Final IRS Regulations Cover Elections for Alternative Simplified Research Credit

The IRS has issued final regulations relating to the time and manner of electing to use the Alternative Simplified Method to compute the Research and Development Credit (ASC). The final regulations mirror the previously issued temporary regulations.

The election to use the ASC is made by completing the portion of IRS Form 6765, Credit for Increasing Research Activities (R&D), relating to the election and attaching the completed form to the timely filed (including extensions) original return.

The election may also be made on an amended return for a tax year that is not closed by the period of limitations but only if the taxpayer did not previously claim a research credit computed under the regular R&D rules on its original or an amended return. An extension of time to make the election is not allowed.

Prior to these regulations being updated, taxpayers were not permitted to use the ASC method when amending a tax returns. These are very important rule changes for those taxpayers that did not take advantage of the R&D credit in a prior year. This also provides flexibility in situations where a taxpayer cannot determine the amount of the credit under the regular provisions of the R&D credit. 

The new regulations also provide  a simple procedure to make a reduced credit election on a timely filed return (which is desired in most cases) and allows the taxpayer to file amended returns calculating the credit under either the regular method or the simplified method.

If you believe your business may benefit from amending a return or think you may be eligible for the R&D credit, contact a member of the Marcum R&D Tax Credit Group.