R&D Credits and Section 174: Timing, Risk, and the July 6 Deadline

Eligible taxpayers have until July 6, 2026, to amend any applicable tax returns to make the election moving the effective date of the 174A expensing provision under the One Big Beautiful Bill Act (OBBBA). However, that deadline applies to only one path. Other options remain available and, depending on the facts, may lead to a more favorable outcome.

Before amending your tax returns, it’s important to understand how each option affects cash flow, compliance risk, and your broader tax position.

Section 174 risk for 2022 – 2024 tax years

The George v. Commissioner decision (February 2026) opened the door for businesses that have not previously claimed R&D tax credits or fully identified research and experimental costs to reevaluate their activities. Recent legislative changes have also introduced both opportunity and potential exposure.

From 2022 – 2024, taxpayers were required under Section 174 to capitalize and amortize domestic R&E costs over a five-year period, regardless of whether a credit was claimed.

Many businesses did not fully identify these costs for capitalization because they did not believe their activities met the definition of R&E. By looking at operations (particularly in agribusiness, manufacturing, and technology) in a new light as a result of George, credits certainly may be available, but it may also highlight a risk area:

• Undercapitalized R&E costs in prior years can lead to tax penalties
• Claiming an R&D credit without having 174A costs identified could cause risk both in the validity of the credit along with the proper treatment of these costs
• Revisiting prior-year filings to align can draw scrutiny

July 6 deadline for amended returns

For small taxpayers (under $31 million in gross receipts), OBBBA allows retroactive relief to fully expense Section 174 costs for 2022 – 2024 by moving the effective date of the provision back — but any amended returns using this option must be filed by July 6, 2026.

The July 6 deadline creates urgency but not necessity. Taxpayers should fully model their options, understand the trade-offs, and prioritize accuracy over speed to support long-term results.

For taxpayers that did not capitalize costs but may have needed to, moving the effective date of the provision, as if capitalizing domestic 174 costs was never a requirement, could provide protection via an election statement within the amended returns.

This accelerated deadline is a significant departure from the typical three-year statute and requires careful analysis before acting.

Amending, which is optional, may make sense if:

• You have significant deferred costs from 2022 – 2024
• The expected benefit is immediate and material
• Prior-year filings are relatively straightforward

Alternate approaches to amending tax returns

While amending returns may seem attractive, it’s not always the best path. Changes to taxable income can trigger downstream impacts — AMT exposure, interest limitations, or shareholder-level consequences — and refunds may be delayed due to IRS backlog. In addition, administrative burdens of amending all applicable returns (including shareholders) may be unnecessary.

An alternative is filing a method change (Form 3115) with the 2025 return, allowing taxpayers to correct Section 174 treatment while spreading income adjustments over time and potentially leveraging favorable timing benefits under OBBBA.

Waiting or taking a prospective approach may make more sense if:

• The structure is complex (multiple entities or owners)
• The benefit changes after modeling credits and other impacts
• Administrative effort outweighs near-term gain

How CLA can help with R&D credits

R&D tax credits can still be claimed on amended returns under normal statutes, meaning the July 6 deadline may not apply in all cases. However, coordination with Section 280C elections — which affect how the credit and related deductions are balanced — is an important part of the overall tax strategy.

CLA can help you evaluate how R&D credits and Section 174 interact across prior and current years so decisions made now don’t create issues later. We work with you to identify qualifying activities, assess capitalization exposure, and compare options like amending returns or filing a method change.

We also help align documentation and filing positions to support timing decisions and stand up to IRS review.

Contact us

Clarify R&D credit options before you amend your tax returns. Complete the form below to connect with CLA.