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This field guide is written for CFOs, controllers, tax directors, and founders at companies that invest in domestic R&D and may qualify for the Section 41 credit.
Assumptions:
You are evaluating how OBBBA affects your 2026 tax position
All dates are subject to applicable statutes of limitations. The filing deadline under Rev. Proc. 2025-28 is the earlier of July 6, 2026 or the claim for credit or refund due date under Section 6511 for that year.
Business Component: A product, process, computer software, technique, formula, or invention that is the subject of R&D activities under Section 41.
Qualified Research Expenses (QREs): Wages, supplies, and contract research expenses that qualify under Section 41. QREs are determined by Section 41 rules, not Section 174A expensing.
Four-Part Test: The statutory test for qualifying research under Section 41: (1) permitted purpose, (2) technological uncertainty, (3) process of experimentation, (4) technological in nature.
Section 280C Reduced Credit: An election to claim approximately 79% of the gross credit (calculated as 100% minus the 21% corporate tax rate, i.e., 1 - 0.21 = 0.79) in exchange for keeping the full R&D deduction without add-back.
Form 6765 Section G: The reporting section requiring project-level and business-component detail for R&D credit claims. Optional for tax year 2025; mandatory for tax year 2026 and beyond (with limited exceptions) per IRS IR-2025-99.
The One Big Beautiful Bill Act created new Section 174A, effective for tax years beginning after December 31, 2024:
Note: Larger businesses (above the $31M threshold) still benefit from Section 174A immediate expensing for tax years 2025 forward. The retroactive election for 2022-2024 is limited to qualifying small businesses, but the go-forward benefits apply broadly.
During 2022-2024, the TCJA's capitalization requirement created a timing mismatch. You incurred R&D costs in Year 1 but deducted them over five years, while Section 41 credits were calculated on current-year QREs. The economics were fragmented.
Under Section 174A, your 2025 R&D spend generates a 2025 deduction. The credit is calculated on the same expenses. Timing aligns. This makes R&D credits more attractive for businesses that found the 2022-2024 regime too complex or economically diluted.
For R&D credit refund claims on amended returns, the IRS has established a five-item documentation framework. These requirements apply when an amended return includes a Section 41 research credit claim for refund (and in some cases a claim for credit); they do not apply to amended returns with no research credit claim. See IRS Required Information for a Valid Research Credit Claim for Refund.
Current enforcement status: Per the IRS Research Credit Claims FAQ, as of June 18, 2024, the IRS is waiving the requirement to provide (a) names of individuals who performed each research activity and (b) the information each individual sought to discover at the time of filing the claim. However, the IRS may request this information during examination. Items 1, 3, 4, and 5 must accompany amended return claims.
For the current state of IRS guidance, see the IRS Research Credit Claims FAQ.
Per the IRS Research Credit Claims FAQ, the IRS allows a 45-day perfection period for claims missing required information. This transition process remains available through January 10, 2027. After that date, incomplete claims face potential summary disallowance without an opportunity to cure.
If you are filing amended returns for retroactive Section 174A elections or any R&D credit refund claim, documentation standards are higher than they were five years ago. Claims must be built at the business-component level with clear linkage between activities and expenses.
For detailed guidance on avoiding common documentation mistakes, see R&D tax credit documentation requirements and filing mistakes.
This is where 2026 planning should focus most of its attention.
Form 6765 Section G mandates project-level and business-component reporting for R&D credit claims. The information required includes:
Per IRS IR-2025-99:
This means the 2027 filing season (for tax year 2026 returns) is when Section G becomes mandatory. However, 2026 is the year to build your data systems so you are ready.
Starting tax year 2026, Section G is mandatory for most filers. However, these groups may file Section G optionally:
The information Section G requires is not new conceptually. It reflects what the IRS has always expected to see in a defensible R&D credit study. The difference is that it becomes a mandatory filing requirement starting tax year 2026, not just an audit-defense best practice. Use 2025 (when Section G is optional) as your dry-run year.
When Section G becomes mandatory, your systems should generate:
If you cannot produce this data today, 2026 is the year to build the systems.
CFO action items for 2026:
Waiting until 2027 filing season to discover your systems cannot produce Section G information will be expensive and stressful.
Small businesses meeting the Section 448(c) gross receipts test (average annual gross receipts of $31 million or less, with controlled group aggregation) can retroactively elect Section 174A treatment for tax years 2022, 2023, and 2024.
Deadline: July 6, 2026 per Rev. Proc. 2025-28, or the IRC Section 6511 statute of limitations for the applicable tax year, whichever is earlier. For 2022 returns filed April 15, 2023, the statute closes April 15, 2026.
What it unlocks: Immediate deductions for R&E costs previously being amortized, potential refunds, and the opportunity to claim R&D credits that may have been skipped during 2022-2024.
Important: Retroactive expensing changes deduction timing. It does not automatically change QREs, which are determined under Section 41 rules.
For complete retroactive election guidance, see retroactive Section 174A election deadline and filing risks.
Many OBBBA benefits depend on meeting the Section 448(c) gross receipts threshold. This test has aggregation rules under IRC Section 52 that apply to entities under common control.
The risk: A business that appears small on its own may exceed the $31 million threshold when combined with related entities. Failing to aggregate properly can result in claiming elections you were not entitled to (triggering penalties) or missing elections you were entitled to (forfeiting refunds).
Common control structures that trigger aggregation: Parent-subsidiary groups, brother-sister groups, and combined groups. The specific ownership thresholds and attribution rules are technical and vary by structure. Consult with a tax advisor to determine whether aggregation applies to your situation.
If your business has affiliated entities or ownership structures involving common shareholders, complete the controlled group analysis early in 2026.
For detailed coverage of aggregation rules and allocation strategies, see R&D tax credit controlled group aggregation rules.
Section 280C prevents claiming both a full R&D deduction and a full credit on the same expenses. Two options:
Option 1 (no election): Claim the full gross credit, but add it back to taxable income.
Option 2 (reduced credit election): Claim approximately 79% of the gross credit (at 21% corporate rate) and keep the full deduction with no add-back.
C-corporations (federal-only, simplified): Both options produce the same federal tax liability. The reduced credit election simplifies book-tax reconciliation and audit documentation.
Pass-through entities: The analysis is more complex. The reduced credit uses the corporate rate, but owners' marginal rates may differ. Model your specific situation.
Multi-state filers: State treatment of the 280C election varies. Some states conform, others do not. Coordinate federal and state planning.
Per Rev. Proc. 2025-28, OBBBA allows small businesses to make late 280C(c)(2) elections or revocations on amended returns filed by July 6, 2026 (or earlier if the statute of limitations closes first). If prior elections were made under the capitalization regime and assumptions have changed, this is a narrow window to revisit them.
For detailed 280C analysis, see Section 280C reduced credit election after OBBBA.
Many states offer R&D tax credits that can add meaningful value on top of federal benefits.
Conforming states: Many states with R&D credits use the federal Section 41 framework. The same expenses generally qualify, though rates and caps vary by jurisdiction.
Decoupled states: Some states (including California) have their own conformity dates and credit rules.
2026 considerations:
For a state-by-state overview, check “State R&D Tax Credit Information”. For California-specific conformity, check “California R&D Tax Credits”.
Are you amending 2022-2024 returns for retroactive Section 174A elections?
Your priorities:
See: retroactive Section 174A election deadline and filing risks and R&D tax credit documentation requirements and common mistakes
Are you filing current-year credits (2025 forward)?
Your priorities:
See: The Section G Readiness section above
Do you have a multi-entity or controlled group structure?
Your priorities:
See: R&D tax credit controlled group aggregation rules
Q1 2026:
Q2 2026:
Q3-Q4 2026:
Ongoing:
Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or financial advice. Each taxpayer's situation is unique. Entity type, controlled group status, state conformity rules, and other factors affect outcomes. Consult a qualified tax professional for advice tailored to your circumstances.
Strike Tax Advisory is an R&D tax credit specialist firm helping innovative businesses across software, manufacturing, engineering, life sciences, and other technical industries with 2026 R&D tax credit planning and documentation.
Our team of CPAs, engineers, and tax professionals will:
Schedule a complimentary assessment to evaluate your 2026 R&D tax credit position.
Success-fee engagement: no upfront cost. If we don't identify credits, you don't pay.
No. Per IRS IR-2025-99, Section G is optional for all filers for tax year 2025. It becomes mandatory for tax year 2026 and beyond, with optional reporting for QSB payroll credit filers and small claimants.
Five categories: business components, research activities and individuals, QRE allocation by activity, QRE totals by category, and supporting documentation. Per the IRS FAQ, individual-level details are currently waived from initial submission but may be requested on exam.
Per the IRS FAQ, the IRS allows a 45-day perfection period for refund claims missing required information. This transition process extends through January 10, 2027. After that date, incomplete claims may be disallowed without an opportunity to cure.
The July 6, 2026 deadline under Rev. Proc. 2025-28 is a hard cutoff for retroactive Section 174A elections for 2022-2024. If your statute of limitations under Section 6511 closes before that date, your window is even shorter. Once the applicable deadline passes, the election opportunity for that tax year is gone. There is no extension or late-filing relief currently provided in the guidance. If you are considering a retroactive election, begin your controlled group analysis and documentation now rather than waiting until Q2.
It depends on the state. Conforming states that follow the federal Section 174 framework may require amended state filings to reflect changes in deduction timing and taxable income. Decoupled states like California have their own conformity dates and rules, so federal changes may not flow through automatically. Review each state where you file to determine whether an amended return is required, whether state R&D credits are affected, and whether different deadlines apply. Coordinate federal and state filings to avoid inconsistencies.
For C-corporations in a simplified federal-only analysis at the 21% rate, yes. For pass-through entities and multi-state filers, outcomes may differ based on owner marginal rates and state treatment. Model your specific situation.
