By: Jim Foster, Esq. Director of Tax
If your business invests in research and development in the United States, the IRS may have just reopened the door to significant tax savings. But businesses only have until July 6, 2026, at the latest, to take advantage of certain opportunities before they expire.
Recent guidance released by the IRS (Revenue Procedure 2025-28) lays out the rules for claiming relief from a widely criticized requirement that forced companies to spread out their R&D deductions over five years instead of writing them off immediately. Now, thanks to the One Big Beautiful Bill Act, businesses can recover those costs much faster – and in some cases, retroactively.
Here's what business owners and their tax advisors need to know – and why waiting could be costly.
What Changed – and Why It Matters
Under the old rules, businesses had to spread out, or "capitalize," their domestic R&D costs over five years rather than deducting them right away. The new IRS guidance provides a roadmap for switching to the new rules now available under the One Big Beautiful Bill Act, which lets many businesses deduct those costs immediately or recover past costs they were forced to capitalize.
The guidance covers two main scenarios:
1. R&D spending from the 2022-2024 tax years that was subject to the old capitalization rules
2. R&D spending from 2025 onward under the new, more favorable framework.
Two Opportunities You Don't Want to Miss
IRS Revenue Procedure 2025‑28 offers several important planning opportunities, particularly for small and midsized businesses.
1. Small Business Retroactive Elections
Companies with average annual revenues of $31 million or less get a special retroactive benefit. They can go back to tax years 2022-2024 and either apply the new, more favorable R&D deduction rules to those earlier years or speed up the write-off of R&D costs they were previously forced to spread over five years on the 2025 or 2025/2026 tax returns. Either way, it means real cash back in your pocket sooner. These options create meaningful cashflow opportunities by allowing qualifying taxpayers to recover previously capitalized costs more quickly.
2. Simplified Method Change Procedures
Normally, changing how you account for R&D costs on your taxes requires filing a lengthy IRS form (Form 3115). The IRS is waiving that requirement for changes. Instead, businesses need to attach a statement to their tax return, referencing the new guidance. This streamlined process allows taxpayers to implement changes more efficiently without navigating the traditional accounting method change filing process.
The Hard Deadline: July 6, 2026
Revenue Procedure 2025‑28 explains how businesses can make or update their Section 174A and related Section 280C elections to properly deduct or amortize domestic R&E costs and coordinate those choices with their R&D credit. To take advantage of these options, elections must generally be filed on an original return, amended return, or partnership Administrative Adjustment Request (AAR) no later than July 6, 2026, or before the applicable refund statute of limitations expires – whichever comes first. Missing this deadline could mean losing the ability to claim deductions or properly offset credits.
Here's the part businesses cannot afford to overlook: there is a firm, non-negotiable deadline attached to these benefits. That July date is impending – and for some taxpayers, the refund deadline may arrive even sooner. If businesses miss these deadlines, the window to claim these opportunities closes permanently.
The Bottom Line: Act Now or Lose Out
This is one of the most significant R&D tax developments in years. For businesses that invest in domestic research and development, the new IRS guidance represents a rare chance to recover money that was locked up under the old rules – and to set up a more favorable tax position going forward. The retroactive relief, simplified paperwork, and flexible transition rules are all designed to make it easier to claim what you're owed. But none of it matters if you don't act on time.
Businesses should start these conversations now rather than waiting until filing deadline is upon them and there is no time to do proper analyses.
If you're unsure whether your business qualifies or how much you could save, consult us at ABGi USA as soon as possible, and we can help you out. The clock is already ticking.
Jim Foster, Esq.
Jim Foster, Esq., serves as Director of Tax at ABGi USA, where he leads the firm’s strategic delivery of incentive solutions. With nearly two decades of experience in tax law, Jim is recognized for his legal and technical mastery, ability to drive internal and external value, and audit defense success and relationship-building with the IRS. Read More
