The IRS extended for another year, until Jan. 10, 2024, the transition period during which it will allow taxpayers 45 days to perfect a refund claim involving a Sec. 41 research and development (R&D) credit to comply with new information requirements.
The update to the requirements was posted Friday to an IRS news webpage that includes the original Oct. 15, 2021, news release highlighting an IRS Chief Counsel memorandum setting forth the requirements, and other subsequent updates.
The latest update follows by less than a week an AICPA Tax Executive Committee letter to the IRS offering recommendations on the requirements. One recommendation it reiterated from an earlier letter was that the IRS delay implementation of the new requirements to allow time for a public comment period and for the Service to consider and respond to those comments. The second letter also recommended that the IRS remove the additional requirements for an R&D credit refund claim to be deemed valid, clarify the information requirements, and for the IRS and Treasury to evaluate each item in a refund claim independently and inform taxpayers within 45 days whether the claim is valid.
The Chief Counsel memo provides that for an R&D credit refund claim on an amended return to be considered sufficient and valid, it must:
- Identify all business components to which it relates for the claim year;
- For each business component, identify:
- All research activities performed,
- All individuals who performed each research activity, and
- All the information each individual sought to discover; and
- Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year. This may be done on Form 6765, Credit for Increasing Research Activities.
The IRS originally provided a transition period until Jan. 10, 2023, during which taxpayers submitting an R&D credit claim that the Service considers not to meet these conditions may provide any required missing information, or perfect it, within 30 days. On Jan. 5, 2022, in an update to its frequently asked questions on the requirements, the IRS lengthened this perfection period to 45 days.