United States: Disputes and appeals | Research Credit Integrity Alliance

This page explains how a business can challenge an IRS decision that reduces or rejects a federal research credit. The route depends on how the credit was claimed and on the kind of decision the IRS made. Time limits are strict, and the letter the IRS sends usually states the rights that apply.1

Three kinds of decision

Decision	Typical situation	Route to challenge it
Proposed change after an examination	The credit was claimed on the original return and the IRS proposes to reduce it, producing additional tax	Discussion with the examiner and supervisor, then Appeals; if unresolved, a notice of deficiency and a petition to the US Tax Court1 2
Disallowance of a refund claim on its merits	The credit was claimed or increased on an amended return and the IRS disallows it	Appeals; then a refund suit in a US District Court or the US Court of Federal Claims1 3 4
Rejection of a refund claim as deficient	The claim did not include the required research credit information	Not eligible for Appeals; the taxpayer may supply missing information within 45 days during the transition period5

Before an appeal

The IRS advises that, before requesting an appeal, a business should make sure it has given the IRS employee handling the case all the information and explanations requested or that it wants considered. If it disagrees with proposed changes, it may discuss them with the employee and then the employee's supervisor.1

If the case qualifies and the IRS agrees, the business may request Fast Track Settlement. The case stays with the examiner while a specially trained Appeals employee acts as a neutral party to help the two sides reach agreement. The business may withdraw at any time and keeps its usual appeal rights for unresolved issues.1

The IRS Independent Office of Appeals

The Independent Office of Appeals is established within the IRS by statute. Its function is to resolve federal tax controversies without litigation on a basis that is fair and impartial to both the government and the taxpayer, and the statute says this process is generally available to all taxpayers.6 The IRS describes Appeals as separate from the division that proposed the changes and as the only level of administrative appeal within the IRS.1

To request an Appeals conference, a business submits a written protest.1

A formal written protest is required if the proposed change to tax and penalties for any period is more than $25,000, and in all partnership and S corporation cases regardless of amount. It must list the disputed issues, the facts and law supporting the business's position, and a statement under penalties of perjury.1
A small case request may be made instead if the total for each period is $25,000 or less.1

A business may represent itself or appoint a person authorized to practice before Appeals, such as an attorney, CPA or enrolled agent. Others may attend as witnesses but may not act as representatives.1 Before an examination case is received in Appeals, IRS policy may require more than 365 days to remain on the statute of limitations, and the IRS may ask the business to agree to extend it. If the business does not, Appeals will not accept the case.1

Research credit refund claims rejected as deficient

The IRS treats a research credit refund claim that lacks the required information as deficient rather than disallowed. It states that refund claims disallowed on timeliness grounds may go to Appeals, but that the Appeals process is not available for claims rejected because they are deficient or otherwise not processible.5 During the transition period, which the IRS says runs through 10 January 2027, it sends Letter 6426C or 6428 identifying the missing information and gives 45 days to perfect the claim before rejecting it in full.5

Going to court

The US Tax Court

If the IRS determines a deficiency, it may send a notice of deficiency by certified or registered mail.2 Within 90 days after the notice is mailed (150 days if it is addressed to a person outside the United States), the taxpayer may petition the Tax Court to redetermine the deficiency. The IRS generally may not assess the deficiency until that period has passed or, if a petition is filed, until the Tax Court's decision is final.7 The IRS describes the Tax Court as generally a "prepayment" forum, and states that the time to petition cannot be changed by the IRS or the court.1

Refund suits

A suit to recover tax may not be brought until a claim for refund has been duly filed with the IRS.3 The US District Courts have jurisdiction over such suits, concurrent with the US Court of Federal Claims.8 A refund suit may not be started until 6 months after the claim was filed unless the IRS decides it sooner, and must be started within 2 years from the date the IRS mails a notice of disallowance by certified or registered mail. The 2 year period may be extended by written agreement, and reconsideration by the IRS after the notice is mailed does not extend it.4 The IRS adds that suit in these courts is generally available only after the amount has been fully paid and a timely refund claim filed.1

Time limit for the refund claim itself

A refund claim must generally be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later.9 IRS Chief Counsel has stated that there are no statutory provisions on this time limit specific to research credit claims.10

Disputes involving preparers

A tax return preparer assessed a preparer penalty for an understatement may pay at least 15 percent of it within 30 days of notice and demand and file a claim for refund of that amount. Collection of the rest is then suspended while the preparer brings proceedings in the appropriate US District Court to determine liability, which must be started within the time set by the statute.11

Sources

Internal Revenue Service, Publication 5, Your Appeal Rights and How to Prepare a Protest if You Disagree (Rev. 4-2021), pages 1 to 6. https://www.irs.gov/pub/irs-pdf/p5.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6212, Notice of deficiency, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap63-subchapB-sec6212.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7422, Civil actions for refund, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap76-subchapB-sec7422.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6532, Periods of limitation on suits, subsection (a)(1), (2) and (4), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap66-subchapD-sec6532.htm (accessed 11 October 2026). Back
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 7 and 15 (page last reviewed or updated 1 October 2026). https://www.irs.gov/businesses/corporations/research-credit-claims-section-41-on-amended-returns-frequently-asked-questions (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7803, Commissioner of Internal Revenue; other officials, subsection (e)(1), (3) and (4), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap80-subchapA-sec7803.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6213, Restrictions applicable to deficiencies; petition to Tax Court, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap63-subchapB-sec6213.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 28 U.S.C. 1346, United States as defendant, subsection (a)(1), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title28/html/USCODE-2024-title28-partIV-chap85-sec1346.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6511, Limitations on credit or refund, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap66-subchapB-sec6511.htm (accessed 11 October 2026). Back
IRS Office of Chief Counsel, Memorandum 20214101F, I.R.C. 41 Research Credit Refund Claims, dated 17 September 2021, released 15 October 2021, Short Answer 3. https://www.irs.gov/pub/irs-lafa/20214101f.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6694, Understatement of taxpayer's liability by tax return preparer, subsection (c), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6694.htm (accessed 11 October 2026). Back