Transition period extended to perfect research credit refund claims

On October 30, 2023, the IRS extended the grace period for which taxpayers are provided 45 days to perfect a research credit claim for refund through January 10, 2025.

The IRS also updated the list of FAQs on its website (Internal Revenue Service - FAQs - Research Credit Refund Claims) providing guidance on the process for refund claim submissions. 

Pursuant to Chief Counsel Memorandum 20214101F, originally released on October 15, 2021, the following is required for all research credit claims for refund:

  1. Identify all business components to which the research credit claim relates.
  2. For each business component, identify:
    1. all research activities performed;
    2. the individuals who performed these research activities; and
    3. the information each individual sought to discover.
  3. Provide the total qualified research expenses the taxpayer is claiming for employee wages, supplies, and contract research for the claim, which may be done through the filing of Form 6765.

The taxpayer must also provide a declaration under penalty of perjury (typically done as a signature on the amended return) stating that all facts are accurate. 

In addition, the taxpayer should provide all facts through a written statement rather than through a research credit study, although the IRS would permit a study so long as the exact pages are provided to direct the IRS to the requisite information, rather than the study being a document dump.

If the entity filing the claim for refund is a pass-through entity (e.g., partnership or S Corporation), then the required information must be included in both the entity tax return and the individual’s tax return claiming the refund (the partner, shareholder, or member).

Mazars’ insight

The IRS also recently released a draft version of proposed changes to Form 6765.  Many of the proposed changes incorporate the required information required from the Chief Counsel Memorandum. It appears that the IRS may be attempting to obtain all of this information with every research credit claim, whether timely filed or through an amended return.

Please contact your Mazars professional for additional information.

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.

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