Beyond Small Business Relief: What Rev. Proc. 2025-28 Means for Taxpayers and CPAs

With the IRS recently granting an extra year for compliance with Section G project-level reporting requirements, many taxpayers and CPAs are already rethinking their R&D documentation strategies. That extension was significant, but it’s not the only change reshaping tax planning this year.

When the IRS released Revenue Procedure 2025-28 on August 28, 2025, much of the initial focus was on its clarification for eligible small businesses electing to expense their 2022–2024 Section 174A research or experimental (R&E) expenditures. Specifically, the guidance confirmed that 2024 returns on extension may fully deduct R&E expenses for that year instead of filing the 2024 return and then amending — a point we addressed in an earlier blog. But for CPA firms advising clients, the implications extend well beyond that single issue.

Rev. Proc. 2025-28 impacts three areas of planning:

1. 1. the small business election pathway,
   2. Section 280C elections, and
   3. accelerated deduction options for 2025 and 2026.

Small Business Election Pathway

Revenue Procedure 2025-28 provided two pathways for eligible taxpayers to elect the small business provision under the One Big Beautiful Bill (OBBB).  Under Section 3 of the Revenue Procedure, taxpayers electing the small business provision can retroactively claim their Section 174A expenses on the 2022 through 2024 tax returns.  While 2022 and 2023 would need to be amended under Section 3, taxpayers that have yet to file their 2024 return can fully expense the 174A costs associated with that year on the originally filed return.

The other option allows eligible taxpayers to make the small business election without the need to amend the 2022 and 2023 returns.  Under Section 7 of the Revenue Procedure, an eligible taxpayer may make the small business election by attaching a simplified statement in lieu of a Form 3115 on their 2024 originally filed return. While the revenue procedure does not expressly reference a 481(a) adjustment, the IRS Office of Associate Chief Counsel has informally confirmed that taxpayers may use a 481(a) adjustment to capture prior-year amounts in 2024. This approach provides greater flexibility and allows clients to realize the benefits of these deductions in 2024 without the administrative burden of amending prior returns.

Although the 9/15 deadline has passed, taxpayers who have not filed their 2024 original return, including C corps and fiscal-year filers, can still adopt the method change for 2024. For eligible small businesses that have already filed their 2024 returns, the option remains to amend and make the small business election across 2022–2024 under Section 3. These amended returns must be filed by the earlier of the statute date of the return or July 6, 2026.

Section 280C Guidance

Rev. Proc. 2025-28 confirms that the Section 280C rules depend on whether taxpayers are amortizing under Section 174 as amended by the TCJA or fully expensing their Section 174A costs:

• 2022–2024 (TCJA 280C rules): Taxpayers were required to either reduce their R&E capital account by the amount the R&D Credit exceeded deductions for the year, or elect a reduced credit under Section 280C. Because of amortization, electing the reduced credit was often not advantageous.
• 2025 and forward (original 280C rules reinstated): With R&D expensing restored, taxpayers claiming the R&D Credit must either reduce their R&E deduction by the credit amount or elect 280C to take a reduced credit without deduction adjustments. For many clients, electing 280C will once again be the more advantageous option.
• Small business exception: Eligible taxpayers retroactively expensing 2022–2024 costs under the OBBB are subject to the original 280C rules, but they may make a late 280C election via a simple attached statement. They may also revoke an election made during those years. If they are making a change of accounting method under Section 7, they will need to take the 280C rules into account in the 481(a) adjustment. Careful coordination between the R&E expensing rules and R&D Credit positions is critical to avoid misstatements or duplicate benefits.

Accelerated Deduction Options for 2025-2026

For taxpayers not electing the small business option, Rev. Proc. 2025-28 provides relief by allowing unamortized Section 174 costs from 2022–2024 to be accelerated:

• Deduct the balance in full in 2025, or
• Spread the deduction evenly over 2025 and 2026.

This can also be accomplished with a statement in lieu of Form 3115, reducing administrative burdens. For clients above the $31 million gross receipts threshold or those who don’t want to amend returns, this creates a planning opportunity to ease the impact of multi-year amortization.

Strategic Considerations for CPAs

With these options on the table, CPAs advising clients must weigh several factors:

• Amend vs. Accelerate: Does it make more sense to amend 2022–2024 returns under the small business election, or to accelerate deductions starting in 2025?
• 280C Elections: Will making a late 280C election or revoking an existing one strengthen your client’s tax position?
• Refund Timing: Is a client better served by pursuing refunds through amendments or waiting to capture accelerated deductions in 2025?
• State and Ownership Factors: Do shareholder changes, state conformity issues, or refund delays tip the balance toward one strategy?

Key Takeaway

Revenue Procedure 2025-28 provides more than just small business relief — it reshapes the planning landscape for all taxpayers with R&E costs. For CPA firms, the challenge is no longer what the law requires, but what strategy best positions each client.

At McGuire Sponsel, our R&D Tax Credit team is actively modeling these scenarios with CPA firms nationwide. If you’d like a second opinion on whether to amend prior returns, make a 280C election, or plan for accelerated deductions, our team is here to help.