Supersonic Flight is Back on the Table, and R&D Tax Credits Can Help Fund It
On July 2, 2026, the FAA published a proposed rule that would repeal the long-standing ban on civil supersonic flight over land and replace it with a performance-based noise standard. If successful, this proposal is expected to accelerate development across the entire supersonic supply chain, including engines, airframes, composites, avionics, and flight control software.
Much of this development work may qualify for the federal R&D tax credit under IRC §41. If your company is designing, testing, or improving technology connected to this next generation of aircraft, the credit can help fund the work.
The Proposal, and What It Means for Flight
Since 1973, federal regulations at 14 CFR §91.817 have prohibited civil aircraft from flying faster than Mach 1 over the United States without special authorization. The rule was written to protect the public from exposure to sonic booms, and it effectively halted commercial supersonic development in the US for decades.
In June 2025, Executive Order 14304 - Leading the World in Supersonic Flight directed the FAA to take the necessary steps to repeal the overland prohibition and establish and interim noise-based certification standard. This led the FAA to publish a notice of proposed rulemaking titled Enabling Supersonic Overland Flight, stating that the general ban is outdated and no longer appropriate given technological and flight technique advances that prevent sonic booms from reaching land.
Instead of banning speeds, the proposed rule pivots to regulating outcomes. Aircraft would be able to fly supersonic over land if the sonic boom overpressure at the surface does not exceed 0.11 pounds per square foot. As this is a performance-based standard, manufacturers would have flexibility in how to build aircraft: quieter airframe shapes, boom-abatement flight techniques, new avionics, or a combination of these.
While this is currently just a proposed rule, companies are anticipating the direction of air-travel and investing accordingly.
Why This Creates an R&D Wave
A performance standard is a clear engineering challenge. Meeting a 0.11 psf overpressure limit at the surface is a problem that can generate years of qualifying research in many companies, not just the large-scale companies most people are familiar with. Things that must be developed, tested, and proven:
- Propulsion systems that deliver supersonic cruise with acceptable noise and fuel economics.
- Airframe design and materials, including composite structures and shaping that softens or redirects shockwaves.
- Avionics and flight control software that manage boom abatement in real time, accounting for speed, altitude, and atmospheric conditions.
- Testing and instrumentation, from wind tunnel work to flight test programs that measure what reaches the ground.
Every one of these categories flows down to suppliers. Machine shops making tooling for new composite layups, software teams writing and validating control algorithms, instrumentation firms building measurement systems, and materials companies formulating resins and alloys all perform potentially qualifying research and development activities that may qualify for the R&D tax credit.
Where the R&D Tax Credit Comes In
The federal research credit under IRC §41 is a dollar-for-dollar reduction in tax liability for qualified research performed in the United States. To qualify, an activity must meet all four parts of the test under IRC §41(d):
• Permitted Purpose: The activity must be intended to develop or improve the functionality, performance, reliability, or quality of a business component.
• Technological in Nature: The work must rely on engineering, physical or biological science, or computer science principles.
• Technical Uncertainty: The activity must be undertaken to discover information intended to eliminate uncertainty about the capability, method, or appropriate design of the business component.
• Process of Experimentation: Your team must have a process that evaluates alternatives through modeling, simulation, systematic trial and error, or other methods to eliminate uncertainty.
Qualifying expenses generally include wages for employees performing, supervising, or supporting the research, supplies consumed in the work (including prototyping materials), and a portion of payments to US contractors performing research on the business’s behalf.
The Funding Question
Aerospace comes with a unique complication, but one that is navigable. Under IRC §41(d)(4)(H), research that is funded by a grant, contract, or otherwise by another person or governmental entity does not qualify for the credit. Whether the research is funded turns on a fact-intensive analysis of the business’s contracts, focusing on the financial risk of failure and who retains substantial rights in the results of the research.
A company investing its own capital to develop technology for the coming commercial supersonic market, with the intent of owning what it creates, is in a fundamentally different position than one performing research under a cost-reimbursement government contract. Many companies, especially in the aerospace sector, have both types of work, which is why a contract-by-contract review matters, and where R&D tax credit experts can help you navigate these situations.
Startups and Small Suppliers
Some of the most important work in the space is happening at early-stage companies with little or no income-tax liability, but the credit may still have value here. A qualified small business, generally defined as a business with less than $5 million in gross receipts for the credit year and no gross receipts more than five years back, can apply up to $500,000 of the research credit per year against the employer portion of payroll taxes.
Separately, the One Big Beautiful Bill Act restored immediate expensing of domestic research costs under new IRC §174A for tax years beginning after December 31, 2024. Deducting research costs in the year incurred along with claiming the §41 credit meaningfully changes the economics of an R&D-heavy budget for a small business.
Documentation
The IRS is raising the bar on what it expects claimants to show. Beginning with the tax year 2026, most taxpayers claiming the credit need to complete Section G of Form 6765, which means reporting expenses by business component. The Tax Court’s recent decision in George v. Commissioner reinforced the necessity for documentation of activities as well.
While documentation does not need to be highly scientific, for a company ramping up supersonic-related development, keeping track of activities will make the process simpler. Things to consider:
- Record hypotheses, design alternatives, test plans, and results as the work happens.
- Track which employees work on projects so payroll records can be sorted.
- Separate research costs from routine production costs, including prototyping supplies and test materials.
- Keep contracts organized to streamline the funded research analysis.
How RK Partners Can Help
RK Partners prides itself on focusing exclusively on R&D tax credits. Our tax attorneys, CPAs, and consultants work with aerospace companies often to identify qualifying activities, analyze contract terms under the funded research rules, and build documentation. We know what questions to ask your team to ensure we provide your business with a claim that will withstand IRS scrutiny.
If your company is performing activities in response to the unfolding supersonic story, or any potential R&D tax credit qualifying activities, reach out to us. We provide no-risk consultations to determine whether your company may qualify for this tax credit.
