Key Takeaways:
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, restores immediate expensing for domestic R&D costs under new §174A (effective 2025 onward) and provides retroactive relief for 2022-2024 capitalization under the TCJA. IRS Rev. Proc. 2025-28 (issued August 28, 2025) offers simplified procedures for automatic method changes, catch-up deductions, and late §280C elections. This creates significant refund opportunities and cash flow benefits, especially for small businesses (average gross receipts ≤$31 million under §448(c)).
- Retroactive Relief for 2022-2024
Eligible small businesses can amend returns or file AARs to apply §174A expensing retroactively, claiming catch-up deductions (full in 2025 or split across 2025-2026) and recovering lost R&D credits impacted by prior amortization. - Key Deadlines
July 6, 2026 (or earlier §6511 statute) for amended returns on retroactive claims and §280C elections; superseding 2024 returns within six months of original due date; act quickly to secure refunds before windows close. - Domestic vs. Foreign R&E Treatment
Domestic R&E qualifies for immediate expensing or elective ≥60-month amortization in 2025+; foreign R&E remains 15-year amortization with no changes. - §280C Election Flexibility
Small businesses can make late reduced-credit elections or revoke prior ones for 2022-2024 via amended Form 6765 (with specific legends), optimizing federal/state tax outcomes and simplifying compliance. - Simplified Implementation Paths
Use automatic method changes under DCNs 265 (pre-2025 domestic), 273 (OBBBA catch-up), and 274 (foreign) without full Form 3115 in many cases; avoids audit protection issues compared to consent methods. - Potential Benefits and Examples
Unlock refunds (e.g., $40,000+ from retroactive expensing on $150,000 capitalized in a biotech case), accelerated deductions, and enhanced credits; model gross vs. reduced-credit options for maximum after-tax savings.
Avoid pitfalls like missing deadlines, poor domestic/foreign tracking, inadequate documentation, or unmodeled elections. Proactive review of prior returns and state conformity is essential. Read on for filing steps, documentation tips, and strategic guidance.
Introduction:
For innovative businesses, especially small and mid-sized firms that capitalized R&E during 2022–2024, Rev. Proc. 2025-28 is a roadmap to recover cash refunds, simplify compliance, and align strategies with the new regime.
Why Rev. Proc. 2025-28 matters
The TCJA required taxpayers to capitalize and amortize R&E starting in 2022 — 5 years for domestic, 15 years for foreign. This crushed cash flow and caused many companies to stop declaring R&E, which also meant no R&D credits were claimed.
OBBBA, signed July 4, 2025, reversed this for domestic R&E by enacting §174A: immediate expensing (or elective 60-month amortization). Rev. Proc. 2025-28 is the IRS’s procedural playbook to make it work in practice, with relief for past years (2022–2024) and updated election mechanics for 2025 forward.
Key provisions of Rev. Proc. 2025-28
1. Superseding returns for 2024 filers
- Taxpayers that filed 2024 without an extension can file a superseding return within six months of the original due date.
- This allows retroactive application of §174A expensing, §280C elections, or method changes.
- Why it matters: Even if you filed early, you can still capture OBBBA’s benefits by filing again — no penalty.
2. Retroactive relief for small businesses (2022–2024)
- Small businesses meeting the §448(c) gross-receipts test (≤$31M average annual receipts over the past 3 years, inflation-adjusted) can apply §174A expensing retroactively to 2022–2024.
- Must file amended returns (or AARs, for partnerships).
- Deadline: earlier of July 6, 2026 or the §6511 refund statute of limitations.
3. Domestic vs. foreign R&E
- Domestic R&E (2025+): Deduct immediately under §174A(a) or elect to amortize ≥60 months under §174A(c).
- Foreign R&E (2025+): Remains 15-year amortization under §174 — no change.
- Planning tip: Companies with mixed domestic/foreign R&E must carefully separate tracking.
4. Catch-up for capitalized domestic R&E (2022–2024)
- Taxpayers with unamortized domestic R&E at 12/31/2024 can:
- Deduct all remaining amounts in 2025, or
- Deduct half in 2025 and half in 2026.
- Treated as a method change (automatic consent under DCN 273).
- Why it matters: Accelerates deductions that TCJA forced over 5 years.
5. §280C(c)(2) late or revoked elections (2022–2024)
- Normally, §280C elections must be made on the timely original return.
- Rev. Proc. 2025-28 allows eligible small businesses to:
- Make a late reduced-credit election, or
- Revoke a prior reduced-credit election,
for 2022–2024 via amended return/AAR.
- Must attach amended Form 6765 with required legends (“FILED PURSUANT TO SECTION 4.03…”).
- Deadline: July 6, 2026 (or earlier §6511).
- Why it matters: Gives flexibility to maximize benefit — e.g., switch from gross credit to reduced credit if it lowers state tax or simplifies compliance.
6. Automatic accounting method changes
Rev. Proc. 2025-28 coordinates with Rev. Proc. 2025-23 (the automatic change list). Key Designated Change Numbers (DCNs):
- DCN 265: For pre-2025 domestic R&E under TCJA rules.
- DCN 273: For OBBBA deductions or amortization, including catch-up.
- DCN 274: For foreign R&E expensing/amortization under amended §174.
- Relief includes filing Form 3115 or a statement in lieu in certain cases.
- Why it matters: Provides a streamlined path to adopt OBBBA rules without audit risk.
OBBBA vs. TCJA at a glance
| Feature |
TCJA (2022–2024) |
OBBBA (2025+) |
| Domestic R&E |
5-year amortize |
Immediate expensing or amortize ≥60m |
| Foreign R&E |
15-year amortize |
15-year amortize (no change) |
| 2022–2024 Domestic |
Capitalized |
Refund window: catch-up in 2025–26 |
| §280C election |
Timely original |
Retroactive small-biz late/revoked allowed |
| Method changes |
Limited relief |
Automatic (DCNs 265/273/274) |
Case study: Biotech refund
A Boston-based biotech startup capitalized $150,000 of R&E in 2023 under TCJA.
- Under Rev. Proc. 2025-28, it elected §174A retroactively for 2022–2024.
- Result: a $40,000 refund plus improved cash flow going forward.
- Strike Tax Advisory managed the amended return, substantiation, and §280C analysis.
Strategic implications
- Refund urgency: 2022–2024 refunds expire July 6, 2026 or earlier.
- Election modeling: Gross vs. reduced-credit election choice affects federal, state, and NOL outcomes.
- Partner engagement: CPAs and fractional CFOs need clear guidance; Strike can provide co-branded one-pagers.
- Audit defense: Elections must be properly documented; Strike Tax Advisory’s money-back guarantee backs clients through the statute of limitations.
Call to action
Rev. Proc. 2025-28 is a landmark opportunity for innovative businesses. Strike helps you:
- Audit 2022–2024 returns for refund potential.
- Model elections to optimize credits and deductions.
- File superseded or amended returns correctly.
- Manage deadlines to ensure refunds are not lost.
- Defend credits under our Strike Shield™ program.
📩 Contact Strike Tax Advisory today to maximize R&D savings under OBBBA and Rev. Proc. 2025-28.
