The One Big Beautiful Bill Act (OBBBA) brought welcome relief to taxpayers by restoring full deductions of domestic research and experimental (R&E) expenditures. But in doing so, it may have also created a new and unintended opportunity. By not incorporating the long-standing “reasonableness” requirement into the new Section 174A, the legislation leaves practitioners and taxpayers alike wondering what “reasonableness” still means when it comes to claiming the Section 41 research credit.
In their Tax Notes Federal article, Grant Thornton’s John Andress, Dennis St. Martin, Monica Bambury and Kevin Benton explore the implications of this subtle but significant omission. They trace the evolution of the “reasonableness requirement” from its origins in the 1954 IRC, through landmark cases like Driggs and Suder, to its repeal under the Tax Cuts and Jobs Act and its continued absence under the OBBBA’s new Section 174A.
For tax specialists, this discussion is more than academic. Without clear statutory language, taxpayers face uncertainty when evaluating compensation, classifying research activities and substantiating claims under Section 41. The result could be a larger pool of qualified research expenditures, and with it a heightened need for defensible documentation and risk assessment.
Grant Thornton advisors’ analysis offers both historical clarity and practical foresight, guiding taxpayers on how to navigate the current landscape while anticipating possible challenges when defending research credit claims.
Read (PDF - 636 KB) the full article to understand how the absence of “reasonableness” could reshape the research credit conversation and why being proactive now may safeguard future positions.
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