Information required with R&D refund claims
The guidance specifies taxpayers making a refund claim for the R&D credit must include the following information:
- All the business components to which the R&D credit claim relates for that year
- For each business component, each of the following:
- All research activities performed
- All individuals who performed each research activity
- All the information each individual sought to discover
- The total qualified employee wage expenses, total qualified supply expenses, and total qualified contract R&D expenses for the claim year (which may be done using Form 6765, “Credit for Increasing Research Activities”)
According to the guidance, the information required must be provided in a written statement signed under penalty of perjury when the refund claim is filed, rather than through the production of documents. However, if a taxpayer provides documents, such as a credit study, the taxpayer must specify in its statement the exact page(s) in the documents that supports a specific fact. If the taxpayer submits separate written statements, each one must be signed under penalty of perjury.
Under the guidance, refund claims that do not include the requisite information will be treated as deficient and the IRS will not consider the taxpayer as having filed a refund claim. Failure to file a valid and timely refund claim could jeopardize the taxpayer’s ability to obtain a refund or file a refund suit.
The IRS will provide a grace period until Jan. 10, 2022, before requiring this information to be included with timely filed IRC Section 41 R&D credit claims for refund. Once the grace period expires, a one-year transition period will begin during which taxpayers will have 30 days to perfect an R&D credit claim for refund prior to the IRS’ final determination on the claim. It is likely that the IRS will provide additional information to help taxpayers comply with the new procedures.
Looking ahead
These procedures place new and onerous requirements on filing refund claims for R&D credits that don’t exist for any other refund claims. Given the lack of clarity regarding precisely what information will satisfy the procedures and the cost and burden of providing the required information, many taxpayers that otherwise are entitled to refunds based on R&D credit claims might forgo filing a claim. If Congress enacts new R&D credit provisions to incentivize certain behaviors, these new procedures could frustrate congressional intent.