Compliance
Navigating New R&E Expense Rules for Small Businesses in the U.S.
Small businesses must act fast—recent U.S. law changes affect how research & experimental (R&E) expenses are deducted and may require amended returns before upcoming deadlines.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What’s Changed Under the New Law
The **One, Big, Beautiful Bill** (OBBB) enacted changes to how businesses can deduct domestic and foreign Research & Experimental (R&E) expenses. Notably, small businesses can now make **elections** to apply the new rules retroactively for tax years starting after **December 31, 2021**, up to before **January 1, 2025**. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/tax-tips/small-businesses-understand-new-research-expense-rules-and-a-july-6-filing-deadline/2026/06/?utm_source=openai))
## Key Deadlines & What You MUST Do
- **July 6, 2026**: deadline to act. This applies if you're claiming relief for those earlier tax years via either **amended returns** or **Administrative Adjustment Requests (AARs)**. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/tax-tips/small-businesses-understand-new-research-expense-rules-and-a-july-6-filing-deadline/2026/06/?utm_source=openai))
- If your business incurred R&E expenses in 2022–2024, now’s the time to gather statements and review tax returns to determine whether the new rules provide better benefit. You may need to file corrected returns. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/tax-tips/small-businesses-understand-new-research-expense-rules-and-a-july-6-filing-deadline/2026/06/?utm_source=openai))
## How Small Businesses Can Take Action
1. **Calculate both old and new deduction scenarios** – compare what you claimed vs. what you *could* claim under OBBB.
2. **Review form eligibility** – ensure that all relevant costs (labour, materials, contract research etc.) are documented appropriately.
3. **File amended returns or AARs** if necessary, before the deadline.
4. **Work with trusted advisors or CPAs**, to avoid misinterpretation and make sure you get full benefit of deductions. Seeking professional help is especially important under transformed rules.
## Examples in Practice
- *Example A*: A tech startup in California with R&E expenses in 2023 could file an amended 2023 return using new rules to significantly improve its deductions.
- *Example B*: A small manufacturing business with foreign R&E projects may now include those under the domestic rule, if electing properly for pre-2025 years.
## Risks & Considerations
- Ensure documentation meets IRS requirements—poor support may lead to audit adjustments.
- Amending returns may trigger additional state-level filings or adjustments in other tax credits/depreciation schedules.
## Action Plan Summary
- Check whether your business incurred **R&E expenses** in 2022-2024.
- Gather all supporting documentation (contracts, receipts, payroll records).
- Consult tax professionals to assess whether amending is advisable.
- File required amended returns or AARs by **July 6, 2026** to preserve eligibility.
By staying informed and proactive, businesses can fully leverage these changes to improve tax outcomes while staying compliant.