Maximize R&D Tax Savings with IRS Rev. Proc. 2025-28 and OBBBA

On August 28, 2025, the IRS issued Rev. Proc. 2025-28 (official IRS PDF), which lays out how taxpayers can implement the R&D expensing reforms of the One Big Beautiful Bill Act (OBBBA). Together with §174A immediate expensing and the permanent alignment of §280C reduced-credit elections, this guidance creates new opportunities — and deadlines — for companies that invest in research and development.

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.

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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.

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OBBBA vs. TCJA at a glance‍

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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.

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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.

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FAQs

Q: Who qualifies for small-business relief?
Taxpayers meeting the §448(c) 3-year average gross-receipts test, not a tax shelter.

Q: What if I already filed 2024?
You may file a superseding return within 6 months of the original due date.

Q: Can software R&E qualify?
Yes — software development is treated as R&E under §174.

Q: Do states conform to §174A?
Varies. Some conform immediately, others may decouple. Strike maps state conformity as part of studies.

‍Q: How do I make/revoke §280C elections?
Attach amended Form 6765 with required legends per Rev. Proc. 2025-28.

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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.