Section 174A Election Deadline: What Inland Empire Small Businesses Must File by July 6, 2026
The Section 174A election deadline is the single most time-sensitive tax opportunity most small business owners in the Inland Empire have never heard of. If your S-Corp, partnership, or LLC capitalized domestic research and experimental (R&E) costs in 2022, 2023, or 2024, the window to retroactively claim full expensing closes on July 6, 2026 — and for many pass-through owners, that’s tens of thousands of dollars sitting unclaimed on a prior-year return.
Small business taxpayers with domestic research and experimental (R&E) expenses incurred in 2022, 2023, or 2024 have until July 6, 2026 to retroactively elect full Section 174A expensing instead of the old 5-year capitalization rule. The election is made through amended returns, an Administrative Adjustment Request (AAR), or a Form 3115 accounting method change — miss it, and the refund opportunity for those years is gone for good.
As of July 2026, the IRS Taxpayer Advocate Service is actively flagging this Section 174A election deadline because so few eligible small businesses have acted on it. Written and reviewed by Adham Abadier, CPA — a California Board of Accountancy licensed Certified Public Accountant (License #158599) and founder of Catalyst CPA Corporation. If your Inland Empire S-Corp, partnership, or LLC capitalized domestic research costs under the old TCJA Section 174 rules between 2022 and 2024, this window closes in days, not weeks — and for many pass-through owners it’s worth $25,000 to $180,000+ in newly unlocked deductions (IRS Rev. Proc. 2025-28). If you’re evaluating whether your entity structure itself is still optimal while you’re in the returns, our S-Corp election review service can be bundled into the same engagement.
Key Takeaways
- Retroactive Section 174A election deadline: July 6, 2026 for applicable tax years 2022-2024 (IRS Taxpayer Advocate Service, June 2026)
- Eligibility requires average annual gross receipts of $25 million or less (inflation-adjusted) over the prior 3 years (Rev. Proc. 2025-28, §3.02)
- Three election paths: amended return/superseding return, AAR (for partnerships under BBA), or automatic Form 3115 method change
- 2024 filers who already deducted domestic R&E in full may be deemed to have made the election — no separate statement required
- California does not conform to Section 174A — the federal election has zero effect on your FTB return
- Missing July 6 forfeits retroactive relief for 2022-2023 tax years permanently under the statute-driven election window
⚠️ S-Corp & Partnership Extended Returns Due September 15, 2026 — 73 Days Away
If you’re already amending a prior-year 1120-S or 1065 for the R&E election, don’t lose sight of your current-year extended deadline. Late-filed S-Corp/Partnership returns trigger a $235-per-shareholder/partner, per-month penalty under §6699 and §6698 — plus Q3 estimated payments (1040-ES, 540-ES, 1120-W, CA Form 100-ES) are also due.
What the Section 174A Election Deadline of July 6, 2026 Actually Requires
Under the One Big Beautiful Bill Act (OBBBA), Congress repealed the TCJA-era mandate that forced businesses to capitalize and amortize domestic R&E costs over 5 years (or 15 years for foreign research). New Section 174A restores immediate expensing for tax years beginning after December 31, 2024. But Congress also gave a narrow window of relief: eligible small business taxpayers can retroactively apply Section 174A expensing to domestic R&E paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2025 — generally 2022, 2023, and 2024.
Why the Section 174A Election Deadline Falls on July 6
The IRS set the deadline at the later of the normal refund statute or a fixed date tied to Rev. Proc. 2025-28, which the IRS Taxpayer Advocate Service confirms lands on July 6, 2026 for most calendar-year small business taxpayers making the retroactivity election. Some taxpayers may have an earlier deadline if their normal 3-year refund statute for a given year closes sooner — the July 6 date is the outer boundary, not a guarantee.
What Happens If You Miss the Deadline
The 2022 and 2023 tax years fall out of reach entirely once their statute of limitations closes without an election on file. For most calendar-year filers, that means the 2022 return (originally due April 2023, refund statute closing around April 2026) may already be at risk depending on extensions filed. 2024 relief is somewhat more forgiving because many businesses are deemed to have elected if they already deducted domestic R&E in full on an original 2024 return under §3.03 of Rev. Proc. 2025-28. Business owners who need a full business tax preparation review of 2022-2024 filings before amending should start that process this week.
Who Qualifies for the Section 174A Election Deadline as a Small Business Taxpayer
Not every business gets this retroactive door. The IRS defines an eligible \”small business taxpayer\” using the same gross receipts test found elsewhere in the code.
The Gross Receipts Test
Your average annual gross receipts for the three tax years preceding the applicable year must be $25 million or less (inflation-adjusted; roughly $31 million for recent years per IRS Rev. Proc. 2024-40 adjustments), measured under IRC §448(c). This small business taxpayer gross receipts test is applied at the entity level for S-Corps and partnerships and at the consolidated group level for corporations with related members.
Three Ways to Make the Election
- Amended return or superseding return — File Form 1120-X, 1120-S with amended box checked, or 1040-X depending on entity type, attaching the statement required under §3.03 of Rev. Proc. 2025-28. Our amended tax return team handles this filing path daily.
- Administrative Adjustment Request (AAR) — Required for partnerships subject to the Bipartisan Budget Act (BBA) centralized audit regime rather than a standard amended Form 1065.
- Automatic Form 3115 method change — For taxpayers who haven’t yet filed their first tax year beginning after December 31, 2024, this path retroactively adjusts the method without amending each prior year individually.
| Election Path | Who Uses It | Key Requirement / Deadline |
|---|---|---|
| Amended / Superseding Return | S-Corps, C-Corps, sole proprietors, most individual filers | File by July 6, 2026 with §3.03 election statement attached |
| Administrative Adjustment Request (AAR) | BBA partnerships (most multi-member LLCs taxed as partnerships) | Same July 6, 2026 window; must follow AAR procedures, not a standard 1065-X |
| Form 3115 Automatic Method Change | Taxpayers who have not yet filed their first post-2024 return | Attach to the first tax year beginning after 12/31/2024; no separate 2022-2024 amendments needed |
Not sure if your Riverside County S-Corp even qualifies as a \”small business taxpayer\” under the $25M gross receipts test — or which of the three election paths fits your entity type before July 6? We’ll run the numbers with you this week.
📞 (951) 223-1826 | Book a free 30-min diagnostic →
California Nonconformity and What the Section 174A Election Deadline Saves an S-Corp Owner
California never adopted the TCJA’s mandatory Section 174 capitalization rule to begin with, and under California Franchise Tax Board guidance, California also does not conform to the new federal Section 174A expensing regime. That California FTB nonconformity means your retroactive federal election changes only your federal return — your California return likely already allowed current-year R&E deduction treatment, so there’s no matching state amendment needed, but you must keep separate federal/state depreciation-style tracking going forward.
A Corona-Based S-Corp Example
Consider a Corona-based custom software development S-Corp, Valley Data Solutions, that incurred $200,000 in domestic R&E wages and contractor costs in 2022. Under the old TCJA rule, only the half-year-convention first-year amortization applied — roughly $20,000 deducted in 2022, with $180,000 stuck in capitalized limbo. By making the retroactive §174A election before the Section 174A election deadline of July 6, 2026, the full $200,000 becomes deductible in 2022, freeing up an additional $180,000 deduction that flows through the K-1 to the sole shareholder. At a 32% federal marginal rate, that shareholder nets roughly $57,600 in additional refunded federal tax once the amended 1040-X is processed — real cash back for a decision that costs nothing but a July 6 filing. Corona and greater Riverside County business owners facing a similar fact pattern should run their numbers immediately.
“The biggest mistake I see is business owners assuming their CPA automatically made this election on the 2024 return. Some are deemed elections — most aren’t. If you had any domestic R&E in 2022, 2023, or 2024 and haven’t explicitly confirmed the §3.03 statement is on file, you need to check this week, not next month.”
Frequently Asked Questions About the Section 174A Election Deadline
What is the Section 174A election deadline for July 6, 2026?
It’s the IRS-set deadline for eligible small business taxpayers to elect retroactive Section 174A treatment of domestic research and experimental expenses paid or incurred in tax years 2022 through 2024, per Rev. Proc. 2025-28.
Who qualifies as a small business taxpayer for this election?
A taxpayer with average annual gross receipts of $25 million or less (inflation-adjusted) over the prior three tax years, tested under IRC §448(c) at the entity or consolidated-group level.
How do I actually make the election?
File an amended or superseding return with the required §3.03 statement, submit an AAR if you’re a BBA partnership, or file an automatic Form 3115 method change if you haven’t yet filed your first post-2024 return.
Does California conform to Section 174A?
No. California never required TCJA-style capitalization of R&E expenses and does not conform to the new federal Section 174A expensing rules, so this federal election has no effect on your FTB filing.
What if I already filed my 2024 return and deducted R&E in full?
You may be deemed to have made the §3.03 election automatically, with no separate statement required, provided you meet the other requirements of Rev. Proc. 2025-28.
What happens if I miss the Section 174A election deadline?
You permanently lose the ability to retroactively apply Section 174A to any tax year whose refund statute of limitations has closed — most commonly affecting the 2022 tax year first.
Is this election available to S-Corps and partnerships, or just individuals?
It’s available to any eligible small business taxpayer regardless of entity type — sole proprietors, S-Corps, partnerships, and C-Corps that meet the gross receipts test can all make the election.
FREE FOR INLAND EMPIRE BUSINESS OWNERS
Free S-Corp Election Analysis (SE-tax savings calc)
Adham will personally review your 2022-2024 R&E expenses, confirm whether your entity meets the $25M gross receipts test, calculate the potential refund from a retroactive §174A election, and check whether your S-Corp structure and reasonable-compensation setup are still optimal.
Don’t Let the Section 174A Election Deadline Pass Without Acting
With the July 6, 2026 deadline just days out, waiting isn’t a neutral choice — it’s an active decision to forfeit any retroactive refund tied to your 2022 tax year. If your Moreno Valley or Riverside County business had domestic R&E costs between 2022 and 2024, or if you’re weighing whether your S-Corp election and reasonable compensation setup still make sense while you’re in the returns anyway, our team at Catalyst CPA Corporation can run the numbers and file the amended return or Form 3115 before the window closes. Explore our broader tax planning resources, check service coverage across the Inland Empire locations we serve, or reach out through our S-Corp election guidance page or call (951) 223-1826 to get this handled this week, not next month.
About the Author
By Adham Abadier, CPA — California CPA License #158599, QuickBooks Gold ProAdvisor.
Adham founded Catalyst CPA Corporation to bring big-firm tax expertise to small businesses across Moreno Valley and the greater Inland Empire. He specializes in S-Corp planning, retroactive election opportunities like Section 174A, and hands-on QuickBooks cleanup for growing local companies.
📞 (951) 223-1826 | ✉️ adham@catalyst-cpa.com | 13114 Yellowwood St, Moreno Valley, CA 92553 | Meet our team
Last reviewed: July 3, 2026 by Adham Abadier, CPA (CA #158599).
Disclaimer
This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. Tax laws, IRS revenue procedures, and California FTB conformity rules change frequently and are applied differently based on individual facts and circumstances. Consult with a licensed CPA, such as Catalyst CPA Corporation, before making any decision regarding the Section 174A election deadline or amending a prior-year return. Use of this content does not create a client relationship with Catalyst CPA Corporation.
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