IRS has issued final regulations that allow taxpayers that did not claim a research credit on a previously filed return for a given tax year to elect the alternative simplified research credit (ASC) on an amended return for that year. The final regulations replace, largely follow, and somewhat liberalize, temporary regulations that were issued in 2014.
Background. For amounts paid or incurred before Jan. 1, 2015, the research credit for a tax year is an amount equal to the sum of:
- 20% of the excess (if any) of the qualified research expenses for the tax year over a base amount -unless the taxpayer elects the ASC;
- 20% of the basic research payments (the “university basic research credit”) ; and
- 20% of certain amounts paid or incurred to an energy research consortium (the “energy research consortium credit”).
Final regulations had provided that: a) the election to use the ASC may not be made or revoked on an amended return, and may not be revoked except with IRS consent; and b), taxpayers will not be granted an extension of time to make or revoke an ASC election.
In 2014, IRS issued temporary regulations that provided a rule that allows a taxpayer to make an ASC election for a tax year on an amended return. Those regulations provided that a taxpayer that previously claimed, on an original or amended return, a credit for a tax year may not make an ASC election for that tax year on an amended return. In addition, those regulations provided that a taxpayer that is a member of a controlled group in a tax year may not make an 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 on an original or amended return for that tax year.
Code Sec. 280C(c)(3) allows a taxpayer to make an annual irrevocable election to claim a reduced research credit rather than reducing the deduction (research and experimental expenditure deduction)
Final regulations largely adopt, and somewhat liberalize, temporary regulations:
In the preamble to the final regulations, IRS also notes that, if a taxpayer is undecided whether to claim the research credit for a tax year but wants to preserve the operative effect of the election for that tax year, then the taxpayer will make the election on line 17 of Form 6765 (Credit for Increasing Research Activities), but leave the remaining section of the form blank. An election on line 17 of Form 6765 made in a tax year does not, in and of itself, constitute a credit claim, and accordingly does not preclude a taxpayer from making an ASC election on an amended return for that tax year.
