Refund claims and the research credit (brief) | Research Credit Integrity Alliance

Key points

Since 10 January 2022 a research credit refund claim must include specified information, or the IRS can reject it without considering its merits.12
The IRS said it acted because these claims are examined in a substantial number of cases and consume significant resources, and so that it can decide up front whether to pay or examine a claim.3
From 18 June 2024 the IRS stopped requiring, at filing, the names of the individuals who did the research and the information each sought to discover, citing its experience with the process.23
A 45 day period to perfect a deficient claim now runs through 10 January 2027. A claim not perfected is rejected in full, with no access to Appeals.24
Since 2014 the federal contingent fee rule has not been enforceable against refund claims filed before an audit.5

The requirements

A claim for refund must generally be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.6 Treasury regulations require it to set out in detail each ground and "facts sufficient to apprise the Commissioner of the exact basis thereof"; a claim that does not comply "will not be considered for any purpose as a claim for refund or credit".7

In a memorandum released on 15 October 2021, IRS Chief Counsel said a valid research credit refund claim must identify all business components, the research activities for each, the individuals who performed each activity and the information each sought to discover, and must give the totals of qualified wage, supply and contract research expenses.1 Documents must be tied to specific facts, because "A mere volume of documents will not suffice".1

Why the IRS acted

The IRS said it receives "thousands of R&E claims for credits in the hundreds of millions of dollars" each year, that these claims are examined in a substantial number of cases and consume significant resources, and that the information would let it "determine upfront" whether a claim should be paid or reviewed.3 Chief Counsel added that specific facts help the IRS "avoid paying refunds to taxpayers who have no factual support for their claim".1 An IRS examiner guide from 2008, which states that it is not an official IRS position, had already described prepackaged claim submissions that "frequently fail to substantiate" the expenses claimed.8

What changed from 2022 to 2024

Date	Change
5 January 2022	Perfection period set at 45 days3
10 January 2022	Requirements apply, with a transition period to perfect deficient claims23
2022 to 2025	Transition period extended four times, now through 10 January 202734
18 June 2024	Names of individuals and the information each sought to discover waived at filing23

Figure 1. Main changes. Sources as cited.

The IRS gave one reason for the 2024 waiver: "significant experience with the Research Credit refund claims process".3 It said the two items may still be requested if a claim is examined.2 It has not published counts of claims found deficient, perfected or rejected.

How claims are screened

The IRS reviews every research credit refund claim for validity. A deficient claim receives a letter and 45 days to respond. A response that only repeats the legal definitions is insufficient, and if the information is not received or is insufficient, "your entire claim for refund will be rejected". Rejected claims cannot go to the Independent Office of Appeals.2

Refund claims and fees

A claim for an excessive amount carries a penalty of 20 percent of the excess on the person making the claim, unless there is reasonable cause.9 That person is the taxpayer.

Circular 230 defines a contingent fee to include "a fee that is based on a percentage of the refund reported on a return", and bars practitioners from charging one for preparing refund claims except those filed within 120 days of a notice of examination.10 In 2014 a federal court held that the IRS lacks authority to regulate the preparation and filing of refund claims filed before an audit, and enjoined enforcement of the rule in that respect.5 Treasury's 2024 proposal to respond has not been finalized.11 The AICPA Code bars its members from preparing refund claims for a contingent fee, but treats claims above the Joint Committee on Taxation review threshold as a permitted exception.12

The case for success fees

Supporters say a fee paid from the refund lets businesses find missed credits at no upfront cost, and that the IRS's new screen now checks every claim. Those are fair points, and nothing here suggests advisers who charge contingent fees act improperly. But the screen tests whether required information is present, not whether the research qualified; Chief Counsel distinguishes rejecting a claim for procedural reasons from disallowing it on the merits.1 The risk of a weak claim stays with the taxpayer.92 Access can be provided by fixed, capped or staged fees.

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. That includes research credit refund claims, where the federal rule has not been enforceable since 2014 for claims filed before an audit. 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

IRS Office of Chief Counsel, Memorandum 20214101F, I.R.C. 41 Research Credit Refund Claims, dated 17 September 2021, released 15 October 2021, Short Answers 1 and 2 and Law and Analysis part A.1 (including footnote 1). https://www.irs.gov/pub/irs-lafa/20214101f.pdf (accessed 11 October 2026). Back
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 2 to 7, 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
Internal Revenue Service, IRS sets forth required information for a valid research credit claim for refund, News release IR-2021-203, 15 October 2021, with updates dated 5 January 2022, 30 September 2022, 30 October 2023, 18 June 2024 and 25 November 2024. https://www.irs.gov/newsroom/irs-sets-forth-required-information-for-a-valid-research-credit-claim-for-refund (accessed 11 October 2026). Back
Internal Revenue Service, IRS extends the period for feedback on Form 6765, News release IR-2025-99, 1 October 2025. https://www.irs.gov/newsroom/irs-extends-the-period-for-feedback-on-form-6765 (accessed 11 October 2026). Back
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
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
Treasury Department, 26 CFR 301.6402-2, Claims for credit or refund, paragraph (b)(1). https://www.ecfr.gov/current/title-26/section-301.6402-2 (accessed 11 October 2026). Back
Internal Revenue Service, Large and Mid Size Business Division, Research Credit Claims Audit Techniques Guide (RCCATG): Credit for Increasing Research Activities Section 41, LMSB-04-0508-030 (May 2008), introductory note and Chapter I "Background". https://www.irs.gov/businesses/research-credit-claims-audit-techniques-guide-rccatg-credit-for-increasing-research-activities-section-41 (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsections (a) and (b), 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 (accessed 11 October 2026). Back
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
Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, 89 FR 104915 (26 December 2024), Explanation of Provisions part B and proposed section 10.51. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026). Back
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 and .04. https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf (accessed 11 October 2026). Back