The Internal Revenue Service (IRS) has released new guidance clarifying how taxpayers can take advantage of restored full expensing for research and development (R&D) costs under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

Under the Tax Cuts and Jobs Act of 2017, businesses were required to amortize R&D costs over five years beginning in 2022, rather than deducting them in the year they were incurred. The OBBBA reverses this change, allowing businesses to once again fully expense domestic research and experimental expenditures in the year they are paid or incurred.

To support implementation, the IRS published Revenue Procedure 2025-28, which outlines how taxpayers can make accounting method changes, file amended or superseding returns, and make relevant elections under the new rules. The procedure modifies earlier guidance (Revenue Procedure 2025-23) and establishes transitional rules for taxpayers navigating the switch from amortization back to immediate expensing.

Specifically, the guidance details how partnerships, S corporations, C corporations, individuals, estates, trusts, and tax-exempt organizations can apply these changes. It also outlines procedures for making elections under Section 174A(c) to amortize domestic R&D costs for tax years beginning after December 31, 2024, in situations where amortization remains preferable.

Importantly, the IRS is providing additional time for affected taxpayers to comply. For tax years beginning in 2024 and ending before September 15, 2025—where the original return deadline was also before that date—the revenue procedure grants an automatic extension of time to file superseding tax or information returns under the updated rules.

These changes are part of a broader effort to align the tax code with incentives for domestic innovation. Restoring full expensing may benefit businesses investing in new products, technology, or systems by providing immediate tax relief and improved cash flow.

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