After weeks of uncertainty following the passage of the One Big Beautiful Bill Act (OBBBA), the IRS has finally released comprehensive guidance on how businesses can handle their research and development tax deductions. Revenue Procedure 2025-28, issued on August 28, 2025, provides clear procedures for accounting method changes and elections related to research and experimental (R&E) expenditures as modified by the recently enacted One Big Beautiful Bill Act.

If your business invests in R&D (whether you're an existing Boast customer or just learning about innovation tax incentives) this guidance creates immediate opportunities that could put serious money back in your pocket. However, many of these opportunities come with tight deadlines.

What Just Changed? The OBBBA Backstory

Let's rewind for a moment. The One Big Beautiful Bill Act, signed into law on July 4, 2025, fundamentally rewrote how businesses can treat their R&D expenses for tax purposes. Previously, under Section 174 changes from the Tax Cuts and Jobs Act, companies were required to capitalize and amortize R&D expenses over five years (15 years for foreign research) starting in 2022; a change that significantly increased tax bills and compliance burdens for innovative businesses.

The OBBBA changed that game entirely by introducing Section 174A, which allows businesses to immediately deduct domestic R&D expenses again. But until last week, the specific procedures for claiming these benefits remained unclear.

Breaking Down Revenue Procedure 2025-28: Your Action Items

For Small Businesses: The Retroactive Jackpot

Here's where things get exciting for small businesses (those with gross receipts under $31 million). Small businesses may retroactively apply OBBBA provisions to tax years beginning after December 31, 2021, meaning you can potentially recover R&D deductions from 2022, 2023, and 2024.

The automatic election pathway: Small businesses filing timely returns on or before November 15, 2025, will be deemed to have elected OBBBA treatment if they deduct R&D expenses on the return. This is huge: No complicated paperwork, just deduct your 2024 domestic R&D expenses on your return and you're automatically in.

But here's the important part: If you make this election for 2024, you must also file amended returns for 2022 and 2023 to claim those years' R&D expenses. For the 2023 taxable year, taxpayers only have until July 6, 2026, to amend their returns to apply this election.

For All Businesses: New Flexibility Going Forward

Starting with tax years beginning after December 31, 2024, all businesses have new options:

  1. Immediate expensing: Deduct domestic R&D expenses in the year they're incurred (the pre-2022 treatment we all missed)
  2. Strategic amortization: Elect to capitalize and amortize domestic R&D expenses over a minimum 60-month period

Foreign SRE expenditures remain subject to 15-year amortization, so the domestic vs. foreign distinction remains critical for planning purposes.

Dealing with Past Capitalized Expenses

Got R&D expenses that were capitalized between 2022-2024 under the old rules? The revenue procedure provides that taxpayers may "amortize any remaining unamortized amount" of domestic R&E expenditures capitalized after December 31, 2021, and before January 1, 2025. You can elect to recover these unamortized amounts either fully in 2025 or spread them over 2025 and 2026. This applies to Small Businesses that don't want to amend their back year returns and to businesses over the $31 million gross receipt mark.

Why This Matters for Your Business (And Your Cash Flow)

This isn't just about so much more than compliance. This new mandate enables significant cash flow optimization and strategic tax planning. The ability to immediately deduct R&D expenses means:

  • Improved cash flow: Instead of spreading deductions over multiple years, you can claim the full benefit upfront
  • Simplified compliance: No more complex amortization schedules for domestic R&D
  • Strategic flexibility: Choose the timing that works best for your tax situation

For context, innovative businesses typically see substantial returns through R&D tax incentives. A startup with $500,000 in eligible R&D expenses could receive $50,000 or more in credits, while larger companies with $2.5 million in eligible expenses could see $250,000 in benefits.

Critical Deadlines: Don't Miss These Windows

September 15, 2025: Automatic extension deadline for superseding 2024 returns (if your original return was filed before this date without extension)

October 15, 2025: Automatic extension deadline for superseding 2024 returns for 1120 filers

November 15, 2025: Deadline for small businesses to file timely 2024 returns with deemed elections

July 6, 2026: Final deadline for small businesses to amend 2023 returns for retroactive application

The Bigger Picture: OBBBA's Innovation Investment

Revenue Procedure 2025-28 represents just one piece of the OBBBA's broader commitment to supporting American innovation. The act includes several other business-friendly provisions, from enhanced tip deductions to senior citizen benefits, but the R&D components are particularly significant for technology and innovation-driven businesses.

What You Should Do Right Now

If you're a small business: Review your 2022-2024 R&D expenses immediately. Calculate potential refunds from amended returns and determine whether the retroactive election makes sense for your situation. Remember, you'll need to apply the election consistently across all applicable years.

For all businesses: Evaluate your 2025 R&D tax strategy. With the flexibility to choose between immediate expensing and strategic amortization, consider which approach optimizes your overall tax position.

Documentation is key: Whether you're claiming past deductions or planning future ones, maintaining robust documentation of your R&D activities remains essential. The IRS guidance doesn't change the fundamental requirement to substantiate your claims.

Looking Ahead: Planning for Success

While this guidance resolves immediate uncertainty around OBBBA implementation, it also opens new strategic possibilities for R&D tax planning. The interplay between R&D tax credits (Section 41) and these deduction rules (Section 174A) creates opportunities for sophisticated tax optimization.

Don't Navigate This Alone

The new guidance creates meaningful opportunities, but the complexity of coordinating elections, amendments, and strategic planning shouldn't be underestimated. Whether you're already maximizing your R&D tax position or just discovering these incentives, having expert guidance ensures you're capturing every dollar you're entitled to while staying compliant with all requirements.

The landscape of R&D tax incentives continues to evolve, but one thing remains constant: businesses that proactively manage their innovation tax strategy consistently outperform those that treat it as an afterthought. With Revenue Procedure 2025-28 now providing the roadmap, the question isn't whether you can afford to optimize your R&D tax position—it's whether you can afford not to.

Ready to maximize your R&D tax benefits under the new guidance? Our team of experts can help you navigate the elections, amendments, and strategic decisions to ensure you're capturing every opportunity. The deadlines are approaching fast, so let's make sure you don't leave money on the table.