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June 4, 2014

IRS Amends Regs to Allow Alternative Research Credit Election on Amended Returns (article)

The IRS has amended Reg. §1.41-9(b)(2) by removing a restriction that prevents a taxpayer from making an election on an amended return to compute the research credit using the alternative simplified credit (ASC) computational method described in Code Sec. 41(c)(5). A temporary regulation is added to provide that the ASC election for a tax year may be made on an amended return provided that the credit for that tax year was not previously claimed on an original or amended return. In addition, a member of a controlled group may not make an ASC election for a tax year on an amended return if any member of the controlled group previously claimed the research credit for that tax year using a method other than the ASC method on an original or amended return.

The IRS made these changes in response to practitioner comments that the information necessary to determine whether to make the ASC election is difficult to obtain by the due date of the original return.

The regulations apply to elections with respect to tax years ending on or after June 2, 2014. A taxpayer may apply the regulations to a tax year ending prior to June 2, 2014, if the taxpayer makes the ASC election before the period of limitations for assessment of tax expires for that tax year.

The text of the temporary regulations also serves as the text of proposed regulations.

The IRS requests comments on all aspects of the proposed regulations. A public hearing will be scheduled if requested in writing by any person that timely submits written comments.

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