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Policy Brief No. 28

Amended returns after the 2025 research expensing changes (brief)

This paper sets out research and the publisher's opinion. Factual statements are cited to their sources. It makes no allegation about any firm or person not named in a cited official record.

The 2025 restoration of research expensing let eligible small businesses reach back to 2022 by amended return. This brief summarizes the rules, where the research credit enters, and why the federal contingent fee rule does not reach most of this work.

ResearchCreditIntegrity.org is operated by SR Tax Services LLC under the Swanson Reed brand. Swanson Reed is an R&D tax advisory firm with a commercial interest in how R&D tax advisers are paid. See our conflicts of interest statement.

Key points

  1. Public Law 119-21 added Section 174A, allowing domestic research expenditures to be deducted again from 2025, and let eligible small businesses apply it to 2022 to 2024 by amended return.1Source 1Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026).
  2. The IRS set July 6, 2026 as the deadline for those elections and for related late Section 280C elections, or earlier where the ordinary refund claim period ended first.2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026).
  3. Amended returns that claim a new or larger research credit must include the information the IRS requires for a valid research credit refund claim.3Source 3Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), "Research Credit Claims on Amended Returns". https://www.irs.gov/instructions/i6765 (accessed 11 October 2026).4Source 4Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 4, 15 and 21 (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).
  4. Treasury's contingent fee rule covers amended returns, but a court has enjoined its enforcement for refund claims filed before an examination.5Source 5Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026).6Source 6US District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565 (CRC), Memorandum Opinion, 16 July 2014, pages 1 and 14 to 15. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf (accessed 11 October 2026).
  5. No official data shows how many amended returns were filed under the 2025 rules or how their preparers were paid.

The change

From 2022 to 2024, domestic research costs had to be capitalized and amortized over five years.2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026). Section 70302 of Public Law 119-21, enacted on July 4, 2025, added Section 174A, which allows those costs to be deducted when paid or incurred in taxable years beginning after December 31, 2024.1Source 1Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026). It also amended Section 41 so that qualified research refers to expenditures treated as domestic research expenditures under Section 174A, and rewrote Section 280C(c)(1) so that the deduction is reduced by the research credit unless a reduced credit is elected.1Source 1Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026).

Every taxpayer may elect to deduct the remaining unamortized 2022 to 2024 amounts in 2025, or over 2025 and 2026.1Source 1Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026). Eligible small businesses, those meeting the Section 448(c) gross receipts test of $31,000,000 for 2025, could instead apply Section 174A to 2022 to 2024, filing an amended return for each year affected.1Source 1Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026).2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026). They could also make or revoke a reduced credit election under Section 280C(c)(2) for those years on an amended return with an amended Form 6765.2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026).

The deadline

Revenue Procedure 2025-28 set the deadline for these elections at Monday, July 6, 2026.2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026). The Act did not extend the period for refund claims, which under Section 6511 is generally three years from filing or two years from payment, whichever is later.7Source 7Office 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). For years beginning in 2022, the IRS's examples give deadlines of April 15, May 15 or July 6, 2026, depending on when the original return was filed.2Source 2Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026).

Where the research credit enters

An amended return that claims a refund involving the research credit must identify the business components, the research activities for each, and the total qualified wage, supply and contract research expenses.4Source 4Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 4, 15 and 21 (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). A deficient claim may be perfected within 45 days during a transition period running through January 10, 2027, after which it is rejected in full, and Appeals is not available for claims rejected as deficient.4Source 4Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 4, 15 and 21 (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).

State returns can follow. New Jersey requires an amended corporation business tax return where a taxpayer amends its federal return under Revenue Procedure 2025-28.8Source 8New Jersey Division of Taxation, The New Jersey Research and Development Tax Credit, Technical Bulletin TB-114(R) (revised 25 November 2025), page 3. https://www.nj.gov/treasury/taxation/pdf/pubs/tb/tb114.pdf (accessed 11 October 2026). Texas's new franchise tax research credit uses the amended or IRS-adjusted Form 6765 figure.9Source 9Texas Legislature, S.B. 2206, 89th Legislature, Regular Session, enrolled version, section 1 (adding Tax Code section 171.9202). https://capitol.texas.gov/tlodocs/89R/billtext/html/SB02206F.htm (accessed 11 October 2026).

What the record shows on amended claims

The IRS has said it receives thousands of research credit refund claims a year and examines them in a substantial number of cases.10Source 10Internal Revenue Service, IRS sets forth required information for a valid research credit claim for refund, News release IR-2021-203, 15 October 2021. https://www.irs.gov/newsroom/irs-sets-forth-required-information-for-a-valid-research-credit-claim-for-refund (accessed 11 October 2026). In 2009 GAO found that, for a panel of large corporations, amendments raised credits claimed by 1.5 to 5.4 percent a year in 2000 to 2003, while examiners recommended reductions of 16.5 to 27.1 percent.11Source 11US Government Accountability Office, Tax Policy: The Research Tax Credit's Design and Administration Can Be Improved, GAO-10-136 (November 2009), pages 14 to 15. https://www.gao.gov/assets/gao-10-136.pdf (accessed 11 October 2026). Those figures describe large corporations two decades ago, not the small businesses eligible in 2025. In 2007 Treasury said it was concerned with contingent fees on refund claims and amended returns filed late in the examination process.12Source 12Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, final regulations, T.D. 9359, 72 FR 54540 (26 September 2007), preamble, "Contingent Fees", page 54542. https://www.federalregister.gov/documents/2007/09/26/E7-18918/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026).

The fee rules and their limits

Circular 230 bars practitioners from charging contingent fees for preparing returns and refund claims, with exceptions for claims filed within 120 days of an examination notice and a few other cases.5Source 5Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026). In 2014 a federal court held that the IRS lacks authority to regulate refund claims filed before an audit and enjoined enforcement of the rule to that extent.6Source 6US District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565 (CRC), Memorandum Opinion, 16 July 2014, pages 1 and 14 to 15. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf (accessed 11 October 2026). The AICPA Code bars its members from preparing an amended return or refund claim for a contingent fee, unless they can show a reasonable expectation of substantive review, such as a refund above the Joint Committee on Taxation threshold.13Source 13American Institute of CPAs, AICPA Code of Professional Conduct (updated for all official releases through September 2026), ET 1.510.001 paragraph .01 and ET 1.510.010 paragraphs .03 to .05. https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf (accessed 11 October 2026). A 2024 Treasury proposal to respond has not been finalized.14Source 14Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, REG-116610-20, 89 FR 104915 (26 December 2024), Explanation of Provisions part B. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026).

If a claim is excessive, the taxpayer may owe a 20 percent penalty on the excess unless there was reasonable cause, together with interest.15Source 15Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsection (a), and 26 U.S.C. 6601, 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-chap68-subchapB-partI-sec6676.htm and https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap67-subchapA-sec6601.htm (accessed 11 October 2026). No federal rule requires a contingent fee to be returned.

The case for success fees, and the answer

Contingent fees can reach small businesses that did not know about the change, spare them an upfront cost, and leave the adviser bearing the cost of work that finds little. These are real advantages. Nothing in this brief suggests that advisers who charge contingent fees act improperly.

The answer is about the incentive. A fee calculated on the refund rises with the refund. Low upfront cost can be provided by fixed, capped or deferred fees. The risk that a refund is later reduced, with interest and penalty, stays with the business.15Source 15Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsection (a), and 26 U.S.C. 6601, 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-chap68-subchapB-partI-sec6676.htm and https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap67-subchapA-sec6601.htm (accessed 11 October 2026).

Our position:

Congress should prohibit contingent fees, commonly called success fees, in federal research and development tax credit engagements under Section 41, so that advisers are paid for the work they perform rather than for the size of the claim they produce. Swanson Reed, which publishes this brief, is a fixed-fee R&D tax adviser with a direct commercial interest: it does not charge success fees, and a ban would remove a pricing model it competes against.

References

  1. Public Law 119-21, 139 Stat. 72, section 70302, approved July 4, 2025. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm (accessed 11 October 2026).      Back
  2. Internal Revenue Service, Rev. Proc. 2025-28, Internal Revenue Bulletin 2025-38 (15 September 2025), sections 2.02, 2.06, 3, 4 and 5. https://www.irs.gov/irb/2025-38_IRB (accessed 11 October 2026).       Back
  3. Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), "Research Credit Claims on Amended Returns". https://www.irs.gov/instructions/i6765 (accessed 11 October 2026).  Back
  4. Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 4, 15 and 21 (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
  5. Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026).   Back
  6. US District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565 (CRC), Memorandum Opinion, 16 July 2014, pages 1 and 14 to 15. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf (accessed 11 October 2026).   Back
  7. 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
  8. New Jersey Division of Taxation, The New Jersey Research and Development Tax Credit, Technical Bulletin TB-114(R) (revised 25 November 2025), page 3. https://www.nj.gov/treasury/taxation/pdf/pubs/tb/tb114.pdf (accessed 11 October 2026).  Back
  9. Texas Legislature, S.B. 2206, 89th Legislature, Regular Session, enrolled version, section 1 (adding Tax Code section 171.9202). https://capitol.texas.gov/tlodocs/89R/billtext/html/SB02206F.htm (accessed 11 October 2026).  Back
  10. Internal Revenue Service, IRS sets forth required information for a valid research credit claim for refund, News release IR-2021-203, 15 October 2021. https://www.irs.gov/newsroom/irs-sets-forth-required-information-for-a-valid-research-credit-claim-for-refund (accessed 11 October 2026).  Back
  11. US Government Accountability Office, Tax Policy: The Research Tax Credit's Design and Administration Can Be Improved, GAO-10-136 (November 2009), pages 14 to 15. https://www.gao.gov/assets/gao-10-136.pdf (accessed 11 October 2026).  Back
  12. Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, final regulations, T.D. 9359, 72 FR 54540 (26 September 2007), preamble, "Contingent Fees", page 54542. https://www.federalregister.gov/documents/2007/09/26/E7-18918/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026).  Back
  13. American Institute of CPAs, AICPA Code of Professional Conduct (updated for all official releases through September 2026), ET 1.510.001 paragraph .01 and ET 1.510.010 paragraphs .03 to .05. https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf (accessed 11 October 2026).  Back
  14. Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, REG-116610-20, 89 FR 104915 (26 December 2024), Explanation of Provisions part B. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026).  Back
  15. Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsection (a), and 26 U.S.C. 6601, 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-chap68-subchapB-partI-sec6676.htm and https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap67-subchapA-sec6601.htm (accessed 11 October 2026).   Back