New Option in Filing for Research Tax Credit on Amended Returns
Taxpayers may now elect the alternative simplified credit rules for calculating their research tax credit on an amended return.
The Tax Code provides a credit to taxpayers for their qualified research expenses. The taxpayer can use the “regular” method or elect to use the alternative simplified credit (“ASC”) rules to calculate their allowable research tax credit. Generally, a taxpayer elects the ASC method by filing Form 6765, Credit for Increasing Research Activities, on a timely filed original return for the tax year to which the election applies. The deadline often created administrative and financial burdens for taxpayers, who requested that the IRS provide additional time to determine which credit method to use.
In response to these requests, new final and temporary regulations now allow taxpayers to elect the ASC method on an amended return. However, a taxpayer who previously claimed a research tax credit for a tax year may not make an ASC election for that same year on an amended return.
Members of a controlled group are subject to a special rule in claiming the research credit on an amended return. Generally, if any member of the controlled group previously claimed the research credit for a tax year by using a method other than the ASC, no other member of that group can make the ASC election on an amended return for that same tax year.
The new final and temporary regulations apply to tax years ending on or after June 3, 2014. Taxpayers are reminded that the research credit has expired, but Congress is hearing a proposal to extend it or make it permanent.
What Does CohnReznick Think?
This is a very welcome taxpayer-friendly change. Prior to this change, a taxpayer could not make an ASC election on an amended return. Many taxpayers, prior to filing their originally timely filed returns ,do not have enough time to determine if the regular research and development credit (R&D) or ASC credit is more beneficial to them. Now, with this change, a taxpayer can make an ASC election on an amended return as long as the taxpayer did not claim an R&D credit on the original timely filed tax return and the statute of limitations is open.
The information contained herein (or in any attachment) is not intended to be used by any taxpayer for the purpose of avoiding any penalties that a taxing authority might impose on the taxpayer or for the promoting, marketing or recommending to another party any tax related matters.
The information in this transmission is privileged and confidential and intended only for the recipient listed above. If you are not the intended recipient, please advise the sender immediately by reply e-mail and delete this message and any attachments without retaining a copy. If you are not the intended recipient, you are hereby notified that any disclosure, copying or distribution of this message, or the taking of any action based upon it, is strictly prohibited.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.