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2022. Additionally, after the expira-
tion of the grace period, there will be a
one-year transition period during which
taxpayers will have 30 days to perfect
a research credit claim for refund prior
to the IRS’s final determination on
the claim.
Editor’s note: In January, the IRS
posted FAQs and issued a memorandum
to IRS staff in which it expanded the
period for perfecting a claim from 30 to
45 days and provided details on how the
IRS will process claims under Sec. 41.

Legal requirements for a
research credit refund claim
expenses, and total qualified contract In the Chief Counsel memorandum,
Credits Against Tax research expenses for the claim the IRS cites Regs. Sec. 301.6402-2 as
year (this may be done using Form its legal basis to require these additional
Research credit refund 6765, Credit for Increasing Research disclosures. The regulation section pro-
claims: New documentation Activities). vides procedural and formatting require-
requirements Further, the taxpayer must submit ments for making a claim of refund,
On Sept. 17, 2021, field attorneys from with a claim a declaration signed under including when the claim can be filed,
the IRS Office of Chief Counsel issued the penalties of perjury verifying that the the forms to be used, the filing location,
memorandum 20214101F to key IRS facts provided are accurate. signature requirements, and other filing
personnel within the Large Business & Under this guidance, failure to in- requirements. Also, under Regs. Sec.
International (LB&I) and Small Busi- clude the required items listed above 301.6402-2 lies the “specificity require-
ness/Self-Employed (SB/SE) divisions will result in a deficient or invalid refund ment,” which requires taxpayers to set
of the IRS. The Chief Counsel memo- claim, which permits the IRS to reject forth in detail each ground upon which
randum advises that taxpayers must the claim without being subject to re- a credit or refund is claimed and facts
provide additional information to make view by any federal court. Inclusion of sufficient to apprise the IRS of the exact
a valid Sec. 41 research credit refund the required information only establishes basis of the claim.
claim on an amended tax return. In the a procedurally valid claim but does not The aim of the specificity require-
memorandum, the IRS describes the prevent the IRS from examining the ment is to provide the IRS adequate
minimum level of factual detail required claim in its normal course, either before notice of both the nature of the claim
to be included with the return to estab- or after payment of the requested refund. and sufficient facts to support the basis
lish a valid refund claim, including these The motivation behind these new of the claim. As the term “sufficient” is
essential pieces of information: requirements is to avoid paying refunds subjective in nature, taxpayers filing a
■ Identify all the business components to taxpayers with frivolous claims lack- refund claim for the research credit have
to which the Sec. 41 research credit ing factual support and to assist the historically opted only to attach a state-
claim relates for that year. IRS in allocating its limited resources. ment to the amended return indicating
■ For each business component: The Chief Counsel memorandum also the reason for the amendment, along
● Identify all research activities recommends that examining agents with an amended Form 6765. As such,
PHOTO BY DRA_SCHWARTZ/ISTOCK ■ Provide the total qualified employee so as not to waive the ability to enforce in this guidance, nor have they attached
taxpayers have not historically provided
ensure the requirements have been satis-
performed;
●
the level of detail suggested by the IRS
fied before further examining the claim,
Identify all individuals who
performed each research activity;
and
these requirements under Regs. Sec.
entire studies (which could include
●
thousands of pages of quantitative sup-
301.6402-2.
Identify all the information each
In a separate news release, the IRS
port, project descriptions, and other
individual sought to discover.
technical documentation gathered to
clarified that these new requirements
wage expenses, total qualified supply
February 2022 9
www.thetaxadviser.com apply to any claims filed after Jan. 10, support the research credit).