Washington, D.C. (February 20, 2026) – In a letter sent to the Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) recommends that Treasury and the IRS issue guidance, through modifications to Rev. Proc. 2025-28 and/or other published guidance regarding the capitalization and amortization of domestic R&E under section 174A(c).
The AICPA recommends the IRS:
Issue guidance through modifications to Rev. Proc. 2025-28 and/or other published guidance, specifying that the capitalization and amortization election under section 174A(c) is an election applied on a project-by-project basis for domestic R&E paid or incurred in the taxable year of election and subsequent taxable years consistent with section 174 and Treas. Reg. §1.174-4 prior to amendment by the TCJA.
Give taxpayers the option to treat the election under section 174A(c) as a yearly election applied to domestic R&E paid or incurred in the taxable year of election only.
Issue guidance, perhaps as a safe harbor, providing a simplified methodology of determining the month in which the taxpayer first realizes benefits from the domestic R&E based on the assumption that the month in which the taxpayer first realizes benefits is the mid-point of the taxable year in which such expenditures are paid or incurred.
Issue guidance providing that an election to capitalize and amortize domestic R&E under section 174A(c) is a method of accounting with respect to the specified domestic R&E paid or incurred during the taxable year of election subject to the election, consistent with section 174 and Treas. Reg. §1.174-4 prior to the amendment by the TCJA.
Under the Tax Cuts and Jobs Act (TCJA), businesses were required—starting in 2022—to capitalize R&E costs and amortize them over 5 years for domestic research or 15 years for foreign research. H.R. 1 legislation reversed part of this rule by restoring the option to immediately deduct domestic R&E expenses, effective for tax years beginning after December 31, 2024.
“There is conflicting language in Section 6 of Rev. Proc. 2025-28 which has led to varying interpretations of the election under section 174A(c) as being either a method of accounting or a taxable year election,” said Reema Patel, Senior Manager for Tax Policy & Advocacy for the AICPA. “The AICPA strongly believes that allowing taxpayers to either make the election under section 174A(c) on a project-by-project basis or on a taxable-year basis will appropriately balance flexibility with administrability. Tax practitioners also need clarification on the guidance as they prepare their tax returns.”
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with 397,000 members and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education, and consulting. A founding member of the Association of International Certified Professional Accountants, the AICPA sets ethical standards for the profession, attestation standards, and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state, and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, partners across the profession to build future talent, and drives continuing education to advance the vitality, relevance, and quality of the profession.
###
Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com