Election of Alternative Simplified Research Credit Now Allowed on Amended Returns

The research credit is an incentive for companies conducting activities such as the design, development or improvement of products or processes in the United States.

The Alterative Simplified Credit ("ASC") is an elective method of computing the research credit. In general, a taxpayer that elects to use the ASC is allowed a credit equal to 14% of the amount by which its qualified research expenses (QREs) for the year exceed 50% of its average QREs for the three preceding tax years. An electing taxpayer that does not have any QREs in one or more of the three preceding tax years is allowed an ASC equal to 6% of its QREs for the tax year.

In 2011, the Internal Revenue Service (IRS) issued regulations that did not permit taxpayers to elect the ASC method on an amended return. However, the IRS recently issued temporary regulations (T.D. 9666) permitting taxpayers to elect the ASC method on an amended return as long as the taxpayer (or a member of its controlled group) did not make an election to use any other method of calculating the research credit on an original or amended return for that year.

By allowing taxpayers the ability to claim the ASC on an amended return, the new regulations provide taxpayers with additional time and flexibility in determining whether to utilize the ASC method to calculate their research credit.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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