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Quotes from Dean Zerbe, Former Senior Counsel to the U.S. Senate Finance Committee; alliant National Managing Director
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The One Big Beautiful Bill Act (OBBB) has a number of important provisions providing tax relief for small businesses. However, one of the most notable is the targeted tax relief for innovative small and medium businesses that qualify for the R&D tax credit – providing retroactive relief to a highly burdensome capitalization requirement of research expenditures.
The Problem
As background, the 2017 tax relief bill included as a payfor a requirement that R&D expenditures had to be capitalized/amortized (previously most companies expensed). While requiring capitalization of R&D was a grind for larger businesses – requiring capitalization of R&D was a wipeout for many small and medium businesses.
Small and medium companies that alliant works with would commonly be upside down due to the new requirement of capitalizing R&D. For example, a small manufacturer in the Midwest went from roughly being in the black $250k to being in the red $750k.
As readers know, I had been raising the flag on the burden of capitalizing R&D expenditures on small and medium businesses for some time. I was confident that if we could get the small business owners to raise their voices about this problem – Congress would listen (as we showed earlier with the AMT turnoff on R&D put in place a few years ago). There was early success in the previous Congress with then-Finance Chairman Wyden (D-OR) and Ways and Means Chairman Smith (R-MO) including retroactive relief as to R&D expensing in a bipartisan, bicameral tax bill. Unfortunately, that bill didn’t secure a Senate vote after passing the House.
However, with the new administration, there are new opportunities. alliant worked closely with small and medium companies as well as their CPAs to ring the bell to policy makers in Congress on the need to include retroactive relief as to the capitalization requirement in the OBBB. Thanks to the good work of Chairman Crapo (R-ID) as well as Senators Young (R-IN)(a leading voice on R&D in the Senate); Barrasso (R-WY); and Cassidy (R-LA) small businesses had success in getting retroactive relief from amortization of domestic R&D expenses.
I should note that the OBBB also — thanks in large part to Senator Daines (R-MT) who was Horatio at the gate on the issue of permanency – makes the R&D fixes permanent. Happy day.
The Fix
The OBBB provides two transition/retroactive rules for taxpayers.
- Allows taxpayers with less than $31 million in revenue to elect to retroactively apply expensing back to 2022.
- Allows all taxpayers (not just those with less than $31 million in revenue) that amortized their research expenditures to elect to recover their remaining 2022-2024 domestic research either in 2025 or ratably across 2025 and 2026.
The Trump Treasury has been helpful in putting out taxpayer-friendly guidance on how small businesses can take advantage of this retroactive relief. IRS issued on August 28, 2025 Rev Proc 2025-28 that allows that small businesses can deduct 2024 174A expenses on original return – must amend 2022-2023 returns by the earlier of statute of limitations or July 6, 2026. The Rev Proc also allows small business taxpayers to make late 280C elections (or revoke timely 280C elections) on 2022-2024 amended returns prior to the earlier of the statute of limitations or July 6, 2026.
On September 5, 2025 – the Treasury added new language to the Rev Proc 2025-28 –that clarified how small businesses can deduct 2024 174A expenditures and recoup remaining 2022-2023 expenditures through a Sect. 481(a) adjustment on an original 2024 return.
So overall – great news for small businesses that qualify. They can elect to deduct Section 174 expenses on an original 2024 tax return. All eligible small businesses may supersede their original entity return. Under the Rev Proc., all eligible small businesses may supersede their original 2024 entity return to claim this relief before the extended due date of that return – even if they did not actually extend.
What does all this retroactive relief mean in practice? For example, alliant works with a civil engineering firm in the Midwest that amortized $3.5 million in R&D expenses in 2024 and $2.5 million in 2023 and $2 million in 2022. Amortization requirements had a huge impact on them and cash flow. This small business is now – thanks to the OBBB retroactive relief — going to have about $5 million in deductions that they are going to be able to pull forward in 2025 and 26. This inflow of cash and positive balance sheet will mean job growth, greater productivity and higher wages.
Now, these are the headlines. However, I will be candid. It wouldn’t be taxes if there weren’t a host of bells and whistles that businesses and their CPAs need to be eyes open in taking advantage of this relief and taking the proper steps to maximize the benefit provided by Congress. In short though, it’s good news if a small business owner did amortize R&D expenses; held off filing and is now filing; or wants to revisit their tax filing on R&D. But details meet devil in navigating it all.
Deadlines to Stay Focused On
Some key deadlines coming up that may be relevant as you look to benefit from this relief:
October 15, 2025 – C corp/ fiscal year ends
October 15, 2025 – 2021 individual statute of limitations and 2024 extended due date.
July 6, 2026 – deadline to amend small businesses under OBBA
And estimated payment dates and extensions dates
As we look to a hoped-for renaissance in domestic manufacturing, this retroactive relief may prove a real spark for innovation in this country – putting big dollars into the hands of small businesses. Dollars that can be used to make new hires; expand a company; and, engage in far-reaching new product designs. As important, as our nation participates in a global economy, these reforms to the R&D tax credit are vital steps in making our manufacturing base more competitive. Big, beautiful news indeed.
Featured Leadership
Dean Zerbe is alliant’s National Managing Director based in the firm’s Washington D.C. office. Prior to joining alliantgroup, Mr. Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman and current Ranking Member of the Finance Committee, Senator Charles Grassley (R-IA), on tax legislation. During his tenure on the Finance Committee, Mr. Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law – including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform), and the Pension Protection Act. Mr. Zerbe is a frequent speaker and author on the outlook for short-term and long-term changes in tax policy, as well as ways accounting firms can help their clients lower their tax bill.
