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June 26, 2024
2024-1261

IRS updates information required for R&D credit claims for refund via amended returns

  • The IRS has limited the scope of information taxpayers must include with research and development (R&D) credit claims for refund via amended returns.
  • Taxpayers no longer need to provide the individuals who performed research activities or the information each individual sought to discover.
  • Though the IRS no longer requires taxpayers to include this information with the amended return, it may still be requested if a refund claim involving the R&D credit is selected for examination, and taxpayers may want to continue to prepare and retain this information.
 

The IRS has updated the information taxpayers must include with R&D credit claims for refund via amended returns, per FAA20214101F. Based on Frequently Asked Question (FAQ) 21, added June 18, 2024, to the FAQs on the IRS's webpage addressing research credit claims on amended returns, the government will no longer require the following information:

  1. The names of the individuals who performed each research activity
  2. The information each individual sought to discover

The new FAQ explains, however, that the IRS may request upon examination the items of information no longer required to be included on the amended return.

As a result of the change to the FAQs, taxpayers must now include only the following information for an R&D credit claim for refund on an amended return:

  1. Identification of all business components to which the research credit claim relates for that year
  2. Identification of all research activities performed for each business component
  3. Total qualified research expenses (QREs) for the claim year (per Form 6765)

The IRS also updated FAQ 10, which asks about an alternative method for identifying individuals who performed each research activity, by directing taxpayers to see FAQ 21, which waives the requirement for employee-specific detail.

Implications

The change in the information requested for R&D credit claims for refund via amended returns will relieve taxpayers of some of the burden associated with filing an amended return. The IRS, however, routinely requests the information now excluded by FAQ 21 in information and document requests when taxpayers are examined by the IRS for research credit claims. Taxpayers should consider preparing and retaining that information in anticipation of examination.

The change in the information sought for R&D credit claims for refund via amended returns may indicate that the IRS is reconsidering the extent of information that will be required on its upcoming revision to Form 6765. However, in a press release that announced the publication of the Draft Form 6765 (June 20, 2024), the IRS indicates that the narrative requirement to describe the information sought to be discovered by business component (see Line 49(f) in the Draft Form 6765) has been reduced for "original returns," implying that the information sought to be discovered by business component will still be required for amended returns. This effectively shifts where this information is provided, not whether "information sought to be discovered" by business component is expected to be provided by taxpayers filing R&D credit claims for refund via amended returns. A Tax Alert on the Draft Form 6765 is forthcoming.

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Contact Information

For additional information concerning this Alert, please contact:

National Tax — Accounting Periods, Methods and Credits

Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor
 

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