R&D Tax Reform: What Businesses Need to Know About the IRS’s Latest Updates and the
One Big Beautiful Bill
(Updated October 2025)

The landscape for R&D tax compliance and incentives is undergoing its most significant overhaul in years. Between the IRS’s October 2025 announcements and the sweeping tax law changes under the One Big Beautiful Bill (OBBB), businesses now have both relief and new responsibilities to navigate.

IRS Extends Deadlines for R&D Credit Reporting

On October 1, 2025, the IRS released IR-2025-99, confirming that Section G of Form 6765, Credit for Increasing Research Activities, will remain optional for the 2025 tax year. Section G requires detailed information about research activities and qualified research expenses (QREs). It becomes mandatory in 2026 for most taxpayers, except:

• Qualified Small Businesses (QSBs) electing the payroll tax credit under Section 41(h)(3)
• Taxpayers with QREs of $1.5 million or less and gross receipts under $50 million

The IRS also extended the comment period for the draft Form 6765 instructions through March 31, 2026. Taxpayers can send feedback to lbi.rt.team@irs.gov with the subject “Instructions for Form 6765.”

Refund Claim Requirements and Transition Period

The IRS also extended the transition period for research credit refund claims through January 10, 2027. During this period, taxpayers will have 45 days to correct deficient refund claims before the IRS makes a final determination.

For claims postmarked after June 18, 2024, refund submissions must include:

• Identification of all business components related to the R&D credit claim
• Descriptions of research activities for each business component
• Total qualified employee wage, supply, and contract research expenses. Taxpayers can use Form 6765 for this portion.

The extension provides extra time for companies to update recordkeeping systems and improve substantiation of claims.

The One Big Beautiful Bill Restores R&D Expensing

Separately, the One Big Beautiful Bill, signed into law on July 4, 2025, has rewritten the rules for R&D expense treatment, reversing years of amortization requirements imposed by the Tax Cuts and Jobs Act (TCJA). Beginning in 2025, businesses can deduct U.S.-based R&D costs in full or elect to amortize over five years. Foreign research must still be amortized over 15 years. All taxpayers can also elect to deduct remaining unamortized R&D costs from 2022–2024 over one or two years starting in 2025.

Retroactive Relief for Small Businesses

Small businesses with average gross receipts under $31 million may apply Section 174A retroactively for tax years 2022–2024. This allows amended returns to recover deferred deductions. The election must be made by July 4, 2026.

Credit and Deduction Coordination

Taxpayers claiming the R&D credit under Section 41 must either reduce their deduction by the credit amount or elect under Section 280C(c) to take a reduced (79%) credit and preserve the full deduction. This election must be made on a timely filed original return.

What Businesses Should Do Now

For 2025: Treat It as a “Grace Year”

• Perform a trial run of Section G reporting: Identify business components, research activities, and related QREs even if not required.
• Standardize documentation: Align descriptions of projects and activities with the four-part test under Section 41.
• Validate control-group calculations: Confirm the aggregation rules to determine if you fall into any exceptions and to measure gross receipts and QRE thresholds.

For 2026 and Beyond

• Expect Section G to become mandatory for most filers.
• Maintain audit-ready documentation at the business-component level.
• Evaluate deduction versus credit optimization under §174A and §41.
• For small businesses, consider whether to amend 2022–2024 returns under the new retroactive rules.

Final Thoughts

The IRS delay gives taxpayers breathing room to adapt, while the OBBB restores the long-lost ability to immediately deduct R&D costs. Together, these changes mark a major shift toward clarity and flexibility in R&D tax compliance. Companies that act now to modernize documentation and work with their tax team to evaluate planning opportunities will be best positioned for 2026 and beyond.