2024 R&D Expensing Guidance: AICPA Provides Recommendations to the IRS

The One Big Beautiful Bill Act (OBBBA) established that eligible small businesses may fully deduct domestic research costs capitalized in 2022-2024 via amended return. The problem is there’s currently no clear guidance from the IRS on how to make this election, what documentation is required, or whether taxpayers can make the election on an originally filed return, which is critical because many 2024 tax returns haven’t been filed yet.

Without IRS guidance, many taxpayers and practitioners are left in limbo.
In a formal letter dated July 31, 2025, the AICPA urged the Treasury Department and the IRS to issue immediate guidance under the OBBBA that would allow eligible small businesses to fully expense domestic R&D costs incurred in 2024.

Specifically, the AIPCA has recommended allowing:

1. Immediate Expensing on original 2024 Returns
   Eligible small businesses should be allowed to deduct their 2024 domestic research costs on their originally filed return by including a statement referencing the election.
2. Retroactive Application to 2022 and 2023
   Taxpayers should be permitted to amend prior returns (2022 and 2023) to deduct research costs incurred in those years or elect to file an accounting method change for or its first taxable year beginning after December 31, 2024, to deduct the 2022 and 2023 costs.
3. NOL Carryforward Relief Without Amending the NOL Year
   If the election has affected a year in which the taxpayer reported a net operating loss (NOL), the taxpayer is allowed to adjust the NOL in the carryforward year(s) instead of amending the original NOL year return.

KBKG Insight

The AICPA’s recommendation is both timely and necessary to avoid administrative headaches for small businesses and practitioners. However, the request introduces a technical issue that warrants attention. Specifically, if taxpayers are permitted to deduct 2024 R&D expenses directly on their originally filed return, it raises a potential conflict with the ongoing amortization of 2022 and 2023 R&D costs, which are still required to be capitalized and amortized under existing rules. This would result in two different accounting methods being applied on a single return: deducting current-year R&D while amortizing prior-year expenses. Without clear guidance from the IRS addressing this issue, practitioners face uncertainty around whether making the election for 2024 will also impact treatment of previously capitalized costs from 2022 and 2023.

This guidance is time sensitive. Without it, taxpayers may feel pressured to capitalize costs unnecessarily, or worse, file returns under the wrong method and face future compliance issues. The AICPA also warns that retroactively applying the election without clear procedures could create avoidable administrative burdens for both taxpayers and the IRS.