R&D Tax Credit Revival:
Section 174 Amortization Ends with New Congressional Fix
Congress has permanently reversed the forced amortization of domestic R&D expenses under Section 174. Starting in 2025, businesses can immediately deduct their domestic qualified research expenses, just as they could before 2022. Even more important: the fix allows for possible retroactive amendments to recover credits from tax years 2022–2024 for certain businesses.
This change offers businesses a substantial opportunity to reduce tax liabilities and unlock cash flow, but deadlines are approaching fast.
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Summary Of Legislative Changes
CHANGE
IMPACT
CHANGE
Immediate
Deductibility Restored
IMPACT
Starting in 2025, all qualified domestic R&D expenses may be fully deducted in the year incurred.
CHANGE
Catch-Up Provisions
for 2022–2024
IMPACT
Eligible businesses may reclaim amortized expenditures via amendment or upcoming filings.
CHANGE
Clear Revenue Threshold
IMPACT
Taxpayers with under $31M in average annual gross receipts (AAGR) between 2022 and 2024 can fully expense their research costs on amended returns. Larger businesses benefit starting with 2025 filings.
CHANGE
Election Flexibility
IMPACT
Business owners and CPA’s potentially have multiple options in the treatment of expenditures and filing mechanisms to maximize cash recovery
CHANGE
R&D Credit Alignment
IMPACT
The Section 41 credit can now be pursued without triggering
adverse 174 treatment.
How The Section 174 Changes Affect You
Businesses with Under $31M AAGR
If You Amortized R&D (2022–2024):
- Potential to Amend Return:
You can file amended returns to claim missed credits or recapture previously capitalized and amortized expenditures.
- Cash Refund Potential:
Combine retroactive deductions and credits for substantial refunds, including interest.
- Streamlined Process:
New flexibility allows for 280C and other appropriate elections on amended returns. And to strategize planning for 2025-2026.
If You Did Not Amortize:
- No Penalty Exposure:
The fix allows for expense treatment in prior years, regardless of how expenditures were treated on original returns.
- File to Claim Missed Credits:
Take full advantage of the 2022–2024 window.
- Immediate Cash Impact:
Refunds for credits are available through a proper amendment strategy, allowing for cash planning for 2025-2026.
Businesses with Over $31M AAGR
If You Amortized R&D (2022–2024):
- Catch-Up Filing Relief:
Recoup missed deductions starting in 2025.
- Tax Burden Correction:
Address inflated taxable income from prior years to reduce tax and increase refunds.
- Pending IRS Guidance:
Certain election rules still to be finalized for strategic planning of 2025-2026.
If You Did Not Amortize:
- Benefit From Changes:
Immediate expensing resumes in 2025—plan to optimize timing.
- Eliminate Future Complexity:
Multi-year amortization ends, simplifying your filings.
- Stay Tuned for Guidance:
Amendment options may open pending additional IRS clarification.
Let’s assess what these changes specifically mean for your business
Why This Matters Now
Without action, your business may leave significant cash on the table. Modeling the impact of the Section 174 fix—both retrospectively and prospectively—can reduce your tax liability, unlock refunds, and optimize future filings.
This is not a one-size-fits-all opportunity. Revenue thresholds, past compliance positions, and R&D spend must all be considered to determine the right path forward.
Key Deadlines:
- Mid-September 2025:
Final deadline to amend 2021 returns to claim the R&D credit. - July 4, 2026:
Final deadline to amend 2022–2024 returns under the new law. - 2025 Filing Season:
First year to apply new treatment going forward.
alliant’s Role in Raising Awareness on Section 174
alliant has been instrumental in raising awareness about Section 174’s devastating impact on American businesses. Our Sr. Vice President and former four-term U.S. Representative from NY Rick Lazio and alliant National Director and former Sr. Counsel to Senate Finance Committee Dean Zerbe, shared real-life client testimonials and case studies to effectively communicate business concerns to lawmakers and drive meaningful discussions around reform.
Section 174 Amortization Ends with New Congressional Fix
- Specialists with industry proficiency across every sub-industry
- Hundreds of engineers who understand your business firsthand
- Two decades of helping over 30,000 businesses with tax incentives
- Direct IRS insight from 6 former commissioners—something no other firm offers
Our unique combination of real-world experience, policy expertise, and direct access to former IRS leadership doesn’t just help us understand Section 174’s impact—we actively work to give a voice to SMB’s and implement change.
Distinguished Former Officials and Policy Leaders
Our advisory team of former IRS commissioners, congressmen, and policymakers provides exclusive insight into tax policy development, regulatory interpretation, and legislative strategy, ensuring our clients receive guidance that’s both compliant and strategically advantageous.
Featured Articles on Section 174
July 9, 2025 | Press Releases
FAQ's
1. What is Section 174?
Section 174 governs how U.S. businesses must treat R&D (Research & Experimental) expenditures for tax purposes. It determines whether these expenditures are immediately deductible or must be amortized over several years.
2. What changed with the new law?
Congress permanently reversed the TCJA-era amortization rules. Beginning in 2025, businesses can deduct R&D costs in the year incurred. The law also provides small businesses with retroactive opportunities to reclaim deductions from tax years 2022–2024.
3. Can I still claim R&D credits for past years?
Yes. In fact, the new law makes it safer and more beneficial to pursue the Section 41 credit in conjunction with newly restored domestic research expenditure deductions.
4. I didn’t amortize my 174 expenses in prior years. What now?
Businesses under $31M AAGR can file amended returns and access refunds . Larger businesses may need to wait for additional IRS guidance.
5. What industries qualify?
Section 174 impacts any company with R&D spend—including software, manufacturing, agriculture, biotech, and engineering. If you’re investing in product, process, or technology innovation, this likely affects you.