Why are some Big 4 accounting firms skipping the 280C election on Form 6765 for R&E credit under IRC 41 (with 174 amortization)?

This is actually a great question that reveals a lot about the current confusion in tax strategy between accounting firms. The 280C election is essentially a choice between: 1) taking a reduced credit amount with no adjustment to deductions, or 2) taking the full credit amount but reducing your deductions by the amount of the credit. In theory, these should basically net out to the same result for most companies. Since the TCJA and subsequent changes to Section 174 requiring capitalization and amortization of R&E expenses, there's been some disagreement about optimal strategy. Some accounting firms believe that not making the 280C election gives more flexibility with the Section 174 amortization requirements - especially regarding the timing of deductions. The reality is that you're right - Section 174 amortization requirements apply regardless of the R&E credit or the 280C election. The election itself doesn't technically reduce the credit - it's just a different way of accounting for it that should theoretically result in the same net tax benefit.

I went through this exact same confusion last year! After spending hours trying to figure it out, I found this tool called taxr.ai (https://taxr.ai) that helped me understand the technical differences between these elections. It turns out my situation was more complicated than I thought because we had foreign R&E expenses too. The tool analyzed our specific situation and showed how the 280C election interacted with our international structure. The analysis actually showed that in our case, NOT making the election was better because of how it interacted with our GILTI calculations. What was most helpful is that they explained everything in plain English while still showing all the technical details. You might want to check it out since your situation sounds similar to what I faced.

Just wanted to follow up here. I did end up trying taxr.ai and wow - it cleared up so much confusion for our situation! I've been beating my head against the wall trying to understand why our tax advisors weren't making the 280C election. Turns out in our specific situation (mix of domestic and foreign R&E with specific state activities), NOT making the election saves us nearly $230K over the 5-year amortization period. The tool showed exactly how the interaction between IRC 41 and 174 played out in our specific fact pattern. What really helped was seeing the year-by-year projections with both approaches side by side. Our CFO finally understood why our new accounting firm was taking this approach. This honestly saved me from having to create a massive spreadsheet model that would have taken weeks.

If you're struggling to get clear answers from your accounting firm on this 280C election question, I highly recommend using Claimyr (https://claimyr.com) to get through to the IRS directly. I had a similar issue last year with conflicting advice on R&E credits, and after weeks of getting nowhere, I used their service to connect with an IRS agent who specializes in business credits. I was super skeptical at first, but they got me connected to the IRS in under 30 minutes when I had previously spent HOURS on hold. The agent walked me through the official position on 280C elections post-TCJA. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c The clarity from speaking directly with the IRS ended up saving us from making a costly mistake based on outdated advice. Might be worth trying if you need an authoritative answer.

OK I need to eat my words here. After my skeptical comment above, I decided to try Claimyr just to prove it wouldn't work. I was completely wrong. Not only did I get through to an IRS agent in about 20 minutes (after previously spending 2+ hours on hold myself), but I actually got transferred to someone in the business credits department. The agent confirmed there's been significant confusion about 280C elections since the TCJA changes to Section 174. She explained that while the election itself doesn't impact the requirement to amortize R&E expenses under 174, the timing differences can create meaningful tax planning opportunities depending on your specific situation. The service literally saved me an entire day of being on hold. I'm still shocked it actually worked.

Something no one has mentioned yet - the 280C election is irrevocable for the tax year. So if you make it, you're stuck with it even if you later realize the other approach would have been better. I think this is why some firms are defaulting to NOT making the election. It preserves more options, especially as we wait for additional guidance on how section 174 amortization interacts with various other code sections.

I had my company's tax advisor on the phone yesterday and specifically asked about this! She said the decision about making the 280C election is getting more complex now that 174 expenses must be amortized. Her explanation was that it depends on several factors: 1. Your effective tax rate 2. Whether you're in an NOL position 3. Your projected tax positions over the next 5 years 4. State tax considerations 5. International tax implications if you have foreign R&E She also mentioned that some of the Big 4 disagree about the "optimal approach" because they're using different economic models to project the long-term impact. So it's less about the technical requirements and more about strategic tax planning under uncertainty.

This is a really timely discussion - I'm dealing with the exact same issue right now! Our company has been going back and forth on the 280C election for months. What I've learned from our research is that the "optimal" approach really depends on your specific tax profile. For companies with significant R&E expenses that are now subject to the 174 amortization requirements, the cash flow timing differences between the two approaches can be substantial. One thing that hasn't been mentioned yet is the impact on state taxes. Some states don't conform to federal treatment of R&E credits or the 280C election, which can create additional complexity. We discovered that in our case, not making the 280C election actually resulted in better state tax treatment even though the federal impact was roughly neutral. I'd also add that given the ongoing uncertainty around potential legislative changes to Section 174 (there's been talk of repealing the amortization requirement), some firms may be taking a more conservative "wait and see" approach by not making the irrevocable election. Have you considered running both scenarios through a detailed projection model? That's what finally helped us understand why our new advisor was recommending against the election - the 5-year NPV analysis showed a meaningful difference we hadn't initially recognized.