Brief Summary

Following the changes implemented by the One Big and Beautiful Act (OBBBA), the IRS published Revenue Procedure 2025-28 to assist and guide taxpayers on the procedures to be adopted in the treatment of R&D expenses in accordance with Sections 174 and 174A.

Key Points

SMALL BUSINESS (retroactivity from the tax years beginning after December 31, 2021):

Fiscal years before 2024: It is necessary to submit an amended corporate income tax return, attaching a statement informing of the retroactive option for that year, or Form 3115 for that year.
Fiscal year 2024: There are two scenarios for this year, namely:
-Companies that have already submitted the Income Tax Return before the publication of the Regulation: follow the same format as in previous years (see details above).
-Companies that have not yet submitted the Income Tax Return: It can be requested directly on the original form, attaching the statement or Form 3115, i.e., it is not necessary to send the form with the previous year’s methodology and then request an amendment.
OTHER BUSINESS (“accelerate” amortization):

Follows the same format as small businesses, and it is possible to submit a statement informing them of the change, or Form 3115, but the requirements for this situation have some particularities in relation to those for small businesses, such as that it is valid for requests in fiscal years beginning after December 31, 2024.

On August 28, 2025, the Internal Revenue Service (IRS) released Revenue Procedure 2025-28, aligning tax regulations with the One Big Beautiful Bill Act (OBBBA). This update significantly alters how companies manage their research and experimental (R&E) expenditures by allowing immediate deductions for certain R&E costs, improving cash flow, and incentivizing innovation.

Additionally, the OBBBA clarifies which activities qualify as domestic R&E expenditures, thereby promoting consistency in compliance. These changes are expected to encourage increased R&D investment among corporations, prompting them to reassess financial strategies considering the new opportunities presented by this legislative shift. For this reason, we present the main aspects, information, and points of attention involved in this publication, and their respective impacts on the tax planning of companies that invest in R&D.

Who Should Pay Attention?

This procedure is especially relevant for:

Companies with R&D expenses between 2021 and 2024
Businesses with R&D expenses in fiscal years beginning after December 31, 2024

Whether you are a startup or an established enterprise, these changes could impact your tax strategy and potentially unlock substantial savings.

Domestic R&D: Immediate Deduction Under §174A

Starting in tax year beginning after December 31, 2024, companies can:

Immediately deduct domestic R&D expenses under §174A(a), or
Elect to amortize them over at least 60 months under §174A(c)

Foreign R&D: No Change

Foreign R&D expenditure continues to be amortized over 15 years, consistent with prior rules.

Changing Accounting Methods: Simplified and Flexible

Taxpayers can change their accounting method using automatic consent procedures under Rev. Proc. 2015-13, as modified by Rev. Proc. 2025-28 and 2025-23 thus simplifying the processes linked to this.

Retroactive Application for Small Businesses

Eligible small businesses may retroactively apply the new rules to prior tax years (2022–2024), amending returns and adjusting accounting methods without filing Form 3115 (see details below).

Recovery of Unamortized Amount Method

If a taxpayer opts to recover unamortized R&D amounts in the same year as a change to the deduction or amortization method under §174A(a) or (c), the changes may be made:

On the same statement, or
On separate statements

This statement must include:

A declaration of whether the taxpayer will:
-Amortize the full remaining amount in the first taxable year after Dec. 31, 2024, or
-Amortize it ratably over two years
A declaration that the change is made on a cut-off basis

It is important to remember that the statement, instead of Form 3115, is treated as a valid Form 3115 for automatic change procedures, in taxpayers eligible under the Procedure.

Deadline for requesting retroactivity or recovery of the unamortized amount

In general terms, the legislation stipulates that this choice must be made within a maximum of one year after the date of enactment of the OBBBA, which would be July 4, 2026 (but as this date falls on a Saturday, the choice must be made by Monday, July 6, 2026). However, it is necessary to pay attention to the deadline for filing a credit or refund request for each fiscal year, as the deadlines may change at this time.

Deemed Compliance for Early Filers

Taxpayers who filed a federal income tax return on or before September 15, 2025, for a taxable year beginning after Dec. 31, 2024, are deemed compliant with the new accounting method if they:

Properly deducted R&D expenses under §174A(a), or
Reported and amortized them under §174A(c) using Form 4562

The same applies to those who adopted the recovery of unamortized amount method, provided they followed one of the two amortization options.

Extension for Amending Returns

To facilitate these changes, the IRS grants a six-month extension for filing superseding 2024 tax returns, applicable to:

Partnerships, S corps, C corps, individuals, trusts, estates, and exempt organizations
Taxpayers who filed timely returns before Sept. 15, 2025, without requesting an extension

These superseding returns must:

Be filed in the same manner as the original
Include “REVENUE PROCEDURE 2025-28” at the top
Be used solely to:
-Make the small business OBBBA election
-Make or revoke a late §280C(c)(2) election
-Change accounting methods under Section 7.02(3)(c)

Legal Framework Updates

Revenue Procedure 2025-28 modifies directly or indirectly:

Rev. Proc. 2025-23 (Automatic Changes)
Rev. Proc. 2025-24 (I.R.B. 1476)
Rev. Proc. 2015-13 (Accounting Method Changes)

No revocations were issued, but several new subsections were added to clarify procedures for both domestic and foreign R&D expenditures.

SPECIAL RULES FOR SMALL BUSINESS AND THE RETROACTIVITY PROCESS
Section 3 of Rev. Proc. 2025-28

Small businesses may make the OBBBA election under this section if they have not already changed their accounting method under Section 7.02(3)(c) of Rev. Proc. 2025-23.

To do so, they must:

Attach a statement titled “FILED PURSUANT TO SECTION 3.03 OF REV. PROC. 2025-28” to their original or amended return
Include:
-Taxpayer name and ID
-Declaration of non-tax shelter status
-Election under §1.448-2(b)(2)(iii)(B), if applicable
-Confirmation of meeting the §448(c) gross receipts test
-Statement of whether the taxpayer is deducting or amortizing R&D expenses
-Amortization period (if applicable)
-Declaration to file amended returns for prior years, if needed

Deadline: The election must be filed by July 6, 2026, or the applicable refund claim deadline under §6511.

Section 7.02(3)(c) of Rev. Proc. 2025-23

Alternatively, small businesses may use this section if they have not made the election under Section 3 of Rev. Proc. 2025-28.

Key conditions:

Applies only to tax years beginning before Jan. 1, 2025
Original return must be filed after August 28, 2025
Not valid for changes in the first tax year beginning after Dec. 31, 2024, if the taxpayer already made a retroactive change or election

Process:

File Form 3115 or
Attach a statement including:
Taxpayer name and ID
Automatic change number: 273
Declaration of non-tax shelter status
Election under §1.448-2(b)(2)(iii)(B), if applicable
Confirmation of meeting the §448(c) gross receipts test

What’s Next?

This Revenue Procedure represents a major step forward and provides legal certainty to taxpayers affected by Sections 174 and 174A, as well as enabling a significant transformation in the tax treatment of R&D expenses.

With this transformation, companies that are actively investing in innovation now have an ideal opportunity to reassess their strategic approach to R&D investments, while this change allows for a more favorable tax environment, supporting continued investment in technology and creativity.

Finally, it can be expected that the IRS will propose (with no date set at this time) changes and adjustments to the forms in order to allow companies to correctly fill out and submit R&D information.

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