.