The July 6th R&D Deadline: What You Need To Know
A Law That Changed the Rules – With a Countdown Clock Attached
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. One of the most significant provisions was the restoration of immediate expensing for domestic research and experimental (R&E) expenditures under the newly introduced Internal Revenue Code (IRC) §174A.
For tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (TCJA) required businesses to amortize R&D costs over five years rather than deducting them in the year they were incurred. For a company that spent $100,000 on qualifying R&D in 2022, that meant deducting just $10,000 that year, which was a 90% reduction in first-year deductibility. This was particularly impactful for small businesses.
The OBBBA eliminated that amortization requirement going forward, but the legislation went even further: for qualifying small businesses, it also opened a retroactive window to amend prior tax years and reclaim those deferred deductions.
That retroactive window closes on July 6, 2026. After that date, the opportunity will no longer exist.
What the July 6 Deadline Actually Means
Under Rev. Proc 2026-27, qualifying small business have until July 6, 2026, to file amended returns for tax years 2022 through 2024, and elect to deduct rather than amortize their previously capitalized R&E expenses.
After that date, the retroactive opportunity disappears. Any R&D investment from 2022 to 2024 that was amortized under the old rules stays amortized. For businesses that were spending heavily on qualifying R&D during those years, the difference between acting and waiting could be a significant amount of recoverable tax dollars.
Who Qualifies for the Retroactive Election?
Eligibility is tied to the small business gross receipts test under IRC §448(c). If your average annual gross receipts over the preceding three tax years do not exceed the applicable threshold ($31M in 2025), you may qualify. The election requires amending all three years together, meaning you cannot elect for a single year in isolation. Each amended return must include a statement confirming small business status and the nature of the election.
Does Your Business Qualify for the R&D Tax Credit?
The R&D tax credit under IRC §41 is separate from the Section 174A expensing relief — and it operates alongside it. Qualifying businesses can claim a credit worth approximately 10% of qualifying wages, contractor costs, materials, and software expenses tied to eligible research activities. The IRS applies a four-part test:
1. The activity must be aimed at developing or improving a product, process, formula, technique, or software
2. The work must rely on principles of engineering, physical or biological science, or computer science
3. There must be genuine technical uncertainty about how to achieve the intended result
4. The activity must involve a process of experimentation: testing alternatives, evaluating approaches, iterating through failures
The test does not require a dedicated research lab, PhD level staff, or formal R&D departments and/or programs. If your team is solving technical problems, testing approaches, and refining outcomes, they may be doing qualified research, no matter what you may be calling it.
Some questions to consider:
- Do your employees perform technical work that involves trial and error?
- Does your team test, prototype, or iterate before arriving at a final result?
- Are there projects where the outcome was uncertain at the start?
- Have you worked to improve efficiencies within your processes?
- Do you develop or adapt software, tools, equipment, or processes in-house?
If you answer yes to any of these, it’s worth investigating whether your company qualifies.
What Costs Can Be Claimed?
- Employee wages for time spent performing, directly supervising, or directly supporting qualifying research activities.
- Supply costs, including raw materials and test components consumed or destroyed during research.
- 65% of amounts paid to third-party contractors performing qualifying research in the U.S.
- Cloud computing tied to qualifying activities, including software development costs
Real-World Impact: What the Numbers Look Like
A manufacturing business with 20 employees would typically receive around $280,000 in R&D tax credits across the three-year retroactive window. That is real capital, returned as a credit against taxes owed, or in some cases, as a cash refund.
Other successful claims from our client base include:
• A software and cybersecurity firm that developed proprietary threat detection tools received $441,000 in R&D credits.
• A wean-to-finish pig farming operation that formulated and tested experimental animal diets obtained $2.9M in credits.
• A custom manufacturing firm that designed and tested new custom-engineered equipment received $95,000 in credits.
• A supplement manufacturer increased its annual claim from $120,000 to over $1.12 million after RK Partners identified overlooked qualifying activities.
Documentation: Start Now, Even Informally
The R&D tax credit is not self-executing. The IRS requires documentation to support a claim, though this shouldn’t feel daunting. An expert can help you compile the information you need for your claim in a compliant manner. Some of the documentation that may be needed includes:
- The technical problem or uncertainty you team was trying to resolve.
- Which employees worked on qualifying activities and how much of their time was spent on them.
- What was tested, what the results were, and how those results informed next steps.
- The costs, including wages, supplies, and contract payments, tied to qualifying work.
What to Do Before July 6
1. Confirm whether your average annual receipts fall under the $31M threshold.
2. Pull expense records for 2022, 2023, and 2024, including payroll, contractor payments, and supply costs.
3. Identify whether R&E costs were amortized on those returns.
4. Assess which activities from those years might qualify under the four-part test.
5. Determine your applicable statute of limitations for 2022 specifically.
6. File amended returns on or before July 6, 2026, or earlier if your statute closes sooner.
How RK Partners Can Help
RK Partners is an exclusively R&D tax credit-focused firm. Our team of tax attorneys, CPAs, and technical consultants manages the entire process, from identifying qualifying activities and QREs, to helping build your documentation, to preparing and filing amended returns built to withstand IRS scrutiny.
We have a 100% success rate with zero audits across our client base. We routinely find credits that a company were unaware qualified, or even found additional credits that were previously missed by another CPA or accountant. If you’re under $31M in gross receipts and performing any form of technical problem-solving, development, or process improvement, there’s a strong possibility that a meaningful credit exists for you.
Contact RK Partners for a complimentary assessment. July 6 is approaching quickly, so calling as early as possible is imperative.
