Navigating Rev. Proc. 2025-28: Key Compliance Obligations for CPAs

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) fundamentally altered the treatment of research and experimental (R&E) expenditures. In response, the IRS released Rev. Proc. 2025-28 on August 28, 2025, which provides the procedures for making elections, filing amended returns, and changing methods of accounting under the new §174A.

It not only sets out the mechanics of retroactively applying §174A for small businesses, but also coordinates with §280C elections, and provides transition and relief rules for 2024 returns.

Background: From TCJA §174 to OBBBA §174A

• TCJA 174 (2017): Beginning in 2022, taxpayers were required to capitalize and amortize R&E expenditures over 5 years (domestic) or 15 years (foreign).
• OBBBA §174A (2025): Restores immediate deductibility of domestic R&E expenditures, effective for years beginning after 12/31/2024. Taxpayers may also elect to capitalize and amortize over at least 60 months.
• Coordination with §280C: OBBBA amended §280C(c)(1) so that domestic R&E deductions (or amounts charged to capital account) are reduced by the credit allowed under 41 (as opposed to the difference between the credit amount and the 174 amortization deduction for that year) unless the taxpayer makes a §280C(c)(2) election for a reduced credit.

Rev. Proc. 2025-28 creates the roadmap for implementing these changes.

1.  Small Business Election to Retroactively Apply §174A Who Qualifies?

A small business taxpayer is any taxpayer that is not a tax shelter under §448(d)(3) and meets the §448(c) gross receipts test (≤ $31M for 2025).

Election Mechanics

• May elect to apply 174A retroactively to taxable years beginning after 12/31/2021 and before 1/1/2025.
• Election is made on an amended return, AAR, or timely filed original return by attaching a statement titled: “FILED PURSUANT TO SECTION 3.03 OF REV. PROC. 2025-28.”

• Eight required items must be included (name/TIN, tax shelter declaration, gross

receipts test, method of treatment, amortization details, etc.).

Deadlines

• July 6, 2026 – final deadline for amended returns/AARs (subject to 6511 statute of limitations).

• Deemed election applies if an original return is timely filed on or before 11/15/2025 with deduction of R&E.

Key Note

Form 3115 is not required.

2.  Coordination with §280C Elections

If a small business elects to retroactively apply §174A, it may also:

• Make a late §280C(c)(2) election (reduces the research credit in lieu of reducing deductions).
• Revoke a prior §280C(c)(2) election. Procedural Requirements

For either action, the taxpayer must:

1. Adjust the 41 credit.
2. Adjust deductions or capitalized
3. Attach an amended Form 6765 marked
4. Include a statement with declarations (not a tax shelter, gross receipts test, ).

Caution for CPAs

• Once made or revoked, the change is permanent for that year.
• Amending to apply 174A requires applying OBBBA’s amended §280C, which may reduce the credit.
• Taxpayers must also provide the three substantiation items required by CCA 20214101F when amending research

3.  Deduction of “Remaining Unamortized Amounts”

Taxpayers who capitalized and amortized domestic R&E under TCJA §174 in 2022–2024 may elect to deduct the remaining unamortized balance:

• Entirely in 2025, or
• Ratably over 2025 and 2026. Statement in Lieu (No Form 3115)

Must be attached to the return and include:

• Taxpayer name &
• Years and expenditures
• Unamortized balance as of 12/31/24.
• Deduction amount(s) and method
• Declaration of compliance with 174A.
• Signature under penalties of

Later Years

If not adopted in 2025, taxpayers may apply the change in a later year with a modified §481(a) adjustment.

3. Transition Rules for 2024 Returns

• • Taxpayers who filed their 2024 returns before 9/15/2025 using proper 174A treatment are deemed compliant with §446(e) and Rev. Proc. 2025-28.
  • Such taxpayers may still recover unamortized balances in 2025 or 2026 using the simplified procedures.

5.  Relief for Taxpayers Who Have Already Filed Original Returns

Many taxpayers did not extend their 2024 returns, limiting their ability to amend.

• Proc. 2025-28 grants an automatic six-month extension under §6081 solely for making §174A method changes or §280C(c)(2) elections/revocations.
• Superseding returns must be filed by the extended due date and write at the top of the superseding tax return “REVENUE PROCEDURE 2025-28”.

Key Compliance Deadlines to Calendar

• 11/15/2025 – deemed election cut-off for original 2024
• 7/6/2026 – final deadline for amended returns, AARs, late elections, or

Conclusion

Rev. Proc. 2025-28 provides both guidance and complexity. For CPAs, the key to compliance is attention to detail in required statements, deadlines, and coordination between §§ 174A and 280C. Properly managed, these elections can unlock immediate deductions and optimize credit positions — but mishandling could lead to missed opportunities or reduced benefits.