Following requests from taxpayers, the IRS and Treasury department have issued new regulations regarding the election to use the Alternative Simplified Calculation (ASC) method on amended tax returns. As of February 2015 taxpayers can claim the ASC on an amended tax return if in previous years they did not claim the section 41 Research Tax Credit on an originally filed or amended return.
Prior to the new final regulations, taxpayers were not permitted to claim the ASC method on an amended return. Taxpayers had to use the regular method, which required the establishment of a base year. To determine a base year, taxpayers had to go back up to 20 years, which ended up being costly and time consuming, and in some cases, generating a smaller tax credit than then ASC method.
While issuing new regulation on the ASC method, the IRS has also provided clarification regarding the section 280 (c) election, which allows a taxpayer to make an irrevocable election to reduce research expenses rather than section 174 expenses. The IRS provides that a 280 (c) election must be made on an originally filed return and cannot be made in later years on an amended return.