The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, finally fixed Section 174—bringing back immediate expensing of domestic R&D expenses starting in tax years beginning after December 31, 2024. But the law left a big question unanswered:
How and when will the IRS issue procedural guidance to implement the changes?
As businesses, CPAs, and tax advisors look toward the extended filing deadlines for 2024 returns (September and October 2025), many are stuck in limbo—waiting on the Treasury Department to clarify exactly how to claim the new benefits and comply with the law.
Why IRS Guidance on Section 174 Is Urgently Needed
Without formal guidance, taxpayers and preparers can’t confidently:
- Elect to deduct unamortized 174 costs from 2022–2024,
- Choose the one-year catch-up or two-year ratable deduction method,
- Apply the small business election for refund claims,
- Coordinate with Section 41 R&D credits and Section 280C(c)(2) elections,
- Determine whether Form 3115 is required or whether a statement will suffice.
All of these items hinge on procedural rules Treasury has yet to issue.
Filing Deadlines Are Approaching Fast
| Taxpayer Type | Filing Deadline (with Extension) | Section 174 Implications |
|---|---|---|
| Partnerships / S Corps | Sept 15, 2025 | K-1s must reflect 174 treatment; may trigger retroactive claims |
| C Corporations | Oct 15, 2025 | Must finalize treatment of 2022–2024 174 costs and 2025 deductions |
| Small Businesses (≤ $31M avg receipts) | July 4, 2026 | Deadline to amend and claim full deduction for prior 174 costs |
Critical Note: Many elections must be made on timely filed returns, including extensions. If guidance isn’t issued before these deadlines, taxpayers may lose the ability to make key elections without filing amended returns.
What’s the IRS Likely to Do?
While there’s no official release date yet, here’s what we expect:
- A Revenue Procedure (likely modeled after Rev. Proc. 2023-11) will outline:
- Automatic method change rules for deducting prior capitalized 174 costs,
- How to elect catch-up or ratable deduction treatment for 2022–2024 costs,
- Special rules for small taxpayers to claim refunds via amended returns,
- 280C election revocation procedures and coordination with 41 credit.
Treasury is under pressure to issue this guidance by late August or early September 2025—to allow preparers to complete extended returns in time.
What You Should Do Right Now
Whether you’re a business owner or a tax advisor, here’s your checklist:
1. Identify Small Taxpayer Status
- If your average gross receipts over the last 3 years are ≤ $31M, you may be eligible to retroactively expense 174 costs and claim a refund.
2. Model Both Scenarios
- Run projections for 2024 returns under:
- Current amortization rules (no guidance),
- OBBB-compliant treatment (full expensing or 2-year allocation).
3. Prepare Draft Filings with Flexibility
- Use placeholder workpapers for 174 treatment until guidance is issued.
- Delay return filings until closer to September/October if possible.
4. Be Ready to File a Form 3115 or Election
- IRS may require a method change or election statement to adopt 174A.
- Coordinate with Section 280C and other elections due with the original return.
Bottom Line
The law has changed—but the instructions haven’t caught up yet. If Treasury doesn’t act soon, taxpayers will be forced to make critical decisions with incomplete information.
We expect guidance before the 2024 extended deadlines, but until then, proactive planning and careful delay of final filings may be your best defense.
