IRS Issues Final Regulations Relating to Election and Calculation of Alternative Simplified Credit (T.D. 9528)

The IRS has issued final regulations relating to the election and calculation of the alternative simplified credit. The final regulations implement changes to the credit for increasing research activities under Code Sec. 41 made by the Tax Relief and Health Care Act of 2006 (P.L. 109-432). Proposed and temporary regulations were published by the Treasury Department and the IRS on June 17, 2008, relating to the alternative simplified credit (ASC). Written and electronic comments responding to the 2008 regulations were received and a public hearing was held on September 28, 2008, with respect to the regulations. The 2008 regulations are adopted as revised by this Treasury decision, after consideration of the written and electronic comments and the statements made at the public hearing.

The 2008 regulations were issued to provide guidance on the election and calculation of the ASC. Before the issuance of the 2008 regulations, identical election procedures existed for the alternative incremental research credit (AIRC). The 2008 regulations extended these election procedures to the ASC. The 2008 regulations also provided that extensions of time to make or revoke the election for both the AIRC and the ASC would not be granted under Reg. §301.9100-3.

Comments had been made that these provisions of the 2008 regulations were too restrictive and commenters had asked that they be excluded from the final regulations. The Treasury Department and the IRS believed that both tax administration and fairness were best served by the adoption of the same election procedures for ASC as for AIRC elections. The election may be made or revoked each tax year by obtaining the consent of the Commissioner by filing Form 6765, Credit for Increasing Research Activities, relating to the ASC or AIRC credit, and attaching the form to the taxpayer’s timely filed original return for the year to which it applies. The ASC election, similar to the AIRC election, may not be made or revoked on an amended return. The final regulations also provide that an extension of time to make or revoke an election would not be granted underReg. §301.9100-3.

The Treasury Department and the IRS agreed with one commenter that calculating the ASC for short tax years on a daily rather than on a monthly basis provides a more accurate calculation and removed any uncertainty with respect to including a partial month in making a monthly calculation. The final regulations generally require that short tax years be prorated by the number of days in the year rather than the number of months for tax years ending after June 9, 2011. Returns filed for tax years ending after December 31, 2006, and before June 9, 2011, and for which the period of limitations has not expired, may be amended to apply the daily calculation for short tax years in lieu of the monthly calculation for short tax years.

T.D. 9528, 2011FED ¶47,024

Other References:

Code Sec. 41

CCH Reference – 2011FED ¶4351

CCH Reference – 2011FED ¶4359

CCH Reference – 2011FED ¶4360A

CCH Reference – 2011FED ¶4360AG

Tax Research Consultant

CCH Reference – TRC BUSEXP: 54,158


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