The IRS updated its FAQ website to announce it is scaling back requirements for Research Credit refund claims on amended returns filed after June 18, 2024. These requirements were originally imposed by Chief Counsel Memorandum 20214101F (CCM) issued in September 2021. Under the guidance of the CCM, taxpayers were required to provide supplemental information to the tax return on a research credit refund claim. The CCM required that the taxpayer identify each business component to which the claim relates, the qualified activities for that component, all individuals who performed said activities, and the information those individuals sought to discover. This June 2024 update removes the requirement to disclose the individuals’ names and the information they sought to discover. The other reporting requirements under the CCM remain in effect. Also, the information may still be requested under examination as it remains pertinent to the research credit claim itself. 

Takeaways

• These changes will likely reduce administrative backlog for subsequent refund claims. 
• The IRS has faced increased public scrutiny around refund claims in the first half of 2024, including tax refund delays and litigation over COVID-related tax credits. 
• The IRS has also issued proposed updates to Form 6765, the form used to claim the Research Credit, which would require information similar to the CCM mandate be disclosed on all research credit claims (not just retroactive claims).
• The CCM cites statutes relevant to both research credit claims and general refund claims as the basis for requiring supplemental disclosures. Taxpayers should monitor the evolving treatment of research credit claims as it may have broader implications for claiming other tax credits, elections, and deductions. 

What does CohnReznick think?

Taxpayers should review the timing of their research credit claims to determine which IRS guidance applies and capture relevant project, cost, and calculation records regardless of timing.

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