IRB Provides Clarity on R&E Expenditures Procedure and Republishes Inflation Adjustments for Clean Energy Credit

The Internal Revenue Service ("IRS") published Internal Revenue Bulletin 2025-38 on September 15, 2025 to provide a synopsis of recently published Revenue Procedure 2025-28 and Notice 2025-38. In light of changes made to the Internal Revenue Code in the One Big Beautiful Bill Act, Revenue Procedure 2025-38 instructs taxpayers on how to make various elections, file amended returns or change accounting methods for certain research and experimental expenditures. 

Additionally, the Revenue Procedure provides transitional rules, modifies a prior Revenue Procedure regarding automatic changes in accounting method for research or experimental expenditures, and grants an extension of time for most taxpayers to file a superseding 2024 federal income tax return. The Revenue Procedure was necessary after the OBBBA created Section 174A, which authorized taxpayers to take immediate deductions for research and experimental expenditures going back to 2022, but left questions unanswered around implementation.

To make a retroactive election to claim research and experimental expenditures for tax years 2022 through 2024, taxpayers must file an original or amended tax return or an Administrative Adjustment Request which includes a statement invoking the election provided for under Rev. Proc. 2025-28. The deadline to make such election is the earlier of July 6, 2026 or the refund statute of limitations for the relevant tax year. Similar guidance applies for Section 280C elections for reduced research credits. 

Taxpayers may also elect for tax periods after December 31, 2024 to maintain the capitalize and amortize regime for deductible research and expenditure costs by including a statement in an original tax return citing the relevant portion of Rev. Proc. 2025-28. The election may provide planning flexibility where NOLs, credit carryforwards, or other tax attributes may make amortization more advantageous.  Finally, taxpayers with a fiscal year beginning in 2024 and ending before Sept. 15, 2025, who filed on time without extension, get an extra six months to file a superseding return if the changes relate to research and experimental expenditures or automatic change of accounting methods.

Notice 2025-38 republishes the inflation adjustment factor and applicable amounts for 2025 for the clean electricity production credit allowable under Section 45Y of the Internal Revenue Code. Section 45Y provides a credit for electricity produced at qualified facilities in the U.S. or its possessions. Section 45Y(c)(2) requires the Secretary of the Treasury to determine and publish in the Federal Register each calendar year the inflation adjustment factor for such calendar year. For 2025, that factor was published on August 25, 2025 in 90 FR 41477. 

For further questions regarding this update, contact Liskow attorneys Caroline Lafourcade and Kevin Naccari and visit our Tax practice page.