IRS allows immediate expensing for all SMB R&D claims

For taxpayers, with a taxable year beginning in 2024 and ending before September 15, 2025, the IRS is granting an automatic extension of time to file superseding tax returns.

Introduction

On July 4, 2025, the One, Big, Beautiful Bill Act (OBBBA) was enacted, bringing significant changes to the treatment of research and experimental (R&E) expenditures under the U.S. Internal Revenue Code. Revenue Procedure 2025-28, released by the IRS, outlines the procedures for taxpayers to adapt to these changes, including new elections and methods of accounting for domestic and foreign R&E expenditures. A key highlight of this revenue procedure is the introduction of superseded return rules, which provide taxpayers with an automatic extension to file updated tax returns. Let’s dive into what this means and how it impacts businesses.

Superseded Return Rules: A Lifeline for 2024 Taxpayers

Section 8 of Rev. Proc. 2025-28 offers a critical relief provision for taxpayers with a taxable year beginning in 2024 and ending before September 15, 2025, where the original due date for their tax return (excluding extensions) was prior to September 15, 2025. This period covers what we’ll call the “2024 taxable year.” For these taxpayers, the IRS grants an automatic extension of time to file superseding tax and information returns that apply the provisions of this revenue procedure.

This extension is a game-changer for businesses that may have already filed their 2024 returns without accounting for the OBBBA’s new rules, which took effect for expenditures paid or incurred in taxable years beginning after December 31, 2024. The ability to file a superseded return allows taxpayers to correct their accounting methods and elections retroactively, ensuring compliance with the updated regulations without facing penalties for late filing – provided the new return is submitted within the extended timeframe.

Why This Matters

The OBBBA revamps the treatment of R&E expenditures, splitting them into domestic and foreign categories with distinct rules (click here for more details):

• Domestic R&E Expenditures (Section 174A): Starting in 2025, these are immediately deductible, with an optional election to amortize over at least 60 months if capitalized. This contrasts with the previous Tax Cuts and Jobs Act (TCJA) rules, which required capitalization and amortization over 5 years.
• Foreign R&E Expenditures (Section 174): These remain capitalized and amortized over 15 years, with new rules for handling disposed or abandoned property.

For the 2024 taxable year, businesses may have capitalized domestic R&E expenditures under the old TCJA Section 174 rules. The superseded return option allows them to adjust these treatments, potentially claiming immediate deductions or electing new amortization periods under Section 174A, depending on their circumstances.

How to Take Advantage

Taxpayers should review their 2024 R&E expenditures to determine if adjustments are necessary. The automatic extension means no formal request is needed to file a superseded return – just ensure it’s submitted by the extended deadline (likely tied to the September 15, 2025, cutoff, though exact dates should be confirmed with IRS guidance). This is particularly beneficial for small businesses and those with short 2025 taxable years, who also receive transition rules under Section 7.02 of the procedure.

Broader Context

The superseded return rules align with the OBBBA’s transition framework, which includes automatic changes in accounting methods and elections to handle unamortized amounts from prior years. For instance, taxpayers can elect to amortize remaining TCJA Section 174 amounts in full in 2025 or over two years, with no Section 481 adjustments required. This flexibility ensures a smooth shift to the new regime, minimizing tax disruptions.

Conclusion

The superseded return rules in Rev. Proc. 2025-28 are a thoughtful provision, giving taxpayers breathing room to align their 2024 filings with the OBBBA’s changes. For businesses with significant R&E spending, this could mean substantial tax savings or corrected compliance.

If you’ve filed your 2024 return and suspect it doesn’t reflect these new rules, now is the time to act. Consult with a tax professional to assess your eligibility and ensure your superseded return is filed correctly before the deadline.

Stay informed as more IRS guidance may follow, and consider leveraging this opportunity to optimize your R&E tax strategy moving forward!