IRS Temporary Regulations

The IRS has issued temporary regulations under Section 41 that allow the use of the Alternative Simplified Credit (“ASC”) method for calculating the research and development credit on an amended return.

The ASC method is far simpler to use than the full credit computation, but expenses still need to be evaluated to compute the credit.  Put simply, it will not be worthwhile for everyone.

The ASC method does provide a smaller amount of credit (14% as opposed to 20% under the full credit), but does not require potentially going back to 1983 for information, as is required for the full credit.

With the ability to use the ASC method on amended returns, it makes sense to re-visit research and experimentation expenses to evaluate whether filing an amended return makes sense.
Other issues to consider:

  • Once made, the election to use the ASC method applies to all subsequent years unless revoked with the IRS’s consent.
  • The ASC method only requires the taxpayer to use the last three years’ worth of research expense history (as opposed to obtaining information back to 1983).
  • Prior to these temporary regulations, the ASC method could not be used on an amended return.

 

About FGMK

FGMK is a leading professional services firm providing assurance, tax and advisory services to privately held businesses, global public companies, entrepreneurs, high-net-worth individuals and not-for-profit organizations. FGMK is among the largest accounting firms in Chicago and one of the top ranked accounting firms in the United States. For more than 40 years, FGMK has recommended strategies that give our clients a competitive edge. Our value proposition is to offer clients a hands-on operating model, with our most senior professionals actively involved in client service delivery.

 

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