R&D Tax Credit News

Back in October, the IRS added additional requirements for taxpayers filing amended research credit claims beginning on January 10, 2022. In a January 3, 2022, memo, the IRS provided interim procedural guidance for applying the new requirements for research credit claims.

Below are some key takeaways addressed in the memo:

• The memo provides a brief description on what to include for each the five areas of new required information. Those five areas are:
  • Identify all the business components that form the factual basis of the IRC § 41 research credit claim for the claim year.
  • All research activities performed by business component.
  • All individuals who performed each research activity by business component (this can be a list, table or narrative).
  • All the information each individual sought to discover by business component (this can be a list, table or narrative).
  • The total qualified
    1. employee wage expenses,
    2. supply expenses, and
    3. contract research expenses.

• Transition period: Should taxpayers not include the necessary documentation for an amended return, the IRS will send taxpayers a letter (Letter 6428) and taxpayers will have 45 days to perfect the claim after the issuance of the letter. Should the additional information not be submitted within that 45-day window, the claim will be determined deficient.
• The transition period will last for one year, and after the transition period ends on January 9, 2023, no opportunity will be allowed to perfect the claim. The information will be required to be attached to the amended return upon filing. If the information is not attached, it will not be a valid claim and will be deemed deficient.

The IRS also posted a FAQ page regarding the additional requirements. Hull & Knarr will continue to share further guidance on amended research credit claims when available from the IRS.