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ABA Seeks Proposed Regs on Research Credit Refund Claims

JAN. 6, 2022

ABA Seeks Proposed Regs on Research Credit Refund Claims

DATED JAN. 6, 2022

January 6, 2022

Hon. Charles P. Rettig
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Re: Comments on Chief Counsel Memorandum 20214101F

Dear Commissioner Rettig:

Enclosed please find comments on Chief Counsel Memorandum 20214101F concerning Research Credit Refund Claims. These comments are submitted on behalf of the Section of Taxation and have not been reviewed or approved by the House of Delegates or the Board of Governors of the American Bar Association. Accordingly, they should not be construed as representing the position of the American Bar Association.

The Section of Taxation would be pleased to discuss these comments with you or your staff.


Julie A. Divola
Chair, Section of Taxation
American Bar Association
Washington, DC


Hon. Lily Batchelder, Assistant Secretary (Tax Policy), Department of the Treasury

Mark Mazur, Deputy Assistant Secretary (Tax Policy), Department of the Treasury

Krishna P. Vallabhaneni, Tax Legislative Counsel, Department of the Treasury

Wendy Friese, Tax Policy Advisor, Office of Tax Policy, Department of the Treasury

William M. Paul, Principal Deputy Chief Counsel and Deputy Chief Counsel (Technical), Internal Revenue Service

Drita Tonuzi, Deputy Chief Counsel (Operations), Internal Revenue Service

Nikole Flax, Commissioner, Large Business and International Division, Internal Revenue Service

Darren Guillot, Commissioner, Small Business/Self-Employed Division, Collection, Internal Revenue Service

De Lon Harris, Commissioner, Small Business/Self-Employed Division, Examination, Internal Revenue Service

Kathryn Zuba, Associate Chief Counsel (Procedure & Administration), Internal Revenue Service


Comments on Chief Counsel Memorandum 20214101F

These comments (“Comments”) are submitted on behalf of the American Bar Association Section of Taxation (the “Section”) and have not been reviewed or approved by the House of Delegates or Board of Governors of the American Bar Association. Accordingly, they should not be construed as representing the position of the American Bar Association.

Principal responsibility for preparing these Comments was exercised by Roland Barral, Caitlin Bradley, Tony Coughlan, Thomas Greenaway, Rochelle Hodes, Kevin Jacobs, Sharon Katz-Pearlman, Robert Kovacev, and Tyrone Montague. The Comments were reviewed by Ellen McElroy and John Colvin of the Committee on Government Submissions and Kurt Lawson, Vice Chair for Government Relations for the Section.

Although members of the Section may have clients who might be affected by the federal tax principles addressed by these Comments, no member who has been engaged by a client (or who is a member of a firm or other organization that has been engaged by a client) to make a government submission with respect to, or otherwise to influence the development or outcome of one or more specific issues addressed by, these Comments has participated in the preparation of the portion (or portions) of these Comments addressing those issues. Additionally, while the Section's diverse membership includes government officials, no such official was involved in any part of the drafting or review of these Comments.

Contact: Robert J. Kovacev
(202) 662-4555

Date: January 6, 2022


On October 15, 2021, the Internal Revenue Service (the “Service”) released Chief Counsel Memorandum 20214101F1 concerning “I.R.C. § 41 Research Credit Refund Claims” (the “Memorandum”). The Memorandum provides specific instructions on how a taxpayer will meet the specificity requirement of Treas. Reg. § 301.6402-2(b)(1) when filing a research credit refund claim. The documentation focuses on aligning qualified research expenses to business components and the employees performing the research. We offer these comments in response to the invitation to comment included in the press release that accompanied the Memorandum.2

The Section appreciates the opportunity to submit comments in conjunction with the Memorandum. These Comments are intended to outline important procedural and tax policy issues arising from the Memorandum, including the new requirements for what should be included in a research credit refund claim. The Section anticipates offering more detailed comments, but the Section will not be in a position to do so until after the January 10, 2022 effective date of the Memorandum. The purpose of these initial Comments is to recommend that the Service issue proposed regulations to implement these section 41 documentation requirements and postpone implementation and enforcement of the new requirements in the Memorandum until the Section and other stakeholders have had sufficient opportunity to analyze those new requirements and engage constructively with the Service.

The Memorandum states that to be a valid research credit refund claim, the claim must, at a minimum:

  • Identify all the business components to which the research credit claim relates for that year;

  • For each business component: identify all research activities performed; all individuals who performed each research activity; and all the information each individual sought to discover; and

  • Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year (this may be done using Form 6765, Credit for Increasing Research Activities).

The Memorandum also emphasizes the impact of the statute of limitations, expressing concern that a taxpayer could timely file a deficient claim but perfect it after the statute of limitations expires. The Memorandum recommends that the Service reject a “deficient” refund claim (i.e., not compliant with the enhanced requirements of the Memorandum) “before initiating an audit (or otherwise actively considering the refund claim on its merits)” to “eliminate the likelihood that a court will find the Service waived the specificity requirement under Treas. Reg. § 301.6402–2(b)(1).” The Memorandum also specifically notes that rejecting the claim might “preclude a taxpayer from amending or perfecting their refund claim if the refund claim failed to follow procedural requirements and the statute of limitations to file a new claim for refund has expired.”


Requiring the inclusion of such an extensive amount of documentation at the time of filing the claim is a significant departure from prior practice. We understand the Service's interest in managing its limited resources by obtaining information with an initial filing to determine if the research credit refund claim should be paid or further reviewed. However, the Memorandum imposes substantive requirements that could result in substantial compliance costs and would prevent certain filings. We believe the best way to achieve balance between the interests of the Service and taxpayers would be to issue proposed regulations establishing any new filing requirements.

Issuing proposed regulations would provide a number of benefits to both the Service and taxpayers. Because proposed regulations are subject to notice and comment under the Administrative Procedure Act,3 it would provide an opportunity for meaningful discussion between the Service and stakeholders. Proposed regulations also would require a consideration of the costs and benefits of the new requirements under the Paperwork Reduction Act of 19954 and, depending on the nature of the regulations, also Executive Orders 128665 and 13563.6 In addition, unlike regulations, the Memorandum is non-authoritative guidance. The Service has an interest in having taxpayers fully comply with any new procedural requirements for refund claims, but without authoritative guidance, there is a risk that it might not be followed consistently. There also is a risk that the Memorandum would not be accorded deference7 under Chevron8 and/or Auer,9 and thus, not followed should the Memorandum be subject to challenge. The Service, taxpayers, and our tax system, which is based on voluntary compliance, all benefit from rules that are consistently applied and followed.

The Section also believes that the Memorandum raises a number of important questions, which we believe should be considered before any changes in refund claims are implemented. For example:

1. Whether the Memorandum is consistent with Rev. Proc. 2011-42,10 which permits taxpayers with a large volume of research and development projects to use statistical sampling to reduce the burden on taxpayers and examination teams. Statistical sampling enhances the efficient review of research and development projects for both the government as well as taxpayers. While the Service recently issued a non-binding FAQ addressing sampling in the context of the Memorandum, we believe that formal guidance, such as Revenue Procedure, is needed to encourage and promote the use of statistical sampling. We would be happy to offer recommendations for enhancing the use of statistical sampling with refund claims.

2. How can taxpayers challenge a refund claim that the Service finds deficient? Any new procedural requirements for refund claims could run afoul of the Taxpayer Bill of Rights,11 which provides that “Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.”12

3. Whether the Memorandum's new requirements effectively re-impose the specific recordation requirement of REG-105170-97,13 which was modified by the contemporaneous documentation requirement of T.D. 8930,14 both of which ultimately were rejected by REG-112991-0115 and T.D. 9104.16

The Section further recommends that the Service delay implementation of the Memorandum, which is currently set to take effect on January 10, 2022, to provide the Section and other stakeholders an appropriate amount of time to evaluate the Memorandum and provide comments, and requests that the Service instruct its revenue agents and service center employees to refrain from applying the Memorandum's new requirements until the Memorandum takes effect.


1Dated September 17, 2021.

2The Service recently issued FAQs and interim guidance, addressing implementation of the Memorandum and inviting further comment. See LB&I-04-0122-0001 (Jan. 3, 2022) &

3Pub. L. No. 79-404, 60 Stat. 237.

4Pub. L. No. 104-13, 109 Stat. 163.

5Regulatory Planning and Review (Sept. 30, 1993), 58 Fed. Reg. 51,735 (Oct. 4, 1993).

6Improving Regulation and Regulatory Review (Jan. 18, 2011), 76 Fed. Reg. 3,821 (Jan. 21, 2011). The analytical (e.g., cost-benefit) requirements of Executive Orders 12866 and 13563 apply to tax regulations that are significant regulatory actions pursuant to Memorandum of Agreement — The Department of the Treasury and the Office of Management and Budget Review of Tax Regulations under Executive Order 12866 (April 11, 2018), as amended by Addendum to the Memorandum of Agreement — The Department of the Treasury and the Office of Management and Budget Review of Tax Regulations under Executive Order 12866 (Dec. 11, 2020).

7See Chief Counsel Notice 2019-006 (Sept. 17, 2019) (advising Chief Counsel attorneys about the Policy Statement on the Tax Regulatory Process issued on March 5, 2019).

8Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Chevron deference relates to an agency's interpretation of a statute.

9Auer v. Robbins, 519 U.S. 452 (1997). Auer deference relates to an agency's interpretation of its own regulations.

102011-37 I.R.B. 318.

11Publication 1 (Rev. Sept. 2017); see also I.R.C. § 7803(a)(3), added by Consolidated Appropriations Act, 2016, Division Q, § 401, Pub. L. No. 114-113, 129 Stat. 2243, 3117.

12The Section notes that while the Service indicated in the recently-released FAQs that during the one-year transition period it would notify taxpayers of deficient claims, it has made no such indication for years after the transition period.

1363 Fed. Reg. 66,503 (Dec. 2, 1998).

1466 Fed. Reg. 280 (Jan. 3, 2001).

1566 Fed. Reg. 66,362 (Dec. 28, 2001).

1669 Fed. Reg. 22 (Jan. 2, 2004).


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