Washington, D.C. (August 5, 2025) – In a letter submitted to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) submitted comments on the recently enacted section 174A, which addresses the treatment of domestic research and experimental (R&E) expenditures (domestic research costs). The AICPA is urging Treasury and the IRS to issue immediate guidance that would allow eligible small business taxpayers to immediately deduct domestic research costs on their originally filed 2024 federal income tax returns rather than being required to capitalize those amounts.
The AICPA notes that the issue raised in the letter requires immediate consideration as many eligible taxpayers have not yet filed their income tax returns for the 2024 income tax filing period. These taxpayers face uncertainty about whether they can deduct these costs upfront or must capitalize them and later amend their returns. This lack of clarity could lead to unnecessary administrative burdens and compliance risks.
To address this, the AICPA recommends that Treasury and the IRS issue guidance stating the following:
Eligible taxpayers may deduct 2024 domestic research costs on their originally filed 2024 federal income tax returns, provided they include a statement or reference indicating an election under Section 70302(f)(1)(A).
Notwithstanding the deemed election, taxpayers may amend their 2022 and 2023 federal income tax returns to deduct domestic research costs paid or incurred in those years..
If the election has affected a year in which the taxpayer reported a net operating loss (NOL), the taxpayer is permitted to adjust the NOL in the carryforward year(s) instead of amending the original NOL year return.
“Providing the guidance cited in the AICPA’s comment letter allows immediate tax relief to eligible taxpayers and resolves uncertainty for those who may have already deducted 2024 domestic research costs,” says Reema Patel, Senior Manager, AICPA Tax Policy & Advocacy. “This guidance benefits sound tax administration for impacted taxpayers, practitioners, and the IRS and we urge Treasury to act immediately to provide taxpayers with certainty and allow them to meet their tax obligations with minimal confusion.”
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.
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Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com