R&E Expenditures: New OBBBA Provisions for Deducting Unamortized Costs

Highly anticipated modifications to the deductibility of R&E expenditures were incorporated in the OBBBA. Legislative changes now allow for the immediate expensing of R&E costs beginning Jan. 1, 2025. These modifications replace the capitalization and amortization requirements under IRC Section 174 and allow taxpayers to elect to deduct unamortized domestic R&E expenditures in the first taxable year after Dec. 31, 2024, or ratably in 2025 and 2026. 

Eligible small businesses can retroactively deduct prior unamortized costs for years 2022-2024. To benefit from this retroactive election, eligible small businesses must amend returns for the applicable years. The revised treatment of R&E costs is considered a change in accounting method. 

Decisions surrounding R&E expenditures have always been complicated. Along with new considerations for past expenses, taxpayers must decide, as before, whether to elect an R&D credit reduction to avoid the required credit addback under Section 280C for current costs. Understanding the opportunities afforded under OBBBA and the long-standing qualifications and reporting requirements for R&E deductions and credits is essential for taxpayers and their advisers. 

Listen as our panel of astute federal tax advisers explains the time-sensitive, tax-saving actions required by businesses now that full expensing of R&E costs is allowed under the OBBBA. 

I. R&E expenditures after OBBBA: introduction

II. Amended returns

III. Two-year spread

IV. Qualifying expenses

V. Qualifying activities

VI. Section 280C election

VII. Form 6765, Credit for Increasing Research Activities

VIII. Planning scenarios

The panel will cover these and other critical issues:

• Choosing between the two-year spread and amending returns after OBBBA
• When to elect the IRC Section 280C credit reduction
• Meeting OBBBA's small business requirements
• Preparing Form 6765, Credit for Increasing Research Activities

Learning Objectives

After completing this course, you will be able to:

• Identify small businesses eligible to carryback unamortized R&E costs
• Determine how to report R&D credits on Form 6765
• Decide when to elect the reduced credit under Section 280C
• Ascertain changes made to Section 174 deductions by the OBBBA

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).