The Request
The AICPA sent a letter to Treasury and the IRS on 19 February 2026 requesting modifications to Revenue Procedure 2025-28. The issue: conflicting language about whether the Section 174A(c) election to capitalise and amortise domestic research and experimentation costs is a per-year decision or a permanent accounting method change.
This matters because the One Big Beautiful Bill Act restored immediate expensing for domestic R&E costs starting in tax years after 31 December 2024. But businesses can elect to capitalise and amortise instead under Section 174A(c). Nobody's quite sure how that election actually works.
The Confusion
Rev. Proc. 2025-28, issued last August, says the election applies to expenditures "paid or incurred in the taxable year." That sounds like an annual choice. But it also says the method "must be adhered to" for all subsequent years unless the Commissioner approves a change. That sounds like a permanent accounting method.
Cheri Freeh, chair of the AICPA Tax Executive Committee, laid out the problem: if a taxpayer elects to capitalise 2026 R&E over 72 months, does that lock in the approach for 2027 and beyond? Or does it just mean you finish amortising the 2026 costs whilst making a fresh decision each year?
The AICPA wants three things: confirmation that elections can be made project-by-project each year (like pre-2017 rules), a safe harbour assuming benefits realise at the tax year midpoint, and explicit confirmation that capitalisation elections are accounting method changes.
Why It Matters Now
Qualified small businesses can retroactively apply the new rules and claim refunds for prior years. Their election deadline is 6 July 2026 or when the refund statute expires, whichever comes first.
Foreign R&E expenditures still get capitalised over 15 years under the old Section 174 rules. The domestic/foreign split requires separate tracking, which makes the election mechanics even more consequential.
Treasury's response will shape 2024 amended returns and 2025 filings across tech, pharma, and manufacturing sectors. Practitioners are waiting.