The IRS issued Interim Guidance that likely will increase the expense and burden of filing research credit refund claims. Research credits in original returns are not affected by the Interim Guidance.
On January 3, 2022, the IRS issued Interim Guidance and Frequently Asked Questions setting forth the procedure IRS personnel must use to determine whether a research credit refund claim is legally sufficient. In a prior alert, we discussed Field Attorney Legal Advice 20214101F (October 15, 2021) in which the IRS Chief Counsel set forth his interpretation of the rules determining whether a research credit refund claim is legally sufficient. The Interim Guidance makes the Field Attorney Legal Advice operational. The bottom line is that filing a research credit refund claim will cost a taxpayer more because of the documentation that must be filed with the claim. The increased cost likely will influence the taxpayer's decision about whether to file the claim.
The Interim Guidance and Frequently Asked Questions provide a specific time period within which a taxpayer filing a research credit refund claim must document its research. The Interim Guidance labels the documentation as "five essential pieces of information": (i) identification of each product or production process to which the claim relates, (ii) for each such product or production process, identification of all research activities performed, (iii) identification of all individuals who performed each research activity,...
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