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 company invests in R&D (whether you’re already a Boast client or just starting to explore innovation tax credits), this guidance opens up immediate opportunities to put real money back in your pocket. But many of these opportunities come with tight deadlines.

What Just Changed? The OBBBA Backstory

Let’s take a step back. The One Big Beautiful Bill Act, signed into law on July 4, 2025, completely changed how businesses can handle R&D expenses for tax purposes. Before this, Section 174 of the Tax Cuts and Jobs Act forced companies to capitalize and amortize R&D costs over five years (or 15 years for foreign research) starting in 2022—a move that drove up tax bills and compliance headaches 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 interesting for small businesses (those with gross receipts under $31 million). You can retroactively apply OBBBA rules to tax years starting after December 31, 2021. That means you could recover R&D deductions for 2022, 2023, and 2024.

The automatic election option for small businesses: If your small business files its return on time—on or before November 15, 2025—and deducts its 2024 domestic R&D expenses, you’ll automatically get OBBBA treatment. That’s a big deal: No extra paperwork—just deduct your 2024 domestic R&D expenses on your return and you’re in.

But here’s what matters most: If you make this election for 2024, you’ll also need to file amended returns for 2022 and 2023 to claim those R&D expenses. For the 2023 tax year, you only have until July 6, 2026, to amend your return and make 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 your domestic R&D expenses in the year you incur them (just like before 2022)
  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

Did you have to capitalize R&D expenses between 2022 and 2024 under the old rules? The new revenue procedure lets you "amortize any remaining unamortized amount" of domestic R&E expenses capitalized after December 31, 2021, and before January 1, 2025. You can choose to recover these unamortized amounts all at once in 2025 or spread them over 2025 and 2026. This applies to small businesses that don’t want to amend prior-year returns and to companies with gross receipts over $31 million.

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

This isn’t just about compliance. This new rule unlocks major cash flow advantages and smarter tax planning. Being able 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 is just one part of OBBBA’s broader push to support American innovation. The act also brings in other business-friendly measures, from bigger tip deductions to new benefits for seniors. But for tech and innovation-driven companies, the R&D changes are especially impactful.

What You Should Do Right Now

If you’re a small business: Review your R&D expenses for 2022–2024 right away. Estimate potential refunds from amended returns and decide if the retroactive election is right for you. Remember, you’ll need to apply the election consistently for all eligible 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 everything: Whether you’re claiming past deductions or planning ahead, you must keep strong records of your R&D activities. The IRS still requires you to back up 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 Go It Alone

The new guidance creates real opportunities, but coordinating elections, amendments, and tax strategy is complex. Whether you’re already optimizing your R&D tax position or just learning about these credits, expert support helps you capture every dollar you deserve—while staying fully compliant.

The R&D tax credit landscape keeps changing, but one thing is clear: companies that actively manage their innovation tax strategy consistently outperform those that treat it as an afterthought. With Revenue Procedure 2025-28 as your roadmap, the real question isn’t whether you can afford to optimize your R&D tax position—it’s whether you can afford not to.

Ready to get the most from your R&D tax benefits under the new rules? Our team of experts can guide you through elections, amendments, and strategic decisions so you don’t miss a single opportunity. Deadlines are coming up fast—let’s make sure you don’t leave money on the table.