The IRS has issued temporary and proposed regulations allowing taxpayers that did not claim a research and development credit on a timely filed return (including extensions) to elect the alternative simplified credit ("ASC") on an amended return. Under previous regulations, an election to use the ASC could not be made or revoked on an amended return.
A research and development credit can be claimed for qualifying expenses one of three ways. The regular credit provides an incremental tax credit for increasing research activities and is computed based on a percentage of a taxpayer's qualified research expenses above a base amount. The alternative incremental credit and the alternative simplified credit were created to provide taxpayers with a simpler method of computation since substantiating expenditures and costs for the base period under the regular credit can be costly, difficult and time consuming. In many instances, the taxpayer claiming the credit needs additional time to determine which method is most advantageous and therefore cannot make the election by the due date of the return.
The temporary and proposed regulations are intended for taxpayers who did not claim any credit on the original return and do not apply if the taxpayer previously claimed a research and development credit under a different method. The new regulations apply to tax years ending on or after June 3, 2014. For tax years ending before June 3, 2014, an amended return may be filed claiming the ASC provided the statute of limitations has not expired.