Beyond Small Business Relief: What Rev. Proc. 2025-28 Means for Taxpayers and CPAs

By David Seibel, EA

When the IRS released Revenue Procedure 2025-28, much of the initial focus was on its clarification for eligible small businesses electing to expense their 2022-24 Section 174A research or experimental (R&E) expenditures. Specifically, the guidance confirmed that 2024 returns on extension may fully deduct R&E expenses without requiring an amended return.

But the guidance extends well beyond that single issue. For CPA firms, two additional areas carry significant implications as you plan with clients: the treatment of Section 280C elections and the option for accelerated deductions in 2025 and 2026.

Section 280C Guidance in Rev. Proc. 2025-28

Revenue Procedure 2025-28 confirms that the Section 280C rules depend on whether taxpayers are amortizing under Section 174 as amended by the Tax Cuts and Jobs Act (TCJA) or fully expensing their Section 174A costs:

2022-24 (TCJA 280C rules): Under the TCJA, Section 280C was modified so that taxpayers had to either:

Reduce their R&E capital account by the amount the R&D Credit exceeded the R&E deductions for the year, or
Elect a reduced credit under Section 280C.

Because of the amortization rules in place during these years, making the 280C election to take a reduced credit was often not advantageous.

2025 and forward (original 280C rules reinstated): With R&D expensing restored, Section 280C reverts to its original treatment. Taxpayers who claim the R&D Credit must choose between:

Taking the full credit and reducing their R&E deduction by the same amount, or
Electing 280C which provides a reduced credit but avoids any adjustment to the deduction. For many taxpayers, making the 280C election will once again be the more advantageous option.

Small business exception: Eligible taxpayers retroactively expensing 2022-24 costs under the One Big Beautiful Bill Act (OBBBA) are subject to the original 280C rules, but they are allowed to make a late 280C election via a simple attached statement. They may also revoke a 280C election that was made during those years.

This nuance is critical: firms helping clients evaluate whether to amend 2022-24 returns must also assess whether making (or revoking) a 280C election strengthens their overall tax position.

Accelerated Deduction Options for Section 174 Expenses

For taxpayers not electing the small business option, Revenue Procedure 2025-28 outlines how deductions for remaining unamortized 174 costs from 2022-24 can be accelerated:

Deduct the balance in full in 2025, or
Evenly spread the deduction over 2025 and 2026.

Importantly, this too can be accomplished with a statement in lieu of Form 3115, reducing administrative burdens. This creates a planning opportunity for taxpayers who don’t qualify under the $31 million gross receipts threshold or don’t want to amend returns but still want relief from multi-year amortization.

Strategic Tax Planning: Amending Returns vs. Accelerating Deductions

The release of Revenue Procedure 2025-28 puts CPAs in the driver’s seat when advising clients on R&D expensing strategy. Key considerations include:

Amend vs. Accelerate: Does it make more sense to amend 2022-24 returns under the small business election, or to take the accelerated deduction beginning in 2025?
280C Elections: Will making a late 280C election or revoking an existing 280C election improve your client’s tax position?
Refund Timing: Is your client better served by pursuing refunds through amendments, or waiting to capture accelerated deductions in 2025?
State and Ownership Factors: Do shareholder changes, state conformity, or refund delays make one path more attractive than another?

Key Takeaways for CPA Firms on Section 174 Expensing

Revenue Procedure 2025-28 provides more than just relief for small businesses – it reshapes the planning landscape for all taxpayers with R&E costs. For CPAs, the challenge is no longer what the law requires, but what strategy makes the most sense for each client.