Tax Planning
Retroactively Leveraging Research Expenses: What Small Businesses Must Do by July 6, 2026
New changes to research & experimental (R&E) expense rules under the One, Big, Beautiful Bill allow many small businesses to make retroactive elections—don’t miss the July deadline.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What’s Changed with R&E Expenses
The One, Big, Beautiful Bill (OBBB) significantly altered how domestic and foreign research & experimental (R&E) expenses are deducted. If your small business incurred qualifying expenses for tax years beginning after December 31, 2021, and before January 1, 2025, you might have **election opportunities**, amendments rights, and accounting method changes reflecting the new rules. ([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))
## Who Qualifies
To take advantage of the retroactive R&E rules, your small business must meet both criteria:
- **Gross receipts test**: Your business must meet the IRC § 448(c) revenue limit for small business gross receipts. ([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))
- **R&E activity not flagged as a tax shelter**: You must not be classified under IRC § 448(d)(3) or Treas. § 1.448-2(b)(2) as a tax shelter. ([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))
## Actions You Should Take by July 6, 2026
Here's what eligible businesses need to do:
| Action | Why It Matters | How to Do It |
|---|---|---|
| File amended returns or AARs | To elect the new treatment for prior years under OBBB you must amend or use Administrative Adjustment Requests. | Attach statements and amend Forms 1120, 1065, or respective return forms. Note: the **earlier of the July 6, 2026 deadline or normal refund claim deadline** applies. ([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)) |
| Review accounting method | You may need to change how you report R&E expenses going forward to reflect the new rules. | Consult a tax professional; file any required accounting method change requests. |
| Gather documentation | To defend your election and avoid IRS challenges. | Maintain detailed records of R&E expenses, gross receipts, and any tax shelter history. |
## Example
*Imagine a small SaaS business, DevTech, that incurred $150,000 in R&E expenses during 2022, with $800,000 gross receipts that year.*
- Under the old rules, DevTech amortized domestic R&E over 5 years and foreign over 15 years.
- Under OBBB, DevTech can **retroactively elect new deduction treatment**, filing amended returns by July 6, 2026, to deduct domestic R&E more favorably. They may also change accounting method starting 2025 to avoid future complications. |
## Risks of Missing the Deadline
- Without making the election by **July 6, 2026**, or before the refund statute expiration, your business **loses retroactive treatment** for those years.
- Understating taxable income or misfiling may lead to penalties or disallowance of deductions.
## Actionable Tips
- Use tax software or a tax advisor to mark this date.
- Request estimates from your preparer on tax savings vs costs of amending.
- Track document deadlines carefully—mail vs electronic submissions.
**Bottom line**: If your business qualifies, don’t wait—make the retroactive R&E election before July 6, 2026. The savings may be significant under the OBBB rules. No excuses.