Rev. Proc. 2025-28: timely moves on R&E costs, the 2024 superseding window and cash-flow wins

Tax season planning just got real for anyone with research and experimental (R&E) costs. Revenue Procedure 2025-28 delivers the roadmap for elections, accounting method changes and a special chance to file superseding 2024 returns, all tied to the One Big Beautiful Bill Act (OBBBA). If your clients build software, design products or run labs, this affects deductions, credits and cash flow right now.

What changed under OBBBA

For years beginning after Dec. 31, 2024, foreign R&E stays in §174 and is amortized over 15 years. Domestic R&E moves from the five-year amortization requirement originally imposed by the Tax Cuts and Jobs Act (TCJA) to the new §174A; this allows a current deduction or, at the taxpayer’s election, amortization over at least 60 months, beginning with the first month the benefit is realized. That split is the planning hinge for 2025 and beyond.

Small businesses get extra relief. Taxpayers under the small business threshold, generally $31 million of average annual gross receipts for 2025, can retroactively apply §174A to years beginning after Dec. 31, 2021, and before Jan. 1, 2025, by attaching a prescribed statement to the original return, amended return or administrative adjustment request (AAR). Eligible small businesses may also recover any remaining domestic R&E from those years either by deducting the full balance in the first taxable year beginning after Dec. 31, 2024, or by amortizing it ratably over two years. The general deadline is July 6, 2026, subject to the refund statute.

The 2024 superseding return opportunity

Rev. Proc. 2025-28 grants an automatic six-month extension for certain partnerships, S corporations, C corporations, individuals, trusts, estates and exempt organizations to file a superseding 2024 return when no extension was originally filed. This includes furnishing corrected Schedules K-1, Partner’s/Shareholder’s/Beneficiary’s Share of Income, Deductions, Credits, etc. The purpose of this relief is to give small businesses time to implement the retroactive election and adopt necessary method changes without waiting to file an amended return.

Elections and method changes made simpler

You can implement many of these shifts with a statement in lieu of Form 3115, Application for Change in Accounting Method, when the procedure allows. In addition, taxpayers that properly deducted or amortized R&E on a timely filed return for the first year beginning after Dec. 31, 2024, are deemed compliant with the change procedures.

Coordinating with the research credit also matters. A late or revoked §280C(c)(2) election is permitted under the same timing framework for eligible small businesses using the retroactive rules, which can simplify return mechanics by taking a reduced credit instead of adjusting deductions.

What to do this season

• Triage R&E by location, then map domestic costs to §174A and foreign costs to §174. Work with clients to analyze whether they benefit more from an immediate deduction or a 60-month write-off.
• Identify small business clients who can retroactively apply §174A for 2022–2024 and set an internal July 6, 2026, file-ready target. Prepare the required election statement for each year.
• Review research credit positions and consider a late §280C election where it streamlines compliance or boosts after-tax results.
• For returns that began in 2024 with no extension, evaluate the superseding return path to make elections and deliver corrected K-1s by the extended due date.
• Where allowed, use a statement in lieu of Form 3115 to reduce prep time while staying within the procedure.

Example: a software startup with mixed research

Camer Corp, a calendar-year S corporation, has $2.4 million in domestic software development and $600,000 in foreign testing for 2025. Under §174A, Camer Corp can expense the $2.4 million or elect to amortize it over at least 60 months. The $600,000 of foreign costs must be amortized over 15 years under §174. If Camer Corp also claimed the research credit, it can evaluate a late §280C(c)(2) election to take the reduced credit without reducing deductions. If Camer Corp capitalized domestic R&E in 2022–2024, it can either fully amortize any remaining balance in 2025 or spread it ratably over two years, then align 2025 treatment with §174A.

It’s important to note that guidance on the technical application of §174 is still pending. For now, Rev. Proc. 2025-28 joins the growing list of procedural updates issued since the amortization requirement took effect for tax years beginning after Dec. 31, 2024. Most procedures in this revenue procedure are effective Aug. 28, 2025.