BDO Seidman Seeks Further Simplification of Rules for Electing Reduced Research Credit

Hurst Richard A

Thank you for speaking with Jonathan Forman and myself last week in connection with proposed regulations that amend the regulations concerning taxpayers who make the election to claim the reduced research credit (i.e., the "280C election"). In that conversation, Jonathan and I reiterated our concern that the proposed regulations may create an undue administrative complexity for some members of a controlled group because under those rules each member must file a Form 6765 to make the 280C election. For example, for each member of a controlled group with 50 members to make the 280C election, 50 Forms 6765 would be required to be filed. This consequence may be particularly awkward with respect to certain members of a controlled group filing a consolidated income tax return (i.e., a subsidiary corporation who has authorized a common parent corporation to include it in a consolidated return filed on behalf of the subsidiary). In other words, replicating a Form 6765 50 times is a less efficient solution than attaching a tabular information disclosure identifying respective members making the 280C election.

Accordingly, we suggested that the proposed regulations be changed to allow for some mechanism(s) to reduce this possible complexity, and we suggested that such a mechanism would be particularly practicable with respect to certain members of a controlled group filing a consolidated income tax return. As regards the latter, we see (at least) two possible approaches:

To ensure compliance with Treasury Department regulations, we wish to inform you that, unless expressly stated otherwise in this communication (including any attachments) any tax advice that may be contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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