Did your small business spend money on research and development in 2022, 2023, and/or 2024, and capitalize them under the Section 174 rules in place at the time? If so, there is a window open right now that lets you recover tax you may not have realized you overpaid. That window closes on July 6, 2026, and it will not reopen.
Here is the background. The “One Big Beautiful Bill Act” (OBBBA), signed into law in 2025, created a new Section 174A that allows businesses to immediately deduct domestic research and experimental (R&E) expenditures in the year they are incurred. Under the old rules in place since 2022, companies were required to capitalize those costs and amortize them over five years, which pushed deductions into the future and inflated near-term taxable income.
Who qualifies, and why the date matters
This retroactive relief is reserved for “small business taxpayers,” defined as those with average annual gross receipts of $31 million or less over the three preceding tax years. If you clear that bar, you can apply the immediate-expensing rules to domestic R&E costs incurred in tax years 2022, 2023, and 2024.
To capture the benefit for those prior years, you generally need to file amended returns, or administrative adjustment requests (AARs) for partnerships subject to the centralized audit rules, by July 6, 2026. That date is exactly one year after OBBBA’s enactment, and it is the linchpin of the entire opportunity.
The IRS spelled out the mechanics in Rev. Proc. 2025-28, released in 2025. It lays out how eligible businesses make the retroactive election and gives “early adopters” some flexibility, including the option to file an accounting method change statement instead of a full Form 3115.
The R&D credit angle you should not overlook
There is a second, related move worth your attention. Small businesses that want to adjust 2022, 2023, or 2024 returns to claim R&D credits can also make a late election under Section 280C to take the reduced R&D credit, as provided in Rev. Proc. 2025-28. Making this election helps you sidestep the income add-backs that would otherwise erode the value of the credit for the affected years. This carries the same July 6, 2026 deadline.
What to do now
The businesses that benefit will be those that start now, not those that wait until the last minute. Reach out to your tax advisor immediately if you capitalized and amortized R&D costs under Section 174 for 2022, 2023, or 2024; or if you are considering an R&D credit study for any of those years; and your average annual gross receipts sit at or below the $31 million threshold. Contact Gray, Gray & Gray, LLP at 781.407.0300 to start the conversation while there is still time to act.
This article is provided for general informational purposes and does not constitute tax or legal advice. Please consult a Gray, Gray & Gray advisor regarding your specific circumstances.