On October 15, 2021, the IRS Office of Chief Counsel published a Chief Counsel Advice Memorandum 20214101F (CCA) that details an updated administrative policy regarding research claims, specifically pertaining to claims for amended returns in previous years. This new memorandum applies to all claims filed on or after January 10, 2022. On January 3, 2022, the IRS provided interim procedural guidance regarding this memorandum in the form of a supplemental memo as well as an FAQ detailing the application of the new requirements for research credit claims.
To support a valid claim, taxpayers must apprise the IRS of the basis for the claim. While this is normally given in a R&D Tax Credit Package, these new guidelines require the validity to be proven at the time of the claim being made in the form of a supplemental document. According to the new guidelines, as well as the January 5th FAQs, each claim must provide five key items of information in order to be a valid claim.
These 5 items are:
The first item is simply a list of all business components, while the fifth item is satisfied by the Form 6765 for each claim.
However, the other 3 items need to be addressed specifically in order to validate a claim. Both the employee information, as well
as the information they sought to discover, can be given in the form of a list, table, or narrative.
In addition to the 5 items, each taxpayer must submit a declaration signed under penalty of perjury verifying that the facts provided
in the documentation are accurate. For many taxpayers, the signatures found on Forms 1040X or 1120X will be sufficient.
For all research credit claims filed between January 10, 2022 and January 9, 2023, taxpayers will have 45 days to perfect a claim that is timely filed, even if the claim does not have the five items of information required. Perfecting a claim is defined as providing this information. If the claim is perfected within the 45 days, the claim will be considered timely filed. The IRS will also notify taxpayers that fail to submit the required information with a Letter 6428. The taxpayer will then have 45 days to submit the required information. After January 9, 2023, all claims must be filed with all five items of information. If the information is not provided, the taxpayer will receive a Letter 6430 and the claim will be rejected.
With the IRS’s newly revised administrative policy as discussed above, taxpayers submitting amended research credit refund claims must be prepared to provide in detail: (1) the grounds upon which a credit or refund is claimed; and (2) the 5 facts sufficient to support the basis for the claim in accordance with the IRS’s new criteria. This must be accompanied by a signed declaration verifying the facts found in the claim. While it is expected that the validity of prior research credit claims will be upheld, taxpayers should consider these new requirements for all future research credit claims.
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