Planning Priorities: R&D expense deductions, R&D tax credits, and substantiation requirements.
2026 Legislative Emphasis: Restoration of immediate expensing for qualifying domestic research expenditures, special treatment of foreign research costs, and transitional rules affecting previously capitalized expenditures.
- Identify qualifying research activities performed during 2026.
- Revise accounting system to categorize and segregate by type of expenditure
- Review accounting system for proper classification of Qualified Research Expenditures (QRE’s) for qualified research wages, supplies, and eligible contract research expenses.
- Categorize domestic research expenditures and foreign research expenditures separately since subject to different treatment.
- Document technical uncertainty, experimentation, and the business purpose of qualifying projects.
- Determine eligibility for the federal research and development tax credit.
- Review eligibility for immediate deduction of qualifying domestic research and experimental expenditures.
- Evaluate transition rules and elections related to previously capitalized research costs.
- Evaluate the alternative simplified credit method versus the regular research credit method.
- Review payroll tax credit opportunities for qualifying small businesses.
- Evaluate state research tax credits and related documentation requirements.
- Review the interaction between research credits and deductible research expenditures.
- Assess potential Section 174, Section 174A, and Section 41 filing and election requirements.