Bulletin No. 2025–38

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2025–38

September 15, 2025

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

INCOME TAX

Rev. Proc. 2025-28, page 393.

Notice 2025-38, page 392.

Revenue Procedure 2025-28 instructs taxpayers on how

to make various elections, file amended returns, or change

accounting methods for certain research and experimental

expenditures as provided under Section 70302 of the One,

Big, Beautiful Bill Act, Public Law 1 19-21, 139 Stat. 72 (July

4, 2025). It also provides transitional rules, modifies Revenue

Procedure 2025-23, List of Automatic Changes, and grants

an extension of time for partnerships, S corporations, C corporations, individuals, estates and trusts, and exempt organizations to file a superseding 2024 Federal income tax return.

Finding Lists begin on page ii.

This notice republishes the inflation adjustment factor and

applicable amounts for calendar year 2025 for the clean

electricity production credit allowable under section 45Y

of the Internal Revenue Code, which were published in the

Federal Register at 90 FR 41477 on August 25, 2025. The

2025 inflation adjustment factor and applicable amounts are

used to determine the amount of the section 45Y credit and

apply to calendar year 2025 sales, consumption, or storage

of electricity produced in the United States or a possession

thereof at a qualified facility.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

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Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

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monthly indexes are cumulated on a semiannual basis, and are

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The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

September 15, 2025 

Bulletin No. 2025–38

Part III

Inflation Adjustment Factor

and Applicable Amounts for

Clean Electricity Production

Credit for Calendar Year

2025

Notice 2025-38

SECTION 1. PURPOSE

This notice republishes the inflation

adjustment factor and applicable amounts

for calendar year 2025 for the clean electricity production credit allowable under

section 45Y (section 45Y credit) of the

Internal Revenue Code (Code), which are

required by section 45Y(c)(2) to be published in the Federal Register. The 2025

inflation adjustment factor and applicable

amounts are used to determine the amount

of the section 45Y credit and apply to

calendar year 2025 sales, consumption,

or storage of electricity produced in the

United States or a possession thereof at a

qualified facility.

SECTION 2. BACKGROUND

Section 45Y was added to the Code

by section 13701(a) of Public Law 117169, 136 Stat. 1818, 1982 (August 16,

2022), commonly known as at the Inflation Reduction Act of 2022, to provide an

income tax credit for producing electricity

at a qualified facility.

Section 45Y(a)(1) provides that, for

purposes of section 38 of the Code, the

section 45Y credit for any taxable year is

an amount equal to the product of (1) the

kilowatt hours of electricity produced by

the taxpayer during such taxable year at

a qualified facility (described in section

45Y(b)), and either (i) sold by the taxpayer

to an unrelated person during the taxable

year, or (ii) in the case of a qualified facility

which is equipped with a metering device

which is owned and operated by an unrelated person, sold, consumed, or stored by

the taxpayer during the taxable year, multiplied by (2) the applicable amount with

respect to such qualified facility.

For purposes of the applicable

amount used in calculating the section

45Y credit, section 45Y(a)(2) provides

a base amount and a higher alternative

amount. Section 45Y(a)(2)(A) provides

that, subject to section 45Y(g)(7) (providing an increase in credit for qualified

facilities located in an energy community), the applicable amount will be the

base amount of 0.3 cents in the case

of a qualified facility that does not satisfy the requirements for the alternative

amount. Section 45Y(a)(2)(B) provides

that, subject to section 45Y(g)(7), the

applicable amount will be the alternative

amount of 1.5 cents in the case of any

qualified facility (1) with a maximum

net output of less than 1 megawatt (as

measured in alternating current), (2) the

construction of which begins prior to the

date that is 60 days after the Secretary

of the Treasury or the Secretary’s delegate (Secretary) publishes guidance on

the requirements of section 45Y(g)(9)

(wage requirements) and section 45Y(g)

(10) (apprenticeship requirements),1 or

(3) that satisfies section 45Y(g)(9) and,

with respect to the construction of such

facility, satisfies section 45Y(g)(10).

Section 45Y(c)(1) provides for an

inflation adjustment for both the base

and alternative amounts. Section 45Y(c)

(1) provides that, in the case of a calendar year beginning after 2024, the 0.3 cent

amount in section 45Y(a)(2)(A) and the

1.5 cent amount in section 45Y(a)(2)(B)

will each be adjusted by multiplying such

amount by the inflation adjustment factor

for the calendar year in which the sale,

consumption, or storage of the electricity

occurs. If the 0.3 cent amount as adjusted

for inflation is not a multiple of 0.05 cent,

such amount is rounded to the nearest multiple of 0.05 cent. If the 1.5 cent amount

as adjusted for inflation is not a multiple

of 0.1 cent, such amount is rounded to the

nearest multiple of 0.1 cent.

Section 45Y(c)(2) requires the Secretary to determine and publish in the Federal Register each calendar year the inflation adjustment factor for such calendar

year. The inflation adjustment factor for

the 2025 calendar year was published in

the Federal Register at 90 FR 41477 on

August 25, 2025.

Section 45Y(c)(3) defines the term

inflation adjustment factor as, with respect

to a calendar year, a fraction, the numerator of which is the GDP implicit price

deflator for the preceding calendar year

and the denominator of which is the GDP

implicit price deflator for the calendar

year 1992. The term GDP implicit price

deflator means the most recent revision

of the implicit price deflator for the gross

domestic product as computed and published by the Department of Commerce

before March 15 of the calendar year.

SECTION 3. 2025 INFLATION

ADJUSTMENT FACTOR

For purposes of section 45Y(c)(1), for

sales, consumption, or storage of electricity occurring in calendar year 2025,

the inflation adjustment factor is a fraction, the numerator of which is the GDP

implicit price deflator for 2024 (125.234)

and the denominator of which is the GDP

implicit price deflator for 1992 (62.707),

which yields an inflation adjustment factor of 1.9971.

SECTION 4. 2025 APPLICABLE

AMOUNTS

For sales, consumption, or storage

of electricity occurring in calendar year

2025, the applicable amount provided

in section 45Y(a)(2)(A) is 0.6 cents (or

$0.006), which is 0.3 cents (or $0.003)

multiplied by 1.9971 and rounded to the

nearest multiple of 0.05 cent. For sales,

consumption, or storage of electricity

occurring in calendar year 2025, the applicable amount provided in section 45Y(a)

(2)(B) is 3 cents (or $0.03), which is 1.5

To meet this requirement, the construction of the qualified facility must begin prior to January 29, 2023. On November 30, 2022, the Department of the Treasury and the Internal Revenue

Service published Notice 2022-61 in the Federal Register (87 FR 73580, corrected in 87 FR 75141 (Dec. 7, 2022)), providing initial guidance with respect to the prevailing wage and apprenticeship requirements and starting the 60-day period described in section 45Y(a)(2)(B).

1

September 15, 2025

392

Bulletin No. 2025–38

cents (or $0.015) multiplied by 1.997 and

rounded to the nearest multiple of 0.1 cent.

SECTION 5. DRAFTING

INFORMATION

The principal author of this notice

is Kevin Babitz of the Office of Associate Chief Counsel (Energy, Credits, and

Excise Tax). For further information

regarding this notice contact Kevin Babitz

at 202-317-5046 (not a toll-free number).

26 CFR 601.204: Changes in accounting periods

and in methods of accounting.

(Also, Part 1, §§ 174, 174A, 280C, 446; 1.280C-4,

1.446-1.)

Rev. Proc. 2025-28

SECTION 1. PURPOSE

This revenue procedure provides procedures for making certain elections under

§ 70302(f) of Public Law 119-21, 139 Stat.

72 (July 4, 2025), commonly known as the

One, Big, Beautiful Bill Act (OBBBA), for

domestic research or experimental expenditures. This revenue procedure modifies

procedures under § 446 of the Internal

Revenue Code (Code)1 and § 1.446-1(e)

for obtaining automatic consent of the

Commissioner of Internal Revenue

(Commissioner) to (i) change methods of

accounting for research or experimental

expenditures under § 174, as in effect after

amendment by § 13206(a) of Public Law

115-97, 131 Stat. 2054 (Dec. 22, 2017),

commonly known as the Tax Cuts and

Jobs Act (TCJA), and prior to amendment

by § 70302(b)(1) of the OBBBA, and (ii)

change methods of accounting to comply

with §§ 174 and 174A (as amended and

enacted by the OBBBA, respectively).

This revenue procedure also provides

procedures for making elections under

§ 174A(c) to amortize domestic research

or experimental expenditures paid or

incurred in taxable years beginning after

December 31, 2024. Finally, for a taxable

year beginning during 2024 and ending

prior to September 15, 2025, for which

the due date (excluding any extension) for

the return of tax for such taxable year was

before September 15, 2025 (2024 taxable

year), section 8 of this revenue procedure

grants an automatic extension of time

to file superseding tax and information

returns applying the provisions of this revenue procedure.

SECTION 2. BACKGROUND

.01 Certain terms used in this revenue

procedure.

(1) References to § 70302 of the

OBBBA. All references hereinafter in this

revenue procedure to “OBBBA § 70302”

refer to provisions of § 70302 of the

OBBBA.

(2) References to § 174. All references

in this revenue procedure to “TCJA § 174”

refer to § 174, as in effect after amendment by § 13206(a) of the TCJA, and prior

to amendment by OBBBA § 70302(b)(1).

All references in this revenue procedure

to “§ 174” refer to § 174 as amended by

OBBBA § 70302(b)(1).

(3) References to § 280C. All references in this revenue procedure to “TCJA

§ 280C” refer to § 280C as in effect after

amendment by the TCJA and prior to

amendment by OBBBA § 70302(b)(2)(B).

All references in this revenue procedure to

“§ 280C” refer to § 280C as amended by

OBBBA § 70302(b)(2)(B).

(4) References to specified research or

experimental expenditures. All references

to “specified research or experimental

expenditures” and “SRE expenditures”

refer to research or experimental expenditures paid or incurred in taxable years

beginning after December 31, 2021, and

before January 1, 2025, under TCJA § 174.

All references to “domestic research or

experimental expenditures under TCJA

§ 174” refer to SRE expenditures other

than SRE expenditures attributable to

foreign research (within the meaning of

§ 41(d)(4)(F)).

.02 Treatment of research or experimental expenditures under TCJA § 174.

For expenditures paid or incurred in taxable years beginning after December 31,

2021, TCJA § 174 requires taxpayers

to charge SRE expenditures to capital

account and allows amortization deduc-

tions of such capitalized expenditures ratably over a 5-year period in the case of

SRE expenditures attributable to domestic

research, or a 15-year period in the case of

SRE expenditures attributable to foreign

research (within the meaning of § 41(d)(4)

(F)), beginning with the midpoint of the

taxable year in which such expenditures

are paid or incurred. The procedures in

sections 7.01 and 7.03 of Rev. Proc. 202523, 2025-24 I.R.B. 1476, as modified by

this revenue procedure, provide automatic changes in method of accounting

for research or experimental expenditures

under TCJA § 174 for amounts paid or

incurred in taxable years beginning before

January 1, 2025.

.03 Treatment of foreign research or

experimental expenditures under § 174.

(1) OBBBA § 70302(b)(1) amended

TCJA § 174 to provide that § 174 applies

only to foreign research or experimental expenditures and that such expenditures continue to be amortized ratably

over a 15-year period beginning with the

midpoint of the taxable year in which

such expenditures are paid or incurred.

Under § 174(b), as amended by OBBBA

§ 70302(b)(1)(B), foreign research or

experimental expenditures are research or

experimental expenditures which are paid

or incurred by the taxpayer during a taxable year in connection with the taxpayer’s

trade or business which are attributable

to foreign research (within the meaning

of § 41(d)(4)(F)). OBBBA § 70302(e)(1)

provides that these amendments apply to

amounts paid or incurred in taxable years

beginning after December 31, 2024.

(2) OBBBA § 70302(b)(1)(C) amended

TCJA § 174(d) to provide that, if any

property with respect to which foreign

research or experimental expenditures

are paid or incurred is disposed, retired,

or abandoned during the period during

which such expenditures are allowed as

an amortization deduction under this section, no deduction or reduction to amount

realized is allowed with respect to such

expenditures on account of such disposition, retirement, or abandonment and such

amortization deduction continues with

respect to such expenditures. OBBBA

§ 70302(e)(2)(A) provides that these

1

Unless otherwise specified, all “section” or “§” references are to sections of the Code, the Income Tax Regulations (26 CFR part 1), or the Procedure and Administration Regulations (26

CFR Part 301).

Bulletin No. 2025–38

393

September 15, 2025

amendments to § 174(d) apply to property

disposed, retired, or abandoned after May

12, 2025.

(3) The procedures in section 7.03 of

Rev. Proc. 2025-23, as modified by this

revenue procedure, provide an automatic

change in method of accounting for foreign research or experimental expenditures under TCJA § 174 for amounts paid

or incurred in taxable years beginning

before January 1, 2025, and for foreign

research or experimental expenditures

under § 174 for amounts paid or incurred

in taxable years beginning after December

31, 2024.

.04 Treatment of domestic research or

experimental expenditures under § 174A.

(1) OBBBA § 70302(a) amended Part

VI of subchapter B of chapter 1 of subtitle

A of the Code by adding § 174A.

(2) Section 174A(a) provides that, notwithstanding § 263, a deduction is allowed

for any domestic research or experimental

expenditures which are paid or incurred

by the taxpayer during the taxable year.

(3) Section 174A(b) provides that, for

purposes of § 174A, the term “domestic

research or experimental expenditures”

means research or experimental expenditures paid or incurred by the taxpayer

in connection with the taxpayer’s trade

or business other than such expenditures

which are attributable to foreign research

(within the meaning of § 41(d)(4)(F)).

(4) Section 174A(c)(1) allows a taxpayer to make an election, in the case of

domestic research or experimental expenditures which would (but for § 174A(a))

be chargeable to capital account but not

chargeable to property of a character

which is subject to the allowance under

§ 167 (relating to allowance for depreciation, etc.) or § 611 (relating to allowance

for depletion), to charge such expenditures to capital account and amortize such

expenditures ratably over a period of not

less than 60 months, beginning with the

month in which the taxpayer first realizes

benefits from such expenditures. Under

§ 174A(c)(1), such election is made in

accordance with regulations or other

guidance provided by the Secretary of

the Treasury or the Secretary’s delegate

(Secretary). Section 174A(c)(2) provides

that the election described in § 174A(c)

(1) may be made for any taxable year,

but only if made not later than the time

September 15, 2025

prescribed by law for filing the return for

such taxable year (including extensions

thereof). The procedures in section 6 of

this revenue procedure provide guidance

on making an election under § 174A(c) for

expenditures paid or incurred in taxable

years beginning after December 31, 2024.

(5) Section 174A(c)(2) further provides that a taxpayer’s computation of

taxable income for the taxable year for

which the election is made, and for all

subsequent taxable years, must be based

on the method the taxpayer has elected

and the amortization period the taxpayer

has selected. The taxpayer may, with the

approval of the Secretary, change to a different method, or a different period, with

respect to part or all of such expenditures.

The election does not apply to any expenditures paid or incurred during any taxable

year before the taxable year for which the

taxpayer makes the election.

(6) Section 174A(d)(1) provides that

§ 174A does not apply to any expenditure for the acquisition or improvement

of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation

and of a character which is subject to the

allowance under § 167 or § 611; but for

purposes of § 174A, allowances under

§ 167 and allowances under § 611 are considered as expenditures.

(7) Section 174A(d)(2) provides that

§ 174A does not apply to any expenditure

paid or incurred for the purpose of ascertaining the existence, location, extent, or

quality of any deposit of ore or other mineral (including oil and gas).

(8) Section 174A(d)(3) provides that,

for purposes of § 174A, any amount paid

or incurred in connection with the development of any software is treated as a

research or experimental expenditure.

(9) OBBBA § 70302(e)(1) provides

that, generally, the amendments made by

OBBBA § 70302 to add § 174A to the

Code apply to amounts paid or incurred

in taxable years beginning after December

31, 2024.

(10) OBBBA § 70302(c)(1) provides

that, generally, the amendments made by

OBBBA § 70302 to add § 174A to the

Code are treated as a change in method

of accounting for purposes of § 481 that

is (i) treated as initiated by the taxpayer,

(ii) treated as made with the consent of

394

the Secretary, and (iii) applied only on a

cut-off basis for any domestic research

or experimental expenditures paid or

incurred in taxable years beginning after

December 31, 2024, and that no adjustments under § 481(a) may be made. The

procedures in section 7.02 of Rev. Proc.

2025-23, as modified by this revenue

procedure, provide an automatic change

in method of accounting for domestic

research or experimental expenditures

paid or incurred in taxable years beginning after December 31, 2024, to change

to a method of accounting provided in

§ 174A.

(11) OBBBA § 70302(c)(2) provides

special rules for changes in method of

accounting for a taxable year that begins

after December 31, 2024, and ends before

July 4, 2025 (the date of enactment of the

OBBBA). The procedures in section 7.02

of Rev. Proc. 2025-23, as modified by

this revenue procedure, provide transition

rules for taxpayers with short 2025 taxable years that are changing their method

of accounting under § 174A for amounts

paid or incurred in taxable years beginning after December 31, 2024.

.05 OBBBA amendment to § 280C(c)(1)

and continued application of § 280C(c)

(2).

(1) TCJA § 280C(c)(1) provides that

if the amount of the research credit for

the taxable year under § 41(a)(1) exceeds

the amount allowable as a deduction for

such taxable year for qualified research

expenses or basic research expenses, then

the amount chargeable to capital account

for the taxable year for such expenses is

reduced by the amount of such excess.

(2) OBBBA § 70302(b)(2)(B) amended

TCJA § 280C(c)(1) to provide that the

domestic research or experimental expenditures (as defined in § 174A(b)) otherwise taken into account as a deduction or

charged to capital account under chapter

1 of the Code are reduced by the amount

of the credit allowed under § 41(a).

OBBBA § 70302(e)(4) makes clear that

this amendment does not create any inference with respect to the proper application

of § 280C(c) with respect to taxable years

beginning before January 1, 2025.

(3) Section 280C(c)(2)(A) allows taxpayers to elect to receive a reduced credit

under § 41(a), in lieu of reducing the

amount of domestic research or experi-

Bulletin No. 2025–38

mental expenditures otherwise taken into

account as a deduction or charged to capital account. Section 280C(c)(2)(C) provides that an election under § 280C(c)

(2) for any taxable year must be made not

later than the time for filing the return of

tax for such year (including extensions),

and that such election is irrevocable.

The OBBBA made no amendments to

§ 280C(c)(2).

.06 Treatment of domestic research or

experimental expenditures previously subject to TCJA § 174.

(1) In general.

(a) Notwithstanding the effective date

provided in OBBBA § 70302(e)(1), which

provides that the OBBBA amendments

apply to amounts paid or incurred in

taxable years beginning after December

31, 2024, OBBBA § 70302(f) provides

transition rules for domestic research or

experimental expenditures that allow an

election to change the amortization period

over which any remaining unamortized

amount arising from the application of

TCJA § 174 is taken into account, as well

as an election for retroactive application

of OBBBA § 70302 by certain eligible

taxpayers.

(b) OBBBA § 70302(f)(2)(A) provides

that, in the case of domestic research

or experimental expenditures paid or

incurred in taxable years beginning after

December 31, 2021, and before January

1, 2025, and which were charged to capital account under TCJA § 174, a taxpayer

may elect to amortize any remaining

unamortized amount with respect to such

expenditures in full in the first taxable

year beginning after December 31, 2024,

or alternatively, amortize such remaining

unamortized amount with respect to such

expenditures ratably over the 2-taxable

year period beginning with the first taxable year beginning after December 31,

2024.

(c) OBBBA § 70302(f)(2)(B) provides that a taxpayer that makes an election under OBBBA § 70302(f)(2)(A) is

treated as initiating a change in method

of accounting for purposes of § 481 with

respect to the expenditures to which the

election applies. Further, the change is

treated as made with the consent of the

Secretary and must be applied only on

a cut-off basis for such expenditures,

and no adjustments under § 481 may be

Bulletin No. 2025–38

made. The procedures in section 7.02 of

Rev. Proc. 2025-23, as modified by this

revenue procedure, provide an automatic

change in method of accounting for amortizing the remaining unamortized amount

previously capitalized under TCJA § 174

under OBBBA § 70302(f)(2).

(2) Small business taxpayers.

(a) OBBBA § 70302(f)(1)(A) provides

that, at the election of an “eligible taxpayer,” § 174A applies to amounts paid

or incurred in taxable years beginning

after December 31, 2021, and § 280C,

as amended by OBBBA § 70302(b)

(2)(B), applies in taxable years beginning after December 31, 2021. An eligible taxpayer making an election under

OBBBA § 70302(f)(1)(A) generally must

file an amended return for each taxable

year affected by such election. OBBBA

§ 70302(f)(1)(B) defines an “eligible

taxpayer” as any taxpayer (other than

a tax shelter prohibited from using the

cash receipts and disbursements method

of accounting under § 448(a)(3)) which

meets the gross receipts test of § 448(c)

for the first taxable year beginning after

December 31, 2024.

(b) OBBBA § 70302(f)(1)(A) provides

that this election must be made in the

manner provided by the Secretary and not

later than the date that is one year after the

date of enactment of the OBBBA, which

is July 4, 2026. Section 7503 provides

where the last day for performing an act

under the internal revenue laws falls on

a Saturday, Sunday, or legal holiday, the

performance of such act will be considered timely if it is completed on the next

succeeding day that is not a Saturday,

Sunday, or legal holiday. Because July

4, 2026, is a Saturday, the election under

OBBBA § 70302(f)(1)(A) must be made

by Monday, July 6, 2026. The OBBBA did

not modify, or provide an exception to, the

statutory period of limitations on filing a

claim for credit or refund under § 6511 for

purposes of the elections under OBBBA

§ 70302(f). Section 6511(a) generally provides that a claim for credit or refund is

timely if it is filed by the taxpayer within

three years from the time the return was

filed or two years from the time the tax

was paid, whichever period expires later.

Section 6511(b) provides limits on the

amount of a claim for credit or refund.

Section 6511(b)(2)(A) generally provides

395

that for a claim filed within the three-year

period under § 6511(a), the amount of the

credit or refund cannot exceed the portion

of tax paid within the period, immediately

preceding the filing of the claim, equal to

three years plus the period of any extension of time for filing that return. Section

6511(b)(2)(B) generally provides that if

a claim is not filed within the three-year

period, the amount of the credit or refund

may not exceed the portion of the tax

paid during the two years immediately

preceding the filing of the claim. Under

§ 6513(a), for purposes of § 6511, any

return filed before the last day prescribed

for the filing thereof is considered filed on

such last day.

(c) Section 3 of this revenue procedure

sets forth the procedures under which an

eligible taxpayer may elect to retroactively

apply § 174A under OBBBA § 70302(f)

(1)(A).

(d) OBBBA § 70302(f)(1)(C) provides

that the election under OBBBA § 70302(f)

(1)(A) may alternatively be implemented

as a change in method of accounting for

purposes of § 481 for an eligible taxpayer’s

first taxable year affected by such election

and will be treated as initiated by the taxpayer for such taxable year and made with

the consent of the Secretary. The procedures in section 7.02 of Rev. Proc. 202523, as modified by this revenue procedure,

provide an automatic change in method of

accounting for retroactive application of

§ 174A by an eligible taxpayer that wants

to treat the election provided in OBBBA

§ 70302(f)(1)(A) as a change in method

of accounting.

(e) OBBBA § 70302(f)(1)(D) provides

that an election under § 280C(c)(2), or a

revocation of a § 280C(c)(2) election, for

any taxable year beginning after December 31, 2021, by an eligible taxpayer making an election under OBBBA § 70302(f)

(1)(A) will not fail to be treated as timely

made (or as made on the return) if made

during the 1-year period beginning on the

date of enactment of the OBBBA, which

is July 4, 2025, on an amended return

for such taxable year. The 1-year period

beginning on July 4, 2025, ends on July

3, 2026. Section 7503 provides where the

last day for performing an act under the

internal revenue laws falls on a Saturday,

Sunday, or legal holiday, the performance

of such act will be considered timely if it is

September 15, 2025

completed on the next succeeding day that

is not a Saturday, Sunday, or legal holiday.

Because July 3, 2026, is a legal holiday

recognizing Independence Day, the election under OBBBA § 70302(f)(1)(D) must

be made by the earlier of the close of the

eligible taxpayer’s period of limitations

on filing a claim for credit or refund under

§ 6511 or Monday, July 6, 2026. As previously discussed, the OBBBA did not modify, or provide an exception to § 6511 for

purposes of the elections under OBBBA

§ 70302(f).

(f) Sections 4 and 5 of this revenue

procedure, respectively, set forth the procedures under which an eligible taxpayer

may make a late election, or revoke an

election, under § 280C(c)(2).

.07 Changing methods of accounting

under § 446(e).

(1) In general.

(a) Except as otherwise expressly provided in the Code and the regulations

thereunder, § 446(e) and § 1.446-1(e)(2)

require a taxpayer to secure the consent

of the Commissioner before changing a

method of accounting for Federal income

tax purposes. Section 1.446-1(e)(3)(i)

provides, in part, that except as otherwise

provided under the authority of § 1.4461(e)(3)(ii), to secure the Commissioner’s

consent to a taxpayer’s change in method

of accounting the taxpayer generally must

file a Form 3115, Application for Change

in Accounting Method, with the Commissioner during the taxable year in which

the taxpayer desires to make the change

in method of accounting. Section 1.4461(e)(3)(ii) authorizes the Commissioner

to prescribe administrative procedures

under which taxpayers will be permitted

to change their method of accounting. The

administrative procedures prescribe those

terms and conditions necessary to obtain

the Commissioner’s consent to effect

the change and to prevent amounts from

being duplicated or omitted.

(b) Rev. Proc. 2015-13, 2015-5 I.R.B.

419, as clarified and modified by Rev.

Proc. 2015-33, 2015-24 I.R.B. 1067, and

as modified by Rev. Proc. 2021-34, 202135 I.R.B. 337, Rev. Proc. 2021-26, 202122 I.R.B. 1163, Rev. Proc. 2017-59, 201748 I.R.B. 543, and section 17.02(b) and (c)

of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, sets

forth the general administrative procedures by which a taxpayer may obtain the

September 15, 2025

automatic consent of the Commissioner to

change a method of accounting described

in the List of Automatic Changes. Rev.

Proc. 2025-23 contains the current List of

Automatic Changes.

(c) A change in a taxpayer’s treatment

of expenditures to comply with § 174 or

§ 174A, or to make certain elections provided in OBBBA § 70302(f), is a change in

method of accounting to which §§ 446(e)

and 481, and the corresponding regulations, apply. A taxpayer that changes its

method of accounting to comply with

§ 174 or § 174A or to make such elections

under OBBBA § 70302(f) must use the

accounting method change procedures in

Rev. Proc. 2015-13 or its successor. Section 7.01 of Rev. Proc. 2025-23, as modified by this revenue procedure, allows

taxpayers to obtain automatic consent to

change their method of accounting for

domestic research or experimental expenditures under TCJA § 174. Section 7.02

of Rev. Proc. 2025-23, as modified by

this revenue procedure, allows taxpayers

to obtain automatic consent to (1) change

their method of accounting for domestic

research or experimental expenditures to

a method of accounting under § 174A for

amounts paid or incurred in taxable years

beginning after December 31, 2024, (2) in

the case of eligible taxpayers, change

their method of accounting for domestic research or experimental expenditures under OBBBA § 70302(f)(1)(C)

(small business retroactive method) for

amounts paid or incurred in taxable years

beginning after December 31, 2021, and

before January 1, 2025, and (3) change

their method of accounting for domestic

research or experimental expenditures

under OBBBA § 70302(f)(2)(B) (recovery of unamortized amount method) for

amounts paid or incurred in taxable years

beginning after December 31, 2021, and

before January 1, 2025. Section 7.03 of

Rev. Proc. 2025-23, as modified by this

revenue procedure, allows taxpayers to

obtain automatic consent to change their

method of accounting for foreign research

or experimental expenditures under either

TCJA § 174 or § 174.

.08 Rules and extensions for certain tax

returns.

(1) In general. Section 6081(a) permits

the Secretary to grant a reasonable extension of time, generally no more than six

396

months, for filing any return, declaration,

statement, or other required document.

(2) Partnership tax returns.

(a) Section 6031(a) requires every

partnership to file a return for each taxable year stating specifically the items

of its gross income and the deductions

allowable by subtitle A of the Code and

such other information as required by

forms and regulations, including information about the partners in the partnership.

For a partnership, the return required by

§ 6031 is the Form 1065, which includes

Schedule K-1. Schedule K-1 provides

the name of the partner and the partner’s

distributive share of taxable income and

other information related to the partner

regarding the partnership. Section 6031(b)

requires that a partnership required to file

a return under § 6031(a) furnish a copy

of the Schedule K-1 to each partner that

includes such information as may be

required to be shown by regulations. In

general, § 6031(b) also prohibits partnerships subject to the centralized partnership

audit procedures of the Bipartisan Budget

Act of 2015 (BBA), Public Law 114-74,

129 Stat. 584 (November 2, 2015), from

amending the information required to be

furnished to their partners after the due

date of the return. Rather, under § 6227,

such partnerships may file an administrative adjustment request (AAR) in the

amount of one or more partnership-related

items for any partnership taxable year.

(b) Section 6072(b) provides that the

due date for filing Form 1065 and furnishing Schedules K-1 to partners is the fifteenth day of the third month following the

close of the partnership’s taxable year. For

example, the due date for a calendar-year

partnership is March 15. For calendar-year

partnerships that timely request a sixmonth extension, the extended due date is

September 15. A partnership that files its

Form 1065 and furnishes Schedules K-1

to its partners prior to the due date for filing the Form 1065 (including extensions)

may file a superseding Form 1065 and

furnish corresponding Schedules K-1 to

its partners prior to the extended due date.

See generally Rev. Proc. 2019-32, 201933 I.R.B. 659.

(3) S corporation tax returns.

(a) Sections 6012(a)(2) and 6037(a)

require every S corporation to file a return

for each taxable year stating specifically

Bulletin No. 2025–38

the items of its gross income and the

deductions allowable by subtitle A of

the Code and such other information as

required by forms and regulations, including information about each shareholder in

the S corporation. For an S corporation,

the return required by § 6037(a) is the

Form 1120-S, which includes Schedules

K-1. Schedule K-1 provides the name

of each shareholder and the shareholder’s share of the corporation’s income,

deductions, credits, and other information

related to the shareholder regarding the S

corporation. Section 6037(b) requires that

an S corporation required to file a return

under section 6037(a) furnish a copy of

the Schedule K-1 to each shareholder

that includes such information as may be

required to be shown by regulations.

(b) Section 6072(b) provides that the

due date for filing Form 1120-S and furnishing Schedules K-1 to its shareholders is the fifteenth day of the third month

following the close of the S corporation’s

taxable year. For example, the due date

for a calendar-year S corporation is March

15. For calendar-year S corporations that

timely request a six-month extension, the

extended due date is September 15. An S

corporation that files its Form 1120-S and

furnishes Schedules K-1 to its shareholders prior to the due date for filing the Form

1120-S (including extensions) may file

a superseding Form 1120-S and furnish

corresponding Schedules K-1 to its shareholders prior to the extended due date.

(4) C corporation tax returns.

(a) Section 6012(a)(2) requires every C

corporation to file a return for each taxable year stating specifically the income,

gains, losses, deductions, credits, and

other information needed to figure the

income tax liability of the C corporation.

For a C corporation, the return required

by § 6012(a)(2) is a Form 1120 or another

form in the Form 1120 series.

(b) Section 6072(a) generally provides

that the due date for filing Form 1120 is

the fifteenth day of the fourth month following the close of the C corporation’s

taxable year. For example, the due date

for a calendar-year C corporation is April

15. For calendar-year C corporations that

timely request a six-month extension,

the extended due date is October 15. A C

corporation that files its Form 1120 prior

to the due date for filing the Form 1120

(including extensions) may file a superseding Form 1120 prior to extended due

date.2

(5) Individual tax returns.

(a) Section 6012(a)(1) requires every

individual having taxable year gross

income at or above certain thresholds to

file a return for each taxable year stating

specifically the individual’s annual taxable income, including income or loss

from a business the individual operated

or a profession the individual practiced

as a sole proprietor. For an individual

reporting income or loss from a business,

the return required by § 6012(a)(1) is the

Form 1040 and a corresponding Schedule

C. Schedule C provides the income or loss

from a business the individual operated or

a profession the individual practiced as a

sole proprietor.

(b) Section 6072(a) provides that the

due date for filing Form 1040 and a corresponding Schedule C is the fifteenth

day of the fourth month following the

close of the individual’s taxable year. This

due date is April 15. For individuals who

timely request a six-month extension, the

extended due date is October 15. An individual who files Form 1040 and a corresponding Schedule C prior to the due date

for filing the Form 1040 (including extensions) may file a superseding Form 1040

prior to the extended due date.

(6) Trust and estate tax returns.

(a) Section 6012(a)(4) requires every

trust to file a return for each taxable year

stating specifically the trust’s income,

deductions, gains, losses, and other information needed to figure the income tax

liability. Section 6012(a)(3) requires

every estate with gross income of $600

or more in a taxable year to file a return

for that year. For trusts and estates, the

return required by § 6012(a)(4) is the

Form 1041, which includes Schedule K-1.

Schedule K-1 provides the name of each

beneficiary and the beneficiary’s share of

the trust or estate’s income, deductions,

credits, and other information of the trust

that is related to the beneficiary regarding the trust or estate. Section 6034A(a)

requires that the fiduciary of any trust or

estate required to file a return under section 6012(a) furnish a copy of the Schedule K-1 to each beneficiary that includes

such information as may be required to be

shown by regulations.

(b) Section 6072(a) provides that the

due date for filing Form 1041 and furnishing Schedules K-1 to its beneficiaries

by either a trust or an estate is the fifteenth day of the fourth month following

the close of the trust or estate’s taxable

year. For example, the due date for calendar-year trusts and estates is April 15.

For calendar-year trusts and estates that

timely request a six-month extension, the

extended due date is October 15. A trust

or an estate that files Form 1041 and furnishes Schedules K-1 to its beneficiaries

prior to the due date for filing the Form

1041 (including extensions) may file a

superseding Form 1041 and furnish corresponding Schedules K-1 to its beneficiaries prior to the extended due date.

(7) Exempt organization business

income tax returns.

(a) Sections 6012 and 1.6012-2(e)

require an exempt organization that is

subject to the tax imposed by § 511(a)(1)

on its unrelated business taxable income

to make a return for each taxable year if it

has gross income of $1,000 or more. For

these exempt organizations, the required

return is Form 990-T.

(b) Section 6072(e) provides that the

due date for filing Form 990-T by an

organization exempt from taxation under

§ 501(a) is the fifteenth day of the fifth

month from the close of the exempt organization’s taxable year. For example, the

due date for a calendar-year exempt organization is May 15. For calendar-year

exempt organizations that timely request

a six-month extension, the extended due

date is November 15. An exempt organization that files Form 990-T prior to the due

date for filing the Form 990-T (including

extensions) may file a superseding Form

990-T prior to the extended due date.

(8) Section 8 of this revenue procedure. The Treasury Department and the

IRS are aware that certain partnerships,

S corporations, C corporations, individuals, trusts, estates, and exempt organi-

A foreign corporation that does not have an office or place of business in the United States must file its income tax return on or before the fifteenth day of the sixth month following the close

of the foreign corporation’s taxable year. For example, the due date for a calendar-year foreign corporation is June 15.

2

Bulletin No. 2025–38

397

September 15, 2025

zations that are eligible taxpayers under

OBBBA § 70302(f)(1)(B) that already

filed a tax return for the 2024 taxable year

did not have the opportunity to make the

election contained in OBBBA § 70302(f)

(1)(A), or the method change provided

in OBBBA § 70302(f)(1)(C), for such

return for the 2024 taxable year. These

taxpayers may not have filed an extension and, for those subject to the BBA,

may be restricted from amending Form

1065 or Schedules K-1 under §§ 6031(b)

and 6227. In order to provide an opportunity for such taxpayers to make the

election contained in OBBBA § 70302(f)

(1)(A) or the accounting method change

provided in OBBBA § 70302(f)(1)(C),

section 8 of this revenue procedure grants

an automatic six-month extension of time

under § 6081 for eligible taxpayers to file

a superseding tax return and to furnish

any corresponding Schedules K-1, as

applicable, for a 2024 taxable year on or

before the extended due date.

SECTION 3. SMALL BUSINESS

ELECTION TO RETROACTIVELY

APPLY § 174A

.01 In general.

(1) Under OBBBA § 70302(f)(1)(A),

a small business taxpayer may elect to

treat OBBBA § 70302(e)(1) as providing

that the amendments made by OBBBA

§ 70302 apply to amounts paid or incurred

in taxable years beginning after December 31, 2021, rather than December 31,

2024. For example, a small business taxpayer may elect to apply § 174A(a) to

deduct domestic research or experimental expenditures that were (1) previously

taken into account under TCJA § 174

and (2) paid or incurred in taxable years

beginning after December 31, 2021, and

before January 1, 2025, in the taxable

year in which the expenditures were originally paid or incurred. Alternatively, for

example, a small business taxpayer may

elect to apply § 174A(c) and charge such

expenditures to capital account in the year

paid or incurred and amortize the expenditures ratably over a period of not less than

60 months, beginning with the month in

which the taxpayer first realizes benefits

from such expenditures.

(2) Under OBBBA § 70302(f)(1)(C), in

lieu of using the procedure in this section

September 15, 2025

3, a small business taxpayer may instead

make a change in method of accounting

under section 7.02(3)(c) of Rev. Proc.

2025-23, as modified by this revenue

procedure, to treat the effective date of

OBBBA § 70302 contained in OBBBA

§ 70302(e)(1) as being applicable to

amounts paid or incurred in taxable years

beginning after December 31, 2021. See

section 7 of this revenue procedure.

.02 Defined terms.

(1) Small business taxpayer. For purposes of this section 3, a small business

taxpayer means any taxpayer, other than a

tax shelter under § 448(d)(3) and § 1.4482(b)(2), that meets the § 448(c) gross

receipts test as provided in § 1.448-2(c)

for its first taxable year beginning after

December 31, 2024. The § 448(c) gross

receipts test is met if a taxpayer has average annual gross receipts for the three

prior taxable years of $25,000,000 or less

(adjusted for inflation), as described in

§ 1.448-2(c). For a taxable year beginning

in 2025, the inflation-adjusted amount is

$31,000,000. See Rev. Proc. 2024-40,

2024-45 I.R.B. 1100.

(2) Applicable taxable year. For purposes of this section 3, an applicable taxable year is any taxable year beginning

after December 31, 2021, and before January 1, 2025.

.03 Small business OBBBA election.

An election under OBBBA § 70302(f)

(1)(A) may be made on a small business

taxpayer’s timely filed (including any

extension) original Federal income tax

return for an applicable taxable year, or

on an AAR or amended Federal income

tax return, as applicable, for an applicable

taxable year, by attaching a statement to

such AAR or Federal income tax return, as

provided in section 3.03(2) of this revenue

procedure (small business OBBBA election). Once an election under this section

3.03 has been made by a small business

taxpayer for an applicable taxable year,

such taxpayer must carry out the election

under this section 3.03 for all applicable

taxable years in which the taxpayer paid

or incurred domestic research or experimental expenditures.

(1) Eligibility to make election. A small

business taxpayer may make the election

provided in this section 3.03 if it has not

made a change in method of accounting

under section 7.02(3)(c) of Rev. Proc.

398

2025-23, as modified by this revenue procedure.

(2) Manner of making election. A small

business taxpayer makes an election under

this section 3.03 by attaching a statement

to its AAR or original or amended Federal

income tax return, as applicable, for an

applicable taxable year. Such a statement

must be entitled, “FILED PURSUANT TO

SECTION 3.03 OF REV. PROC. 2025-28”,

and must be attached to the Federal income

tax return that is the AAR, or original or

amended return, as applicable, filed for each

applicable taxable year, and must include:

(a) the name and taxpayer identification number of the small business taxpayer

that paid or incurred domestic research

or experimental expenditures in taxable

years beginning after December 31, 2021,

and before January 1, 2025;

(b) a declaration that the taxpayer is

not a tax shelter for its first taxable year

beginning after December 31, 2024 (taking into account the election provided in

§ 1.448-2(b)(2)(iii)(B) if the declaration in

section 3.03(2)(c) of this revenue procedure is made);

(c) if the taxpayer has not previously

made the election provided in § 1.448-2(b)

(2)(iii)(B) and the taxpayer intends to make

such election for its first taxable year beginning after December 31, 2024, a declaration that the taxpayer will make the election provided in § 1.448-2(b)(2)(iii)(B) for

purposes of determining whether it is a tax

shelter for its first taxable year beginning

after December 31, 2024, on the original

Federal income tax return (including extensions) filed for such taxable year;

(d) a declaration that the taxpayer

meets the § 448(c) gross receipts test, as

provided in § 448(c) and § 1.448-2(c),

for its first taxable year beginning after

December 31, 2024;

(e) a statement indicating whether the

taxpayer is making the small business

OBBBA election to (i) deduct domestic

research or experimental expenditures in

the applicable taxable year in which they

are paid or incurred or (ii) charge such

expenditures to capital account and amortize such expenditures under § 174A(c);

(f) if the taxpayer is making the small

business OBBBA election to charge

domestic research or experimental expenditures to capital account under § 174A(c),

a declaration that:

Bulletin No. 2025–38

(i) the taxpayer is charging such expenditures to a domestic research or experimental expenditures capital account in

the applicable taxable year in which such

expenditures are paid or incurred, and

amortizing such amount over a period of

not less than 60 months beginning with

the month in which the taxpayer first realizes benefits from such expenditures; and

(ii) the number of months (not less than

60) selected for the amortization period;

and

(g) a declaration that the taxpayer will

file an AAR or amended return, as applicable, to reflect the election provided in

this section 3.03 for any applicable taxable year(s) for which the taxpayer previously filed a Federal income tax return

prior to September 15, 2025, that specifies

such applicable taxable years, if the taxpayer paid or incurred domestic research

or experimental expenditures in such

applicable taxable year(s).

(3) Due date for making election on an

AAR or amended return.

(a) In general. For an applicable taxable year, an election under this section

3.03 made on an AAR or amended return

for such applicable taxable year, or an

AAR or amended return filed to carry out

an election made for another applicable

taxable year under this section 3.03, must

be filed on or before July 6, 2026. As previously discussed in section 2.06(2)(b) of

this revenue procedure, small business

taxpayers with an applicable taxable year

beginning in 2022 should be aware that for

purposes of OBBBA § 70302(f), § 6511,

which governs the statute of limitations

for credit or refund, was not amended.

Accordingly, any election under this section 3.03 made on an AAR or amended

return for such applicable taxable year, or

an AAR or amended return filed to carry

out an election made for another applicable taxable year under this section 3.03,

will be considered timely only if it is filed

on or before the earlier of: (i) July 6, 2026,

or (ii) the due date for filing a claim for

credit or refund for such applicable taxable

year under § 6511 or § 301.6511(a)-1(a)

(1) (the date that is three years from the

time the return was filed for the applicable

taxable year beginning in 2022).

(b) Example 1. Taxpayer, a C corporation, timely

filed a Federal income tax return for its applicable

taxable year beginning January 1, 2022, and ending

December 31, 2022, on March 1, 2023. Under sec-

Bulletin No. 2025–38

tion 3.03(3)(a) of this revenue procedure, and consistent with §§ 6511(a) and 6513(a), the taxpayer’s due

date for filing an amended return to make an election

under this section 3.03, or to carry out an election

made for another applicable taxable year under this

section 3.03, for the applicable taxable year ending

December 31, 2022, is April 15, 2026.

(c) Example 2. Taxpayer, a C corporation, timely

filed (including extensions) a Federal income tax

return for its applicable taxable year beginning January 1, 2022, and ending December 31, 2022, on May

15, 2023. Under section 3.03(3)(a) of this revenue

procedure, and consistent with § 6511(a), the taxpayer’s due date for filing an amended return to make

an election under this section 3.03, or to carry out

an election made for another applicable taxable year

under this section 3.03, for the applicable taxable

year ending December 31, 2022, is May 15, 2026.

(d) Example 3. Taxpayer, a C corporation, timely

filed (including extensions) a Federal income tax

return for its applicable taxable year beginning January 1, 2022, and ending December 31, 2022, on

August 25, 2023. Under section 3.03(3)(a) of this

revenue procedure, the taxpayer’s due date for filing an amended return to make an election under

this section 3.03, or to carry out an election made

for another applicable taxable year under this section

3.03, for the applicable taxable year ending December 31, 2022, is July 6, 2026.

(4) Deemed election. Solely for purposes of an original Federal income tax

return for an applicable taxable year timely

filed on or before November 15, 2025, the

small business taxpayer will be deemed to

have made an election under this section

3.03 for such taxable year if it deducts

the domestic research or experimental

expenditures paid or incurred during such

taxable year on such original return and

otherwise complies with the requirements

of this section 3.03 for all other applicable

taxable years.

.04 Method changes not required.

(1) A small business taxpayer that

makes an election under this section 3 to

deduct domestic research or experimental

expenditures in the applicable taxable year

in which such amounts are paid or incurred

is not required to make a change in method

of accounting under section 7.02(3)(a) of

Rev. Proc. 2025-23, as modified by this

revenue procedure, for the first taxable year

beginning after December 31, 2024, if its

method of accounting for its first taxable

year beginning after December 31, 2024, is

the § 174A(a) deduction method (as defined

in section 7.02(2)(b) of Rev. Proc. 2025-23,

as modified by this revenue procedure). A

small business taxpayer that makes an election under this section 3 to charge domestic

research or experimental expenditures to

capital account in the applicable taxable

399

year in which such amounts are paid or

incurred and amortize such expenditures

under § 174A(c) is not required to make a

change in method of accounting under section 7.02(3)(b) of Rev. Proc. 2025-23, as

modified by this revenue procedure, for the

first taxable year beginning after December

31, 2024, if its method of accounting for its

first taxable year beginning after December

31, 2024, is the § 174A(c) amortization

method (as defined in section 7.02(2)(c)

of Rev. Proc. 2025-23, as modified by this

revenue procedure).

(2) A small business taxpayer that

makes an election under section 3.03 of

this revenue procedure is not required or

permitted to make a change in method of

accounting under section 7.02(3)(c) of

Rev. Proc. 2025-23, as modified by this

revenue procedure.

.05 Tax shelter determinations for prior

applicable taxable years. For purposes of

determining whether a taxpayer is a tax

shelter under § 448(d)(3) and § 1.448-2(b)

(2) for an applicable taxable year for which

the original Federal income tax return was

filed on or before September 15, 2025, the

taxpayer may disregard the election made

under section 3.03 of this revenue procedure on an AAR or amended return for

such applicable taxable year. Accordingly,

whether the taxpayer is a tax shelter for

such applicable taxable year, and whether

the taxpayer is eligible for the small business taxpayer rules contained in §§ 163(j)

(3), 263A(i), 448(b)(3), 460(e)(1)(B), and

471(c) for such applicable taxable year, is

unaffected by the election provided in this

section 3.

SECTION 4. SMALL BUSINESS

TAXPAYER ELECTION UNDER

§ 280C(c)(2)

.01 In general. Under OBBBA

§ 70302(f)(1)(D), an eligible small business taxpayer may make a late election

under § 280C(c)(2) for any prior applicable taxable year to have the provisions

of section § 280C(c)(1) not apply and

instead elect to adjust the amount of the

research credit under § 41 as required

under § 280C(c)(2)(B) for such applicable

taxable year (late § 280C(c)(2) election).

.02 Defined terms.

(1) For purposes of this section 4,

the terms “small business taxpayer” and

September 15, 2025

“applicable taxable year” have the same

meaning as provided in section 3.02 of

this revenue procedure.

(2) Eligible small business taxpayer.

For purposes of this section 4, an “eligible

small business taxpayer” means a small

business taxpayer that made an election

under section 3 of this revenue procedure

for an applicable taxable year or made a

change in method of accounting under

section 7.02(3)(c) of Rev. Proc. 2025-23,

as modified by this revenue procedure.

.03 Eligible small business taxpayer

§ 280C(c)(2) election.

(1) Eligibility to make election. An eligible small business taxpayer may make a

late § 280C(c)(2) election under this section 4.03 for any applicable taxable year

for which the taxpayer filed an original

Federal income tax return for such applicable taxable year on or before September

15, 2025 (eligible prior year). An eligible small business taxpayer may make a

late § 280C(c)(2) election for an eligible

prior year, regardless of whether it makes

a late § 280C(c)(2) election for any other

eligible prior year. However, an eligible

small business taxpayer may not make a

late § 280C(c)(2) election for an eligible

prior year for which it previously revoked

a § 280C(c)(2) election under section 5 of

this revenue procedure.

(2) Manner of making election. An eligible small business taxpayer makes a late

§ 280C(c)(2) election for an eligible prior

year under the procedures provided in this

section 4.03. An election under this section

4.03 is made by following rules similar to

those contained in § 1.280C-4(a). Accordingly, a late § 280C(c)(2) election is made by:

(a) adjusting the taxpayer’s research

credit amount under § 41(a) or alternative

simplified credit amount under § 41(c)(4),

for the eligible prior year as required under

§ 280C(c)(2)(B) on the AAR or amended

Federal income tax return, as applicable,

filed for such eligible prior year, and including any and all applicable forms (including

the Form 3800, General Business Credit);

(b) adjusting the taxpayer’s domestic

research or experimental expenditures

otherwise taken into account as a deduction or charged to capital account under

chapter 1 of the Code to no longer reflect

§ 280C(c)(1), as modified by the OBBBA;

(c) attaching an amended Form 6765,

Credit for Increasing Research Activities,

September 15, 2025

marked at the top “FILED PURSUANT

TO SECTION 4.03 OF REV. PROC.

2025-28” to the AAR or amended Federal

income tax return, as applicable, filed for

such eligible prior year, clearly indicating

on such Form 6765 the taxpayer’s intent to

make the § 280C(c)(2) election by checking the appropriate response to question A

on page 1 of such form, and/or otherwise

completing the appropriate sections of the

form; and

(d) to the extent not already provided

elsewhere on the AAR or amended return,

as applicable, attaching a statement indicating that the taxpayer is making a late

§ 280C(c)(2) election under section 4 of

Rev. Proc. 2025-28 that includes:

(i) a declaration that the taxpayer is not

a tax shelter for its first taxable year beginning after December 31, 2024 (taking into

account the election provided in § 1.4482(b)(2)(iii)(B) if the declaration in section

4.03(2)(c)(ii) of this revenue procedure is

made);

(ii) if the taxpayer has not previously

made the election provided in § 1.4482(b)(2)(iii)(B) and the taxpayer intends

to make such election for its first taxable

year beginning after December 31, 2024, a

declaration that the taxpayer will make the

election provided in § 1.448-2(b)(2)(iii)

(B) for purposes of determining whether

it is a tax shelter for its first taxable year

beginning after December 31, 2024, on

the original Federal income tax return

(including extensions) filed for such taxable year; and

(iii) a declaration that the taxpayer

meets the § 448(c) gross receipts test, as

provided in § 448(c) and § 1.448-2(c),

for its first taxable year beginning after

December 31, 2024.

(3) Due date for making election on

an AAR or amended return. For an eligible prior year, a late § 280C(c)(2) election under this section 4.03 made on an

AAR or amended return for such eligible

prior year must be filed on or before July

6, 2026. As previously discussed in section 2.06(2)(b) of this revenue procedure,

small business taxpayers with an eligible prior year beginning in 2022 should

be aware that, for purposes of OBBBA

§ 70302(f), § 6511 was not amended.

Accordingly, to be considered timely, any

election under this section 4.03 made on

an AAR or amended return for such eligi-

400

ble prior year should be filed on or before

the earlier of: (i) July 6, 2026, or (ii) the

due date for filing a claim for credit or

refund for such eligible prior year under

§ 6511 or § 301.6511(a)-1(a)(1) (the date

that is three years from the time the return

was filed for the eligible prior year beginning in 2022). See also the examples provided in section 3.03(3)(b)-(d) of this revenue procedure.

(4) Duration of election. A late

§ 280C(c)(2) election, once made for any

eligible prior year, is irrevocable for that

taxable year.

SECTION 5. SMALL BUSINESS

TAXPAYER REVOCATION OF

§ 280C(c)(2) ELECTION

.01 In general. Under OBBBA

§ 70302(f)(1)(D), an eligible small business taxpayer may revoke a prior election

made under § 280C(c)(2) for any applicable taxable year.

.02 Defined terms. For purposes of

this section 5, the terms “small business

taxpayer,” “applicable taxable year,” and

“eligible small business taxpayer” have

the same meaning as provided in section

4.02 of this revenue procedure. For purposes of this section 5, the term “eligible

prior year” has the same meaning as provided in section 4.03(1) of this revenue

procedure.

.03 Small business taxpayer revocation

of a § 280C(c)(2) election.

(1) Eligibility to revoke a § 280C(c)(2)

election. An eligible small business taxpayer may revoke a § 280C(c)(2) election

under this section 5.03 for any eligible

prior year, regardless of whether it revokes

a § 280C(c)(2) election for any other eligible prior year. However, an eligible small

business taxpayer may not revoke a late

§ 280C(c)(2) election made under section

4 of this revenue procedure for such eligible prior year.

(2) Manner of revoking the election. An

eligible small business taxpayer revokes a

§ 280C(c)(2) election for an eligible prior

year under the procedures provided in this

section 5.03. An eligible small business

taxpayer revokes a § 280C(c)(2) election

for an eligible prior year by:

(a) adjusting the taxpayer’s research

credit amount under § 41(a) or alternative

simplified credit amount under § 41(c)

Bulletin No. 2025–38

(4) to no longer reflect the application of

§ 280C(c)(2)(B) on the AAR or amended

Federal income tax return filed for such

eligible prior year, and including any and

all applicable forms (including the Form

3800, General Business Credit);

(b) adjusting the taxpayer’s domestic

research or experimental expenditures

otherwise taken into account as a deduction or charged to capital account under

chapter 1 of the Code as required under

§ 280C(c)(1), as modified by the OBBBA;

(c) attaching an amended Form 6765,

Credit for Increasing Research Activities

marked at the top “FILED PURSUANT

TO SECTION 5.03 OF REV. PROC. 202528” to the AAR or amended Federal income

tax return filed for such eligible prior year,

clearly indicating on such Form 6765 the

taxpayer’s intent to revoke the § 280C(c)

(2) election by checking the appropriate

response to question A on page 1 of such

form, and/or otherwise completing the

appropriate sections of the form; and

(d) to the extent not already provided

elsewhere on the AAR or amended return,

attaching a statement indicating that the

taxpayer is revoking a prior § 280C(c)

(2) election under section 5 of Rev. Proc.

2025-28 and that includes:

(i) a declaration that the taxpayer is not

a tax shelter for its first taxable year beginning after December 31, 2024 (taking into

account the election provided in § 1.4482(b)(2)(iii)(B) if the declaration in section

5.03(2)(d)(ii) of this revenue procedure is

made);

(ii) if the taxpayer has not previously

made the election provided in § 1.4482(b)(2)(iii)(B) and the taxpayer intends

to make such election for its first taxable

year beginning after December 31, 2024, a

declaration that the taxpayer will make the

election provided in § 1.448-2(b)(2)(iii)

(B) for purposes of determining whether

it is a tax shelter for its first taxable year

beginning after December 31, 2024, on

the original Federal income tax return

(including extensions) filed for such taxable year; and

(iii) a declaration that the taxpayer

meets the § 448(c) gross receipts test, as

provided in § 448(c) and § 1.448-2(c),

for its first taxable year beginning after

December 31, 2024.

(3) Due date for revoking election on

an AAR or amended return. For an eligible

Bulletin No. 2025–38

prior year, a revocation of a § 280C(c)(2)

election under this section 5.03 made on

an AAR or amended return for such eligible prior year must be filed on or before

July 6, 2026. As previously discussed in

section 2.06(2)(b) of this revenue procedure, small business taxpayers with an eligible prior year beginning in 2022 should

be aware that for purposes of OBBBA

§ 70302(f), § 6511 was not amended.

Accordingly, to be considered timely, a

revocation of an election under this section 5.03 made on an amended return for

such eligible prior year should be filed on

or before the earlier of: (i) July 6, 2026,

or (ii) the due date for filing a claim for

credit or refund for such eligible prior year

under § 6511 or § 301.6511(a)-1(a)(1) (the

date that is three years from the time the

return was filed for the eligible prior year

beginning in 2022). See also the examples

provided in section 3.03(3)(b)-(d) of this

revenue procedure.

(4) Duration of election. Once the

§ 280C(c)(2) election is revoked for an eligible prior year, an electing small business

taxpayer may not make a late § 280C(c)

(2) election under section 4 of this revenue

procedure for such eligible prior year.

SECTION 6. ELECTION TO

CAPITALIZE AND AMORTIZE

DOMESTIC RESEARCH OR

EXPERIMENTAL EXPENDITURES

UNDER § 174A(c)

.01 In general. For domestic research

or experimental expenditures paid or

incurred in a taxable year beginning after

December 31, 2024, a trade or business of

a taxpayer (applicant) may elect to capitalize and amortize all such expenditures

paid or incurred in the taxable year under

§ 174A(c), provided the applicant did not

change its method of accounting with

respect to domestic research or experimental expenditures under section 7.02(3)

of Rev. Proc. 2025-23, as modified by this

revenue procedure, for such taxable year.

.02 Manner of making election. The

election of the method under § 174A(c)

must be made by the due date (including extensions) of the Federal income tax

return for the taxable year, by attaching a

statement marked at the top “FILED PURSUANT TO SECTION 6.02 OF REV.

PROC. 2025-28” to the applicant’s orig-

401

inal Federal income tax return for the first

taxable year to which the election applies.

The § 174A(c) method so elected, and

the amortization period selected by the

applicant under § 174A(c)(1)(B), must be

adhered to in computing taxable income

for the taxable year in which the election is

made and for all subsequent taxable years

unless the applicant obtains the consent of

the Commissioner to change to a different

method of accounting, or to a different

amortization period. The election does not

apply to any domestic research or experimental expenditures paid or incurred

during any taxable year before the taxable

year for which the election in this section

6.02 is made. The election statement must

include the following information for each

applicant:

(1) the name and taxpayer identification number of the applicant;

(2) the taxable year in which the election is being made;

(3) a declaration that the applicant is

charging such expenditures to a research

or experimental capital account, and

amortizing such amount over a period of

not less than 60 months, beginning with

the month in which the applicant first realizes benefits from such expenditures, in

accordance with § 174A(c); and

(4) the number of months (not less than

60) selected for the amortization period.

.03 Exception for 2025 taxable years.

For a taxable year beginning after December 31, 2024, and before January 1, 2026,

an applicant that makes a change in method

of accounting to the § 174A(c) amortization method under section 7.02(3)(b) of

Rev. Proc. 2025-23, as modified by this

revenue procedure, for such taxable year

will be deemed to have properly made the

election provided in this section 6.

SECTION 7. MODIFICATION OF

SECTION 7 OF REV. PROC. 2025-23

Section 7 of Rev. Proc. 2025-23 is

modified to read as follows:

.01 Change for Domestic Research or

Experimental Expenditures under TCJA

§ 174.

(1) Description of change.

(a) In general. This change applies to a

taxpayer that wants to change its method

of accounting for domestic research

or experimental expenditures paid or

September 15, 2025

incurred in taxable years beginning before

January 1, 2025, to:

(i) comply with TCJA § 174; or

(ii) rely on interim guidance provided

in sections 3, 4, 5, 6, or 7 of Notice 202363, 2023-39 I.R.B. 919, as modified by

Notice 2024-12, 2024-5 I.R.B. 616.

(b) References. Section 13206(e) of

Public Law 115-97, 131 Stat. 2054 (Dec.

22, 2017), commonly known as the Tax

Cuts and Jobs Act (TCJA) provides that

the amendments made by § 13206 of the

TCJA apply to amounts paid or incurred

in taxable years beginning after December

31, 2021. Unless otherwise stated, references to “TCJA § 174” in this section 7

refer to § 174 as amended by § 13206(a) of

TCJA, but prior to amendment by § 70302

of Public Law 119-21, 139 Stat. 72 (July 4,

2025), commonly known as the One, Big,

Beautiful Bill Act (OBBBA), for amounts

paid or incurred in taxable years beginning

after December 31, 2024. All references in

this section 7 to “OBBBA § 70302” refer to

provisions of § 70302 of the OBBBA.

(c) Changes included in section 7.01(1)

(a) of this revenue procedure. The changes

described in section 7.01(1)(a) of this

revenue procedure include, among other

changes, a change:

(i) from capitalizing domestic research

or experimental expenditures that constitute specified research or experimental

(SRE) expenditures, as defined in TCJA

§ 174(b) and section 4.02(2) of Notice

2023-63, as applicable, to inventoriable

property or depreciable property and

recovering such expenditures through

cost of goods sold or depreciation, respectively, to capitalizing and amortizing such

expenditures under TCJA § 174(a) or section 3.02 of Notice 2023-63, as applicable; and

(ii) from treating a domestic research

or experimental expenditure that does not

meet the definition of an SRE expenditure

as an SRE expenditure subject to capitalization and amortization under TCJA

§ 174(a) or section 3.02 of Notice 202363, as applicable, to treating that expenditure under the appropriate provision of

the Code.

(2) Inapplicability. This change

described in section 7.01(1)(a) of this revenue procedure does not apply to:

(a) a change in the treatment of

acquired, leased, or licensed computer

September 15, 2025

software under Rev. Proc. 2000-50,

2000-2 C.B. 601, as modified by Rev.

Proc. 2007-16, 2007-1 C.B. 358 (see section 9.01 of this revenue procedure);

(b) a change in the treatment of research

or experimental expenditures under § 174

as in effect prior to the amendments

made by § 13206(a) of the TCJA, or software development expenditures, paid or

incurred in taxable years beginning before

January 1, 2022 (see section 9.01 of this

revenue procedure);

(c) a change to rely on interim guidance

provided in sections 8 and 9 of Notice

2023-63, as modified by Notice 2024-12,

2024-5 I.R.B. 616;

(d) a change from treating SRE expenditures paid or incurred by a taxpayer that

transfers related property (that is, property

with respect to which such SRE expenditures were paid or incurred) in a § 351

exchange as amortizable by the transferee

corporation following such exchange to

treating such SRE expenditures as amortizable by the transferor following such

exchange (as such a change is not a change

in method of accounting);

(e) a change in the treatment of domestic research or experimental expenditures

paid or incurred in taxable years beginning after December 31, 2024 (see section

7.02 of this revenue procedure); or

(f) a change in the treatment of foreign

research or experimental expenditures

(see section 7.03 of this revenue procedure).

(3) Manner of making change.

(a) Modified § 481(a) adjustment and

cut-off.

(i) In general. Except as provided in

section 7.01(3)(a)(ii) of this revenue procedure, the change under section 7.01(1)

(a) of this revenue procedure is made with

a modified § 481(a) adjustment that takes

into account only expenditures paid or

incurred in taxable years beginning after

December 31, 2021, and before January 1,

2025.

(ii) Exception for negative modified

§ 481(a) adjustment. If a change described

in section 7.01(3)(a)(i) of this revenue

procedure results in a modified § 481(a)

adjustment that is negative, the taxpayer

may instead choose to implement the

change on a cut-off basis.

(b) Form 3115 and required statement.

In completing a Form 3115, Application

402

for Change in Accounting Method, to

make the change in method of accounting

under section 7.01(1)(a) of this revenue

procedure, a taxpayer must include on an

attachment to Form 3115:

(i) a general description of the type of

domestic research or experimental expenditures included as SRE expenditures;

(ii) the taxable year(s) in which the

expenditures subject to the change were

paid or incurred by the applicant; and

(iii) a declaration that provides the reason for which the applicant is changing

its method of accounting under section

7.01(1)(a) of this revenue procedure. The

declaration must also state whether the

applicant is making the change on a cutoff basis under section 7.01(3)(a)(ii) of

this revenue procedure or with a modified

§ 481(a) adjustment that takes into account

only expenditures paid or incurred in taxable years beginning after December 31,

2021, under section 7.01(3)(a)(i) of this

revenue procedure.

(4) Transition rule. A taxpayer that

filed a Federal income tax return on or

before January 17, 2023, for a taxable year

beginning after December 31, 2021, is

deemed to have complied with the § 446

method change procedures and section

7.01 of this revenue procedure to change

its method of accounting for domestic

research or experimental expenditures

paid or incurred in the first taxable year

beginning after December 31, 2021, to

comply with TCJA § 174 if the taxpayer:

(a) reported the amount of research or

experimental expenditures that constitute

SRE expenditures paid or incurred for

such taxable year on Part VI of Form 4562,

Depreciation and Amortization, filed with

the Federal income tax return; and

(b) properly capitalized and amortized

such SRE expenditures in accordance

with TCJA § 174 for such taxable year.

(5) Certain eligibility rules inapplicable.

(a) In general. The eligibility rules in

section 5.01(1)(d) and (f) of Rev. Proc.

2015-13, 2015-5 I.R.B. 419, do not apply

to a change described in section 7.01(1)

(a) of this revenue procedure made by a

taxpayer for any taxable year beginning in

2023 or 2024.

(b) Changes made in successive taxable years. A taxpayer may make a

change described in section 7.01(1)(a) of

Bulletin No. 2025–38

this revenue procedure for a taxable year

beginning in 2023 or 2024, regardless of

whether the taxpayer made a change for

the same item for any previous taxable

year beginning in 2022, 2023, or 2024.

(6) Limited audit protection. A taxpayer does not receive audit protection

under section 8.01 of Rev. Proc. 2015-13

for the change under section 7.01(1)(a)

of this revenue procedure with respect to

expenditures paid or incurred in taxable

years beginning on or before December

31, 2021. Additionally, a taxpayer does

not receive audit protection under section

8.01 of Rev. Proc. 2015-13 for a change

under section 7.01(1)(a) of this revenue

procedure made for any taxable year

beginning in 2023, with respect to expenditures paid or incurred in the first taxable

year beginning after December 31, 2021,

if the taxpayer did not change its method

of accounting under section 7.01(1)(a)

in an effort to comply with TCJA § 174

for the first taxable year beginning after

December 31, 2021. See section 8.02(2)

of Rev. Proc. 2015-13.

(7) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

7.01 is “265.”

(8) No inference relating to expenditures paid or incurred in taxable years

prior to the first taxable year in which

TCJA § 174 became effective. No inference may be drawn from section 7.01 of

this revenue procedure regarding the treatment of expenditures paid or incurred in,

and changes in methods of accounting for,

taxable years prior to when TCJA § 174

was in effect, including issues relating

to the application of §§ 1.174-1, 1.1742, 1.174-3, and 1.174-4 for taxable years

prior to when TCJA § 174 was in effect.

(9) No ruling on method used. The consent granted under section 9 of Rev. Proc.

2015-13 for a change made under section

7.01(1)(a) of this revenue procedure is

not a determination by the Commissioner

that the new method of accounting is a

permissible method of accounting, nor

does it create any presumption that the

new method of accounting is a permissible method of accounting. The director

will ascertain whether the new method

of accounting is a permissible method of

accounting.

Bulletin No. 2025–38

(10) Contact information. For further

information regarding a change under this

section, contact the Office of the Associate

Chief Counsel (Income Tax and Accounting), Branch 7, at (202) 317-7005 (not a

toll-free number).

.02 Change to a § 174A Method for

Domestic Research or Experimental

Expenditures under the OBBBA, Including Certain Transition Options.

(1) Description of change. This change

applies to a taxpayer that wants to make a

change in method of accounting to which

this section applies for domestic research

or experimental expenditures to comply

with § 174A, as added to the Code by

OBBBA § 70302(a), and to make certain transition method changes under the

OBBBA.

(2) Definitions. For purposes of this

section 7.02, the following definitions

apply:

(a) Domestic research or experimental expenditures. “Domestic research

or experimental expenditures” means

research or experimental expenditures

paid or incurred by the taxpayer in connection with the taxpayer’s trade or business other than such expenditures which

are attributable to foreign research (within

the meaning of § 41(d)(4)(F)).

(b) Section 174A(a) deduction method.

The “§ 174A(a) deduction method” means

the method of accounting described in

§ 174A(a) that allows a deduction for any

domestic research or experimental expenditures which are paid or incurred by the

taxpayer during the taxable year. This

method of accounting is only applicable to

amounts paid or incurred in taxable years

beginning after December 31, 2024.

(c) Section 174A(c) amortization

method. The Ҥ 174A(c) amortization

method” means the method of accounting described in § 174A(c)(1) that allows

a taxpayer to elect to charge all domestic

research or experimental expenditures

paid or incurred during the taxable year

to capital account and to be allowed an

amortization deduction for such expenditures ratably over a period of not less than

60 months, beginning with the month in

which the taxpayer first realizes benefits

from such expenditures. This method of

accounting is only applicable to amounts

paid or incurred in taxable years beginning after December 31, 2024.

403

(d) Small business retroactive method.

The “small business retroactive method”

means the election provided in OBBBA

§ 70302(f)(1)(A) that a small business

taxpayer implements by using the change

in method of accounting provided under

OBBBA § 70302(f)(1)(C) and, thus,

treats OBBBA § 70302(e)(1) as providing

that the amendments made by OBBBA

§ 70302 apply to domestic research

or experimental expenditures paid or

incurred in taxable years beginning after

December 31, 2021, rather than December 31, 2024. Accordingly, this method of

accounting is applicable only to amounts

paid or incurred in taxable years beginning after December 31, 2021, and before

January 1, 2025. The small business retroactive method means either: (i) deducting

domestic research or experimental expenditures in the taxable year paid or incurred

under § 174A(a) or (ii) charging such

amounts to capital account and amortizing

such amounts under § 174A(c).

(e) Small business taxpayer. A “small

business taxpayer” means a taxpayer,

other than a tax shelter under § 448(d)

(3) and § 1.448-2(b)(2), that meets the

§ 448(c) and § 1.448-2(c) gross receipts

test for its first taxable year beginning

after December 31, 2024. The § 448(c)

gross receipts test is met if a taxpayer has

average annual gross receipts for the three

prior taxable years of $25,000,000 or less

(adjusted for inflation), as described in

§ 1.448-2(c). For a taxable year beginning

in 2025, the inflation-adjusted amount is

$31,000,000. See Rev. Proc. 2024-40,

2024-45 I.R.B. 1100.

(f) Recovery of unamortized amount

method. The “recovery of unamortized

amount method” means either method

of accounting described in OBBBA

§ 70302(f)(2)(A) that allows a taxpayer

to elect to recover the remaining unamortized amount by either: (i) amortizing

the remaining unamortized amount in

full in the first taxable year beginning

after December 31, 2024, under OBBBA

§ 70302(f)(2)(A)(i), or (ii) amortizing the

remaining unamortized amount ratably

over the 2-taxable year period beginning with the first taxable year beginning

after December 31, 2024, under OBBBA

§ 70302(f)(2)(A)(ii).

(g) Remaining unamortized amount.

The “remaining unamortized amount”

September 15, 2025

means, as of the first day of the taxpayer’s

first taxable year beginning after December 31, 2024, the remaining unamortized

amount of domestic research or experimental expenditures which were (i) paid

or incurred in taxable years beginning

after December 31, 2021, and before

January 1, 2025, and (ii) charged to capital account by the taxpayer under TCJA

§ 174 for such taxable years.

(3) Applicability. This change applies

to a taxpayer that wants to:

(a) for a taxable year beginning after

December 31, 2024, and before January

1, 2026, change to the § 174A(a) deduction method for domestic research or

experimental expenditures that are paid or

incurred in taxable years beginning after

December 31, 2024;

(b) for a taxable year beginning after

December 31, 2024, and before January

1, 2026, change to the § 174A(c) amortization method for domestic research or

experimental expenditures that are paid or

incurred in taxable years beginning after

December 31, 2024;

(c) in the case of a small business taxpayer, change to the small business retroactive method for a taxable year beginning before January 1, 2025, for which

an original Federal income tax return is

filed after August 28, 2025, for domestic

research or experimental expenditures

that were paid or incurred in taxable years

beginning after December 31, 2021, and

before January 1, 2025; or

(d) for the first taxable year beginning

after December 31, 2024 (or, in the case of

a taxpayer described in section 7.02(6)(b)

of this revenue procedure, for a taxable year

beginning after December 31, 2024, and

before January 1, 2026), change to use the

recovery of unamortized amount method

for the remaining unamortized amount.

(4) Inapplicability. This change does

not apply to:

(a) a change in method of accounting

for research or experimental expenditures

which are attributable to foreign research

(within the meaning of § 41(d)(4)(F)) (see

section 7.03 of this revenue procedure);

(b) except as provided in section

7.02(3)(c) and (d) of this revenue procedure, a change in method of accounting

for domestic research or experimental

expenditures taken into account under

TCJA § 174 and paid or incurred in a

September 15, 2025

taxable year beginning before January 1,

2025 (see section 7.01 of this revenue procedure);

(c) a late election under § 280C(c)(2),

or revocation of a § 280C(c)(2) election,

under OBBBA § 70302(f)(1)(D) and section 4 or 5, as applicable, of Rev. Proc.

2025-28;

(d) a small business OBBBA election

under OBBBA § 70302(f)(1)(A) and section 3 of Rev. Proc. 2025-28; or

(e) a change in method of accounting

under section 7.02(3)(a) or (b) of this revenue procedure for the first taxable year

beginning after December 31, 2024, in the

case of a small business taxpayer that either

(i) makes a change in method of accounting

to the small business retroactive method for

a taxable year beginning before January 1,

2025, under this section 7.02, or (ii) that

makes a small business OBBBA election

under section 3 of Rev. Proc. 2025-28,

if its method of accounting for domestic research or experimental expenditures

for the first taxable year beginning after

December 31, 2024, is consistent with the

method of accounting used in the immediately preceding taxable year, after taking

into account either (i) the change in method

of accounting to the small business retroactive method for the immediately preceding taxable year or (ii) the small business

OBBBA election, as applicable.

(5) Manner of making change.

(a) Year of change is the first taxable

year beginning after December 31, 2024,

or a taxable year beginning before January

1, 2025, in the case of a change described

in section 7.02(3)(c) of this revenue procedure.

(i) Cut-off basis. Changes under section 7.02(3)(a) and (b) of this revenue procedure are implemented on a cut-off basis.

A change under section 7.02(3)(d) of this

revenue procedure is also implemented

on a cut-off basis, such that the remaining unamortized amount continues to be

amortized under the recovery of unamortized amount method selected by the taxpayer under OBBBA § 70302(f)(2)(A).

(ii) Statement in lieu of a Form 3115.

The requirement of § 1.446-1(e)(3)(i) to

file a Form 3115, Application for Change in

Accounting Method, is waived and a statement in lieu of a Form 3115 is authorized

for a change under this section 7.02. If the

taxpayer is making the change under sec-

404

tion 7.02(3)(d) of this revenue procedure

for the same year of change as a change

under section 7.02(3)(a) or (b) of this revenue procedure, the changes may be made on

the same statement or separate statements.

Notwithstanding the definition of Form

3115 in section 3.07 of Rev. Proc. 2015-13,

2015-5 I.R.B. 419, the statement in lieu of a

Form 3115 that is permitted under this section 7.02 is considered a Form 3115 for purposes of the automatic change procedures

of Rev. Proc. 2015-13. The requirement

to file the duplicate copy, under section

6.03(1)(a) of Rev. Proc. 2015-13, is waived.

The statement must include the following

information for each applicant:

(A) the name and taxpayer identification number of the applicant;

(B) the designated automatic accounting method change number for this change

(see section 7.02(12) of this revenue procedure);

(C) if the applicant is changing its

method of accounting to the § 174A(a)

deduction method or the § 174A(c)

amortization method, a declaration that

the applicant is changing the method of

accounting for domestic research or experimental expenditures on a cut-off basis;

(D) if the applicant is changing its

method of accounting to the § 174A(a)

deduction method, a declaration that the

applicant is deducting such expenditures

under the § 174A(a) deduction method

beginning with the year of change;

(E) if the applicant is changing its

method of accounting to the § 174A(c)

amortization method, a declaration that:

(I) the applicant is charging such

expenditures to a domestic research or

experimental expenditures capital account

beginning with the year of change, and

amortizing such amount over a period of

not less than 60 months beginning with

the month in which the taxpayer first realizes benefits from such expenditures, in

accordance with the § 174A(c) amortization method; and

(II) the number of months (not less than

60) selected for the amortization period;

(F) In the case of a small business

taxpayer changing to the small business

retroactive method, a declaration that the

applicant:

(I) is not a tax shelter for its first taxable year beginning after December 31,

2024 (taking into account the election

Bulletin No. 2025–38

provided in § 1.448-2(b)(2)(iii)(B) if the

declaration in section 7.02(5)(f)(II) of this

revenue procedure is made);

(II) if the taxpayer has not previously

made the election provided in § 1.448-2(b)

(2)(iii)(B) and the taxpayer intends to make

such election for its first taxable year beginning after December 31, 2024, a declaration that the taxpayer will make the election provided in § 1.448-2(b)(2)(iii)(B) for

purposes of determining whether it is a tax

shelter for its first taxable year beginning

after December 31, 2024, on the original

Federal income tax return (including extensions) filed for such taxable year; and

(III) meets the gross receipts test, as

provided in § 448(c) and § 1.448-2(c),

for its first taxable year beginning after

December 31, 2024; and

(G) if the applicant is changing to a

recovery of unamortized amount method:

(I) a declaration regarding whether the

applicant is changing to either:

(i) amortize the remaining unamortized

amount in full in the first taxable year

beginning after December 31, 2024, under

OBBBA § 70302(f)(2)(A)(i); or

(ii) amortize the remaining unamortized

amount ratably over the 2-taxable year

period beginning with the first taxable year

beginning after December 31, 2024, under

OBBBA § 70302(f)(2)(A)(ii); and

(II) a declaration that the applicant is

changing the method of accounting for the

remaining unamortized amount on a cutoff basis.

(b) Year of change is later than the first

taxable year beginning after December

31, 2024.

(i) Modified § 481(a) adjustment and

cut-off basis. A change under section

7.02(3)(a) of this revenue procedure for

a year of change later than the first taxable year beginning after December 31,

2024, is made with a modified § 481(a)

adjustment, and must take into account

only domestic research or experimental

expenditures paid or incurred in taxable

years beginning after December 31, 2024.

A change under section 7.02(3)(b) of this

revenue procedure for a year of change

later than the first taxable year beginning

after December 31, 2024, is implemented

on a cut-off basis.

(ii) Special rule for short 2025 taxable

years. In the case of a taxpayer described

in section 7.02(6)(b) of this revenue proce-

Bulletin No. 2025–38

dure, a change under section 7.02(3)(d) of

this revenue procedure is made with a modified § 481(a) adjustment and the remaining

unamortized amount is amortized under the

recovery of unamortized amount method

selected by the taxpayer under OBBBA

§ 70302(f)(2)(A).

(iii) Statement in lieu of Form 3115.

The requirement of § 1.446-1(e)(3)(i) to

file a Form 3115, Application for Change

in Accounting Method, is waived and a

statement in lieu of a Form 3115 is authorized for a change under this section 7.02.

If the taxpayer is making the change under

7.02(3)(d) of this revenue procedure for

the same year of change as a change under

section 7.02(3)(a) or (b) of the revenue

procedure, the changes may be made on

the same statement or separate statements.

Notwithstanding the definition of Form

3115 in section 3.07 of Rev. Proc. 2015-13,

2015-5 I.R.B. 419, the statement in lieu of

a Form 3115 that is permitted under this

section 7.02 is considered a Form 3115 for

purposes of the automatic change procedures of Rev. Proc. 2015-13. The requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is

waived. The statement must include the

information described in section 7.02(5)(a)

(ii) of this revenue procedure; however, in

lieu of the information described in section

7.02(5)(a)(ii)(C) of this revenue procedure,

the applicant should include a declaration

that the applicant is changing the method

of accounting for domestic research or

experimental expenditures with a modified § 481(a) adjustment, and provide such

modified § 481(a) adjustment.

(6) Transition rules.

(a) Change to the § 174A(a) deduction method or the § 174A(c) amortization

method. A taxpayer that filed a Federal

income tax return on or before September

15, 2025, for a taxable year beginning after

December 31, 2024, is deemed to have

complied with the general procedures under

§ 446(e), § 1.446-1(e), and this section 7.02 to

change its method of accounting for domestic research or experimental expenditures

paid or incurred in taxable years beginning

after December 31, 2024, to the § 174A(a)

deduction method or the § 174A(c) amortization method, as applicable, to comply with

§ 174A if the taxpayer either:

(i) properly deducted such domestic

research or experimental expenditures in

405

accordance with the § 174A(a) deduction

method for such taxable year; or

(ii) reported the amount of domestic

research or experimental expenditures

paid or incurred for such taxable year

on Part VI of Form 4562, Depreciation

and Amortization, filed with the Federal

income tax return, and properly capitalized

and amortized such domestic research or

experimental expenditures in accordance

with the § 174A(c) amortization method

for such taxable year.

(b) Change to the recovery of unamortized amount method. A taxpayer that filed

a Federal income tax return on or before

September 15, 2025, for a taxable year

beginning after December 31, 2024, is

deemed to have complied with the general procedures under § 446(e), § 1.4461(e), and this section 7.02 to change its

method of accounting for the remaining

unamortized amount to the recovery of

unamortized amount method, if the taxpayer either:

(i) amortized the remaining unamortized amount in full in the first taxable year

beginning after December 31, 2024; or

(ii) amortizes the remaining unamortized amount ratably over the 2-taxable

year period beginning with the first taxable year beginning after December 31,

2024.

(7) Certain eligibility rules inapplicable.

(a) In general. The eligibility rule in

section 5.01(1)(d) of Rev. Proc. 201513, 2015-5 I.R.B. 419, does not apply to

a change described in section 7.02(3) or

7.02(6) of this revenue procedure for taxable years beginning before January 1,

2026.

(b) Special rule. For purposes of determining whether the eligibility rule in

section 5.01(1)(f) of Rev. Proc. 2015-13,

2015-5 I.R.B. 419, is satisfied for a change

described in section 7.02(3) or 7.02(6)

of this revenue procedure, the following

changes in method of accounting are not

taken into account:

(i) any change in method of accounting for domestic research or experimental

expenditures made under § 174, prior to

amendment by OBBBA § 70302, for a taxable year beginning before January 1, 2025;

(ii) a change in method of accounting

described in section 7.02(6)(a) or (b) of

this revenue procedure; or

September 15, 2025

(iii) a change under section 7.02(3)(a)

or (b) of this revenue procedure for the

first taxable year beginning after December 31, 2024.

(8) Limited audit protection. A taxpayer

does not receive audit protection under

section 8.01 of Rev. Proc. 2015-13 for a

change under this section 7.02 with respect

to expenditures paid or incurred in taxable

years beginning before January 1, 2025.

See section 8.02(2) of Rev. Proc. 2015-13.

(9) Special rule for changes to the

§ 174A(c) amortization method. A change

under 7.02(3)(b) of this revenue procedure

for a taxable year beginning after December 31, 2024, and before January 1, 2026,

will constitute an election by the taxpayer

under § 174A(c) for the year of change for

purposes of section 6 of Rev. Proc. 2025-28.

(10) No inference relating to expenditures paid or incurred in taxable years

prior to the first taxable year beginning

before January 1, 2025. No inference may

be drawn from this section 7.02 regarding the treatment of expenditures paid or

incurred in, and changes in methods of

accounting for, taxable years in which

TCJA § 174 was in effect, including issues

relating to the application of Notice 202363, 2023-39 I.R.B. 919, as modified by

Notice 2024-12, 2024-5 I.R.B. 616.

(11) No ruling on method used. The

consent granted under section 9 of Rev.

Proc. 2015-13 for a change made under

this section 7.02 is not a determination by

the Commissioner that the new method

of accounting is a permissible method of

accounting, nor does it create any presumption that the new method of accounting is a permissible method of accounting.

The director will ascertain whether the

new method of accounting is a permissible method of accounting.

(12) Designated automatic accounting

method change numbers. The designated

automatic accounting method change

number for a change under this section

7.02 is “273.”

(13) Contact information. For further

information regarding a change under this

section, contact the Office of the Associate

Chief Counsel (Income Tax and Accounting), Branch 7 at (202) 317-7005 (not a

toll-free number).

.03 Change for Foreign Research or

Experimental Expenditures.

(1) Description of change.

September 15, 2025

(a) In general. This change applies to a

taxpayer (applicant) that wants to change

its method of accounting for foreign SRE

expenditures or foreign research or experimental expenditures, as applicable, paid

or incurred in taxable years beginning

after December 31, 2021, to:

(i) comply with TCJA § 174 for expenditures paid or incurred in taxable years

beginning before January 1, 2025;

(ii) rely on interim guidance provided

in sections 3, 4, 5, 6, or 7 of Notice 202363, 2023-39 I.R.B. 919, as modified by

Notice 2024-12, 2024-5 I.R.B. 616; or

(iii) comply with the changes made to

§ 174 by the OBBBA for expenditures

paid or incurred in taxable years beginning after December 31, 2024, for taxable

years beginning before January 1, 2026.

(b) Changes included in section 7.03(1)

(a) of this revenue procedure. The changes

described in section 7.03(1)(a)(i) and (ii)

of this revenue procedure include, among

other changes:

(i) a change from capitalizing SRE

expenditures, as defined in TCJA § 174(b)

and section 4.02(2) of Notice 2023-63, as

applicable, to inventoriable property or

depreciable property and recovering such

expenditures through cost of goods sold or

depreciation, respectively, to capitalizing

and amortizing such expenditures under

TCJA § 174(a) or section 3.02 of Notice

2023-63, as applicable; and

(ii) from treating an expenditure that

does not meet the definition of SRE

expenditures as an SRE expenditure subject to capitalization and amortization

under TCJA § 174(a) or section 3.02 of

Notice 2023-63, as applicable, to treating

such expenditure under the appropriate

provision of the Code.

(2) Inapplicability. This change

described in section 7.03(1)(a) of this revenue procedure does not apply to:

(a) a change in the treatment of

acquired, leased, or licensed computer

software under Rev. Proc. 2000-50,

2000-2 C.B. 601, as modified by Rev.

Proc. 2007-16, 2007-1 C.B. 358 (see section 9.01 of this revenue procedure);

(b) a change in the treatment of research

or experimental expenditures under § 174,

as in effect prior to the amendments

made by § 13206(a) of the TCJA, or software development expenditures, paid or

incurred in taxable years beginning before

406

January 1, 2022 (see section 9.01 of this

revenue procedure);

(c) a change to rely on interim guidance

provided in sections 8 and 9 of Notice

2023-63, as modified by Notice 2024-12;

(d) a change from treating SRE expenditures paid or incurred by a taxpayer that

transfers related property (that is, property

with respect to which such SRE expenditures were paid or incurred) in a § 351

exchange as amortizable by the transferee

corporation following such exchange, to

treating such SRE expenditures as amortizable by the transferor following such

exchange (as such a change is not a change

in method of accounting);

(e) a change in the treatment of domestic research or experimental expenditures

(as defined in § 174A(b)) paid or incurred

in taxable years beginning after December

31, 2024, or, in the case of a small business

taxpayer (as defined in section 7.02(2)(e)

of this revenue procedure), a change in

the treatment of such expenditures paid or

incurred in taxable years beginning after

December 31, 2021 (see section 7.02 of

this revenue procedure); or

(f) a change in the treatment of domestic research or experimental expenditures

paid or incurred in taxable years beginning after December 31, 2021, and before

January 1, 2025 (see section 7.01 of this

revenue procedure).

(3) Manner of making change.

(a) Modified § 481(a) adjustment and

cut-off.

(i) In general. Except as provided in

section 7.03(3)(a)(ii) of this revenue procedure, the changes under section 7.03(1)

(a)(i) and (ii) of this revenue procedure are

made with a modified § 481(a) adjustment

that takes into account only expenditures

paid or incurred in taxable years beginning after December 31, 2021, and before

January 1, 2025. For the first taxable year

beginning after December 31, 2024, the

change under 7.03(1)(a)(iii) of this revenue procedure is made on a cut-off basis.

For all other taxable years, the change

under 7.03(1)(a)(iii) of this revenue procedure is made with a modified § 481(a)

adjustment that takes into account only

expenditures paid or incurred in taxable

years beginning after December 31, 2024.

(ii) Exception for negative modified

§ 481(a) adjustment. If a change described

in section 7.03(3)(a)(i) or (ii) of this rev-

Bulletin No. 2025–38

enue procedure for SRE expenditures

under TCJA § 174 results in a modified

§ 481(a) adjustment that is negative, the

taxpayer may instead choose to implement the change on a cut-off basis.

(b) Form 3115 and required statement.

In completing a Form 3115, Application

for Change in Accounting Method, to

make the change in method of accounting

under section 7.03(1)(a) of this revenue

procedure, the applicant must include on

an attachment to Form 3115:

(i) a general description of the type

of expenditures included as foreign SRE

expenditures or foreign research or experimental expenditures, as applicable;

(ii) the taxable year(s) in which the

expenditures subject to the change were

paid or incurred by the applicant; and

(iii) a declaration that provides the

reason for which the applicant is changing its method of accounting under section 7.03(1)(a) of this revenue procedure.

The declaration must also state whether

the applicant is making the change on a

cut-off basis or with a modified § 481(a)

adjustment under section 7.03(3)(a) of

this revenue procedure.

(4) Transition rule. A taxpayer that filed

a Federal income tax return on or before

January 17, 2023, for a taxable year beginning after December 31, 2021, is deemed

to have complied with the § 446 method

change procedures and section 7.03 of this

revenue procedure to change its method of

accounting for foreign research or experimental expenditures paid or incurred

in the first taxable year beginning after

December 31, 2021, to comply with TCJA

§ 174 if the taxpayer:

(a) reported the amount of research or

experimental expenditures that constitute

SRE expenditures paid or incurred for

such taxable year on Part VI of Form 4562,

Depreciation and Amortization, filed with

the Federal income tax return; and

(b) properly capitalized and amortized

such SRE expenditures in accordance

with TCJA § 174 for such taxable year.

(5) Certain eligibility rules inapplicable.

(a) In general. The eligibility rules in

section 5.01(1)(d) and (f) of Rev. Proc.

2015-13, 2015-5 I.R.B. 419, do not apply

to a change described in section 7.03(1)

(a)(i) or (ii) of this revenue procedure

made by a taxpayer for any taxable year

Bulletin No. 2025–38

beginning in 2023 or 2024. The eligibility

rules in section 5.01(1)(d) and (f) of Rev.

Proc. 2015-13 do not apply to a change

described in section 7.03(1)(a)(iii) of this

revenue procedure made by a taxpayer

for the first taxable year beginning after

December 31, 2024.

(b) Changes made in successive taxable years. A taxpayer may make a

change described in section 7.03(1)(a)

(i) or (ii) of this revenue procedure for a

taxable year beginning in 2023 or 2024,

regardless of whether the taxpayer made

a change for the same item for any previous taxable year beginning in 2022,

2023, or 2024.

(6) Limited audit protection. A taxpayer does not receive audit protection

under section 8.01 of Rev. Proc. 2015-13

for the change under section 7.03(1)(a)

(i) or (ii) of this revenue procedure with

respect to expenditures paid or incurred

in taxable years beginning on or before

December 31, 2021. Additionally, a taxpayer does not receive audit protection

under section 8.01 of Rev. Proc. 201513 for a change under section 7.03(1)

(a)(i) or (ii) of this revenue procedure

made for any taxable year beginning

in 2023, with respect to expenditures

paid or incurred in the first taxable year

beginning after December 31, 2021, if

the taxpayer did not change its method

of accounting under section 7.01(1)(a)

in an effort to comply with TCJA § 174

for the first taxable year beginning after

December 31, 2021. Finally, a taxpayer

does not receive audit protection under

section 8.01 of Rev. Proc. 2015-13 for

a change under section 7.03(1)(a)(iii) of

this revenue procedure with respect to

expenditures paid or incurred in taxable

years beginning before December 31,

2024. See section 8.02(2) of Rev. Proc.

2015-13.

(7) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under section 7.03 of

this revenue procedure is “274.”

(8) No inference relating to expenditures paid or incurred in taxable years

prior to the first taxable year in which

TCJA § 174 became effective. No inference may be drawn from section 7.03

of this revenue procedure regarding the

treatment of expenditures paid or incurred

407

in, and changes in methods of accounting

for, taxable years prior to when TCJA

§ 174 was in effect, including issues

relating to the application of §§ 1.174-1,

1.174-2, 1.174-3, and 1.174-4 for taxable

years prior to when TCJA § 174 was in

effect.

(9) No ruling on method used. The consent granted under section 9 of Rev. Proc.

2015-13 for a change made under section

7.03(1)(a)(i) or (ii) of this revenue procedure is not a determination by the Commissioner that the new method of accounting is a permissible method of accounting,

nor does it create any presumption that the

new method of accounting is a permissible method of accounting. The director

will ascertain whether the new method

of accounting is a permissible method of

accounting.

(10) Contact information. For further

information regarding a change under this

section, contact the Office of Associate

Chief Counsel (Income Tax and Accounting), Branch 7 at (202) 317-7005 (not a

toll-free number).

SECTION 8. RELIEF PROVIDED TO

AN ELIGIBLE ENTITY

.01 Scope. The filing-and-furnishing

extensions provided by section 8.02 of

this revenue procedure apply to an eligible

partnership, S corporation, C corporation,

individual, trust, estate, or exempt organization described in section 8.03 of this

revenue procedure for the taxable year

described in section 8.04 of this revenue

procedure.

.02 Relief. The IRS will treat the

timely filing of Form 1065, including

the furnishing of any applicable Schedules K-1, by a partnership, Form 1120-S,

including the furnishing of any applicable Schedules K-1, by an S corporation,

Form 1120 (or another form in the Form

1120 series) by a C corporation, Form

1040 by an individual, Form 1041,

including the furnishing of any applicable Schedules K-1, by a trust or estate, or

Form 990-T by an exempt organization

described in section 8.03 of this revenue

procedure, as a timely and appropriately

filed request for a six-month extension of

the due date to file the Form 1065, Form

1120-S, Form 1120 (or another form

in the Form 1120 series), Form 1040

September 15, 2025

(Schedule C), Form 1041, or Form 990T, as applicable. An eligible partnership,

S corporation, C corporation, individual,

trust, estate, or exempt organization that

timely filed a tax return (without regard

to the extension of time provided by this

revenue procedure) may file a superseding tax return, as well as furnish Schedules K-1, as applicable, before the expiration of the extended due date.

.03 Eligible entities. The filing-and-furnishing extensions provided

in section 8.02 of this revenue procedure are available only to a partnership,

S corporation, C corporation, individual, trust, estate, or exempt organization that (1) timely filed a tax return and

furnished any applicable Schedules K-1

prior to application of this revenue procedure before September 15, 2025, (2)

did not otherwise file for an extension,

and (3) files a superseding tax return and

furnishes any applicable Schedules K-1

on or before the date that is six months

after the taxpayer’s due date (excluding

any extension) solely for purposes of (i)

making the small business OBBBA election provided in section 3 of this revenue

procedure, (ii) making the late § 280C(c)

(2) election provided in section 4 of this

revenue procedure, (iii) revoking a prior

§ 280C(c)(2) election under section 5

of this revenue procedure, or (iv) making a change in method of accounting

described in section 7.02(3)(c) of Rev.

Proc. 2025-23, as modified by this revenue procedure.

.04 Eligible taxable year. The filing-and-furnishing extensions provided in

this section 8 apply only to a partnership,

S corporation, C corporation, individual,

trust, estate, or exempt organization taxable year beginning during 2024 that ended

prior to September 15, 2025, and for which

the due date (excluding any extension)

for the return of tax for such taxable year

would be before September 15, 2025.

.05 Procedure. To take advantage of

the relief provided in this section 8, an eligible partnership, S corporation, C corporation, individual, trust, estate, or exempt

organization must file a superseding tax

return in the same manner as the original

return and write on the top of the superseding tax return “REVENUE PROCEDURE 2025-28.”

September 15, 2025

SECTION 9. EFFECT ON OTHER

DOCUMENTS

This revenue procedure modifies section 7 of Rev. Proc. 2025-23.

SECTION 10. EFFECTIVE DATE

.01 In general. Sections 3 through 6

and section 8 of this revenue procedure are

effective August 28, 2025. Sections 7.02

and 7.03 of Rev. Proc. 2025-23, as modified by this revenue procedure, are effective for a Form 3115 filed after August 28,

2025. Except as otherwise provided under

this section 10, section 7.01 of Rev. Proc.

2025-23, as modified by this revenue procedure, is effective for a Form 3115 filed

after August 28, 2025.

.02 Transition rule for taxpayers that

properly file the duplicate copy of Form

3115 before November 15, 2025, for a

change described in section 7.01(1)(a) of

Rev. Proc. 2025-23, prior to modification

by this revenue procedure.

(1) In general. If, before November 15, 2025, a taxpayer properly files

the duplicate copy of a Form 3115 for a

change described in section 7.01(1)(a) of

Rev. Proc. 2025-23, prior to modification by this revenue procedure, the Form

3115 is not subject to the effective date

provided in section 10.01 of this revenue

procedure for section 7.01 of Rev. Proc.

2025-23, as modified by this revenue

procedure.

(2) For domestic research or experimental expenditures, option to implement

change as described in section 7.01 of Rev.

Proc. 2025-23, as modified by this revenue procedure. If, before September 15,

2025, a taxpayer properly files the duplicate copy of a Form 3115 for a change in

method of accounting described in section

7.01(1)(a) of Rev. Proc. 2025-23, prior to

modification by this revenue procedure,

that continues to be eligible for the automatic change procedures under section

7.01(1)(a) of Rev. Proc. 2025-23, as modified by this revenue procedure, but has not

filed its timely filed (including extensions)

original Federal income tax return for the

year of change implementing the change,

the taxpayer may choose to implement the

change as described in either (1) section

7.01(1)(a) of Rev. Proc. 2025-23, prior to

408

modification by this revenue procedure, or

(2) section 7.01(1)(a) of Rev. Proc. 202523, as modified by this revenue procedure,

but not both.

(3) For foreign research or experimental expenditures, option to implement

change as described in section 7.03 of Rev.

Proc. 2025-23, as modified by this revenue procedure. If, before September 15,

2025, a taxpayer properly files the duplicate copy of a Form 3115 for a change in

method of accounting described in section

7.01(1)(a) of Rev. Proc. 2025-23, prior to

modification by this revenue procedure,

that continues to be eligible for the automatic change procedures under section

7.03 of Rev. Proc. 2025-23, as modified

by this revenue procedure, but has not

filed its timely filed (including extensions)

original Federal income tax return for the

year of change implementing the change,

the taxpayer may choose to implement the

change as described in either (1) section

7.01(1)(a) of Rev. Proc. 2025-23, prior to

modification by this revenue procedure, or

(2) section 7.03 of Rev. Proc. 2025-23, as

modified by this revenue procedure, but

not both.

SECTION 11. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of 1995

(44 U.S.C. §§ 3501-3520) (PRA) generally requires that a Federal agency obtain

the approval of the Office of Management

and Budget (OMB) before collecting

information from the public, whether such

collection of information is mandatory,

voluntary, or required to obtain or retain

a benefit. An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless it displays a valid control number

assigned by the Office of Management

and Budget.

The collections of information in this

revenue procedure are in sections 3, 4, 5,

6, 7 and 8. This information is necessary

and will be used to determine whether the

taxpayer properly changed to a permitted method of accounting, properly made

small business elections under OBBBA

§ 70302(f)(1), properly elected to capitalize and amortize its domestic research

or experimental expenditures under

Bulletin No. 2025–38

§ 174A(c), or properly elected to deduct

certain unamortized amounts under

OBBBA § 70302(f)(2). The collection of

information is required for the taxpayer

to obtain consent to change its method

of accounting or make elections under

OBBBA § 70302(f).

These collection requirements are

included in the OMB Control Number

1545-0074 for individual filers, 1545-

Bulletin No. 2025–38

0123 for business filers, 1545-0092 for

trust and estate filers, and 1545-0047 for

tax-exempt filers, in accordance with the

PRA (44 U.S.C. § 3507).

SECTION 12. DRAFTING

INFORMATION

of Associate Chief Counsel (Income Tax

& Accounting). For further information

regarding this revenue procedure, please

contact the Office of the Associate Chief

Counsel (Income Tax and Accounting),

Branch 7 at (202) 317-7005 (not a toll-free

number).

The principal author of this revenue

procedure are personnel from the Office

409

September 15, 2025

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

­effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds that

the same principle also applies to B, the

earlier ruling is amplified. (Compare with

modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

has caused, or may cause, some confusion. It is not used where a position in a

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously published ruling and points out an essential

difference between them.

Modified is used where the substance

of a previously published position is being

changed. Thus, if a prior ruling held that a

principle applied to A but not to B, and the

new ruling holds that it applies to both A

and B, the prior ruling is modified because

it corrects a published position. (Compare

with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.

This term is most commonly used in a ruling

that lists previously published rulings that

are obsoleted because of changes in laws or

regulations. A ruling may also be obsoleted

because the substance has been included in

regulations subsequently adopted.

Revoked describes situations where the

position in the previously published ruling

is not correct and the correct position is

being stated in a new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the substance of a prior ruling, a combination of

terms is used. For example, modified and

superseded describes a situation where the

substance of a previously published ruling

is being changed in part and is continued

without change in part and it is desired to

restate the valid portion of the previously

published ruling in a new ruling that is

self contained. In this case, the previously

published ruling is first modified and then,

as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations

to show that the previous published rulings will not be applied pending some

future action such as the issuance of new

or amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

The following abbreviations in current

use and formerly used will appear in

material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2025–38

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

i

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

September 15, 2025

Numerical Finding List1

Bulletin 2025–38

Announcements:

2025-19, 2025-29 I.R.B. 191

2025-20, 2025-31 I.R.B. 271

2025-21, 2025-32 I.R.B. 312

2025-24, 2025-36 I.R.B. 359

2025-25, 2025-36 I.R.B. 360

Notices:

2025-32, 2025-27 I.R.B. 1

2025-33, 2025-27 I.R.B. 4

2025-34, 2025-27 I.R.B. 6

2025-35, 2025-27 I.R.B. 8

2025-31, 2025-28 I.R.B. 14

2025-36, 2025-30 I.R.B. 192

2025-37, 2025-30 I.R.B. 198

2025-40, 2025-31 I.R.B. 266

2025-39, 2025-32 I.R.B. 308

2025-28, 2025-34 I.R.B. 316

2025-41, 2025-34 I.R.B. 325

2025-42, 2025-36 I.R.B. 351

2025-43, 2025-36 I.R.B. 356

2025-44, 2025-37 I.R.B. 386

2025-45, 2025-37 I.R.B. 388

2025-38, 2025-38 I.R.B. 392

Proposed Regulations:

REG-125710-18, 2025-30 I.R.B. 263

REG-107459-24, 2025-32 I.R.B. 313

REG-132805-17, 2025-35 I.R.B. 342

REG-108822-25, 2025-36 I.R.B. 361

Revenue Procedures:

2025-22, 2025-30 I.R.B. 200

2025-24, 2025-31 I.R.B. 273

2025-25, 2025-32 I.R.B. 311

2025-26, 2025-33 I.R.B. 315

2025-28, 2025-38 I.R.B. 393

Revenue Rulings:

2025-13, 2025-28 I.R.B. 11

2025-14, 2025-32 I.R.B. 300

2025-15, 2025-32 I.R.B. 302

2025-16, 2025-35 I.R.B. 342

2025-17, 2025-36 I.R.B. 349

2025-18, 2025-37 I.R.B. 365

Treasury Decisions:

10021, 2025-31 I.R.B. 264

10031, 2025-32 I.R.B. 304

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2025–52, dated December 22, 2025.

1

September 15, 2025

ii

Bulletin No. 2025–38

Finding List of Current Actions on

Previously Published Items1

Bulletin 2025–38

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2025–52, dated December 22, 2025.

1

Bulletin No. 2025–38

iii

September 15, 2025

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

INTERNAL REVENUE BULLETIN

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