On June 2, 2014, the IRS announced changes to the Research and Development Tax Credit allowing the Alternative Simplified Credit (ASC) calculation methodology to be utilized on amended returns.
This surprising, beneficial change is an important development for taxpayers that have not previously taken advantage of the credit. Historical documentation requirements many times deterred taxpayers from pursuing an R&D credit claim on an amended return. The ASC method requires much less historical information and documentation than the regular R&D calculation methodology. The new regulations will now provide taxpayers with options for making the claim on amended returns.
Prior to this amendment, which is effective immediately, taxpayers were prevented from making an election on an amended return to calculate the R&D research credit using the ASC method. The Treasury’s announcement now allows taxpayers the opportunity to use ASC on amended returns in cases where the credit was not previously claimed on a return. Prior to this announcement, taxpayers could only apply the ASC method on a timely filed (including extensions) original return for the taxable year in which the election applied.
Some other restrictions to the use of the credit including any taxpayers that previously claimed, on an original or extended return, an R&D (Section 41) credit for increasing research activities may not make the ASC election for that tax year on an amended return. Additionally, taxpayers that are part of a controlled group cannot make an ASC election on an amended return if any members of that controlled group filed for the credit on an originally filed, including extensions, timely filed tax return using a method other than the ASC.
Should you have any questions about R&D and its availability on amended returns, we urge you to contact your Marcum Tax Professional.