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Friday, June 6, 2014

R&D Alternative Simplified Credit Election Allowed on Amended Return


On June 2, 2014, the Treasury Department and IRS released final and temporary regulations (TD 9666) for publication in the Federal Register relating to the election of the research and development alternative simplified credit (ASC). 

The final regulations remove the restriction in §1.41-9(b)(2) that prohibits a taxpayer from electing the ASC under section 41(c)(5) for a tax year on an amended return. The temporary regulations allow a taxpayer to make an ASC election for a tax year on an amended return with certain restrictions: 

  • A taxpayer that previously claimed the research credit for a tax year may not make an ASC election for that tax year on an amended return. 
  • A taxpayer that is a member of a controlled group in a tax year may not make an ASC election for that tax year on an amended return, if any member of the controlled group for that year previously claimed the research credit using a method other than the ASC, for that tax year. 

These regulations are provided in response to requests received by the IRS to allow taxpayers to make an ASC election on an amended return. The requests explained that the burden of substantiating expenditures and costs for the base period under the regular credit can be costly, time consuming, and difficult. Consequently, taxpayers often need additional time to determine whether to claim the regular credit or the ASC. 

These new regulations apply to elections with respect to tax years ending on or after June 3, 2014. However, a taxpayer may rely on the regulations to make an ASC election for a tax year ending prior to June 3, 2014, as long as the taxpayer makes the election before the period of limitations for assessment of tax has expired for that tax year.

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