The Internal Revenue Service’s plan to revise a form for the 2024 tax year that would need to be filed by companies seeking research and development tax credits has drawn pushback from the American Institute of Certified Accountants.
In a letter filed during the comment period last fall, the AICPA asserted that the IRS’s proposed revisions to Form 6765, Credit for Increasing Research Activities, conflicts with the intentions of the more than three-decade-old, Reagan-era tax credit that was aimed at reversing “the decline of United States’ competitiveness” and incentivizing companies to make domestic investments.
“Complying with the IRS proposed changes absent recommendations within this letter...will place a material administrative burden on all taxpayers and especially small taxpayers,” the Oct. 30 letter states. “The new requirements are in direct conflict with Congress’ original intent of including the research credit within the Economic Recovery Tax Act of 1981.”
The changes come on the heels of another tax change related to R&D contained in the 2017 Tax Cuts and Jobs Act. Under that change companies can no longer immediately deduct R&D expenses but now amortize and spread them out over five years in domestic cases, according to the Tax Foundation.
“Emotions are high for all taxpayers around research and development as a tax issue,” Shelby Ford, R&D tax managing partner at the public accounting and consulting firm Crowe Global in Chicago who is also chair of the AICPA Research Credit Refund Claims Working Group, said in an interview.
The new asks in the proposed form are “qualitative” in nature whereas the existing form generally asks for more “quantitative” data, such as the dollar size of the credit claim and the salaries of the workers or contractors involved in the research projects, she said. For example, under the proposal companies will have to include a description of each qualifying project.
“The main thread for the AICPA letter is that the tax payers want to comply with the law and they want to comply with information requested but at that level of detail it’s too much,” Ford said, adding that she’s hopeful that many of the AICPA’s recommendations for modifying the new form would be adopted. As it stands, she said smaller companies don’t have the same capacity that larger firms have to handle information needed to file.
For CFOs and finance leaders whose companies could be affected, she advises them to focus on proactive record keeping in the event the additional information is needed.
A spokesperson for the IRS did not immediately respond to a request for comment.
