ai

Read this article if you are a CFO, business owner, tax director, controller, investor, or CTO at a company with research and development expenses, and you want to help ensure compliance while maximizing your tax benefits.  

The research and development (R&D) tax landscape is undergoing significant transformation in 2026. While some provisions restore previous benefits, others introduce heightened compliance requirements that demand immediate attention from businesses claiming R&D deductions and credits.

The return of immediate expensing

Beginning with tax years after December 31, 2024, the One Big Beautiful Bill Act (OBBBA), passed in July 2025, reverses the five-year amortization requirement for domestic research expenses that had been in effect since 2022. Companies can once again deduct domestic R&D costs immediately, restoring a critical cash-flow advantage and eliminating one of the most burdensome compliance challenges of recent years. 

However, this relief comes with an important caveat: foreign research expenses remain subject to 15-year amortization. Businesses must continue to maintain separate tracking systems to distinguish between domestic and foreign R&D activities—a requirement that adds complexity to what might otherwise seem like a straightforward regulatory rollback.

Heightened IRS scrutiny and documentation standards 

While immediate expensing returns, the documentation burden intensifies. The IRS has significantly increased its scrutiny of R&D claims, and this trend shows no signs of abating in 2026. Companies must now provide more detailed, specific explanations of their research activities, demonstrate how each project qualifies for the tax credit, and clearly link expenses to qualifying activities. 

The agency now expects documentation that is: 

• Specific and organized 
• Based on robust, contemporaneous data collection throughout the research process 
• Supported by comprehensive records that can substantiate claims 

With audit activity on the rise, insufficient or vague records carry substantially higher risk than in previous years. While year-end compilation of documentation remains acceptable, it must be grounded in thorough, ongoing data collection and record-keeping systems established during the actual research activities. The key is ensuring that supporting documentation is comprehensive and can withstand scrutiny, regardless of when it is formally assembled. 

Updated Form 6765 requirements

Critical reporting changes have been incorporated into Form 6765, which now requires more upfront disclosure. After years of reviewing weak refund claims and resolving disputes, the IRS has pushed for clearer descriptions, better substantiation, and greater transparency. As of 2026, these enhanced expectations are the standard. 

Businesses must provide a comprehensive explanation of their R&D components, activities, and qualified expenses with their filing—not after questions arise. While the IRS extended the transition period for meeting updated R&D credit documentation standards to January 10, 2026, this grace period doesn't soften the underlying requirements. The new standards are permanent, and claims that fail to meet them will face greater pushback. 

Retroactive relief for 2022 – 2024

The legislation doesn't ignore businesses that were forced to amortize domestic R&D expenses during 2022 through 2024. Companies can take advantage of retroactive relief by deducting all remaining unamortized amounts in 2025, or by splitting the deduction between 2025 and 2026. 

Small businesses—defined as those with average gross receipts of $31 million or less—receive an additional option: they can amend their 2022 – 2024 returns to apply immediate expensing retroactively. This window remains open until the earlier of July 4, 2026, or statute of limitations, providing small businesses with meaningful opportunities to recapture lost cash flow from prior years. 

Strategic implications 

The 2026 changes present a dual reality: improved cash flow through immediate expensing, coupled with a substantially more rigorous compliance environment. The financial benefit is clear, but it comes with strings attached. 

Companies that invest in robust tracking systems and maintain contemporaneous documentation will be best positioned to maximize available incentives while withstanding IRS scrutiny. Those who delay implementing stronger documentation practices risk disallowances, penalties, and significant compliance costs down the road. 

The message is clear: take advantage of the restored immediate expensing benefit but do so with meticulous attention to documentation. The era of informal R&D record-keeping is definitively over. 

Payroll tax credit for early-stage startups

For early-stage startups that may not yet have federal income tax liability, the Section 41(h) payroll tax credit provides an essential mechanism to monetize research activities immediately. A Qualified Small Business (QSB)—defined as an entity with less than $5 million in gross receipts for the current year and no gross receipts dating back more than five years—can elect to apply up to $500,000 of its federal R&D credit against the employer's portion of payroll taxes. 

Following the passage of the Inflation Reduction Act, this credit first offsets the 6.2% Social Security (OASDI) tax and then applies to the 1.45% Medicare tax. To secure this benefit, the election must be made on the company's timely filed income tax return using Form 6765, and the credit is subsequently claimed on a quarterly basis via Form 8974 attached to the payroll tax return (e.g., Form 941). 

Key eligibility summary 

Gross receipts: Must be under $5 million for the tax year 

Five-year rule: No gross receipts for any year preceding the five-taxable-year period ending with the current year 

Annual cap: Up to $500,000 (increased from $250,000 for tax years beginning after December 31, 2022) 

Duration: The election can be made for a maximum of five taxable years

Alternative minimum tax relief for pass-through entities 

For pass-through entities such as S corporations and partnerships, the Alternative Minimum Tax (AMT) was historically a major barrier to utilizing the R&D tax credit. Because the credit is part of the General Business Credit, it generally cannot be used to reduce a taxpayer's tax liability below their Tentative Minimum Tax (TMT). This often meant that business owners who fell into the AMT net would see their R&D credits trapped as carryforwards, providing no immediate cash-flow benefit. 

The eligible small business exception 

Since 2016, the Protecting Americans from Tax Hikes (PATH) Act has provided critical relief for Eligible Small Businesses (ESBs). R&D credits for an ESB are treated as "specified credits," meaning they can be used to offset both regular tax and AMT. This is a "look-through" provision for pass-through owners with specific requirements: 

Entity qualification: The entity must be a non-publicly traded corporation, partnership, or sole proprietorship. 

The $50 million test: The business must have average annual gross receipts of $50 million or less for the three preceding taxable years. 

Shareholder/partner level: For the credit to offset AMT at the individual level, the owner must also separately meet the $50 million gross receipts test for that taxable year.

The 25/25 limitation 

While the AMT relief is a significant advantage, it does not allow the credit to eliminate tax liability entirely. The credit remains subject to a general limitation designed to ensure taxpayers maintain a minimum level of tax payment. Specifically, the R&D credit cannot reduce your tax below a calculated threshold based on your tax liability. In practical terms, this means that even qualifying businesses will retain some tax obligation after applying the credit—it cannot reduce your tax bill to zero. 

Next steps for R&D tax planning 

The convergence of beneficial tax treatment with stringent documentation requirements makes 2026 a pivotal year for R&D tax planning. Companies should: 

• Review and strengthen R&D documentation processes immediately. 
• Implement contemporaneous tracking systems for all research activities. 
• Assess eligibility for retroactive relief opportunities. 
• Ensure clear segregation between domestic and foreign R&D expenses. 
• Update Form 6765 preparation procedures to meet enhanced standards. 
• Evaluate eligibility for the payroll tax credit if your startup qualifies as a QSB. 
• Determine whether your pass-through entity and its owners meet the ESB criteria for AMT relief. 

BerryDunn can help 

To ensure compliance and maximize your R&D tax benefits under the new 2026 framework, contact your BerryDunn accounting and tax advisors today. Learn more about our team and services.  

On February 20, 2026, the US Supreme Court issued a ruling on Learning Resources, Inc. v. Trump, a case challenging President Trump’s authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). In a 6-3 vote, the US Supreme Court ruled that IEEPA does not permit the President to impose tariffs.

Tariffs imposed under IEEPA

Prior to this ruling, the Trump Administration imposed significant tariffs under IEEPA. This law authorizes the President to act to address any unusual or extraordinary foreign threat that endangers national security, foreign policy, or the economy in the US if a national emergency is declared. President Trump declared such an emergency on April 2, 2025, citing the trade deficit and illegal immigration. The subsequent tariffs include:

• 10% minimum tariff on most imports
• 50% tariff on copper, steel, and aluminum
• 20 – 40% tariffs on most goods from Brazil, India, Canada, Mexico, and China

How can importers request refunds?

These tariffs are estimated to generate $175 billion in refunds for affected importers. Although the Court’s decision does not provide guidance on how importers should be refunded for these previously paid tariffs, it is expected that a refund procedure will be established through either the US Court of International Trade or US Customs and Border Protection (CBP). To prepare for these refunds, importers should:

• Compile entries and payment records related to IEEPA duties.
• Submit CBP Form 19 protests within 180 days of each entry’s liquidation, if not done so already. This 180-day deadline may be waived when refund procedures are established.
• Prepare for possible litigation in the US Court of International Trade.

What's next? 

While this is a significant “win” for US importers, Trump has asserted that he will continue to impose tariffs via alternative statutes that allow him to act. While these statutes may authorize the President to impose tariffs, these authorities are limited by time-based restrictions or approval from other governmental parties.

How BerryDunn can help

Our dedicated audit, tax, and consulting professionals understand the impact of tariffs and can assist with developing strategies for refunds as they become available. Learn more about our team and services. 

Maine business owners, this one's been a long time coming.

After years of advocacy from the Maine CPA community and business organizations, Governor Janet Mills' supplemental budget proposal includes a Pass-Through Entity Tax (PTET) for Maine, which would be effective for tax years beginning January 1, 2026. If enacted, partnerships and S corporations will finally have access to a federal tax planning strategy that businesses in 36 other states have been using for years. Maine has been late to the party, but the party has started!

Why the pass-through entity tax matters to Maine businesses

Here's the backstory. The 2017 Tax Cuts and Jobs Act capped the federal deduction for state and local taxes (SALT) at $10,000 per year for individual taxpayers. For many business owners, that cap wiped out a meaningful federal deduction on income that was already being taxed at the state level. C-corporations never had this problem, as they've always been able to deduct state income taxes in full at the entity level. The PTET would level the playing field by shifting the tax obligation from the individual to the entity, where it can be deducted without hitting the SALT cap.

OBBBA impact on the pass-through entity tax

When the One Big Beautiful Bill Act (OBBBA) was signed on July 4, 2025, it changed the math again. The OBBBA temporarily raised the individual SALT cap from $10,000 to $40,000 for tax years 2025 through 2029. Good news, right? For many business owners, the answer was “yes.” But the headline number doesn't tell the whole story.

The expanded cap phases out aggressively for higher earners. If your modified adjusted gross income exceeds $500,000, that $40,000 cap starts shrinking; if your income is above $600,000, you're effectively back to $10,000. For Maine's most successful pass-through entity owners, the expanded SALT cap may provide little or no individual relief. For that group, the PTET remains the more powerful tool.

For owners in the $300,000 to $500,000 range, the analysis is more nuanced. The expanded cap may partially cover your deduction needs, but when you add up property taxes, state income taxes, and other SALT items, the entity-level election often still makes sense—especially when you can potentially stack the full PTET deduction at the entity level on top of up to $40,000 of personal SALT items.

How Maine's PTET works

The election is made annually on a timely-filed Maine return and is irrevocable once the filing deadline passes. The tax is calculated on the entity's aggregate Maine-source income—grossed up for the PTE tax itself—at Maine's highest individual marginal rate of 7.15%. Members then receive a 90% refundable credit against their individual Maine income tax for their share of what the entity paid.

That 90% matters. Maine is joining Massachusetts and a handful of other states that offer less than a full 100% credit, which means there's a built-in 10% cost to the election. In most cases, the federal benefit will outweigh that haircut—but it requires analysis. This isn't a one-size-fits-all recommendation.

What if your business has nonresident members?

If your entity has nonresident members, there's an additional wrinkle: the electing PTE must pay estimated tax equal to 10% of the PTE tax allocated to each nonresident member, due within 30 days of the entity return's due date. The upside: Nonresident members whose only Maine-source income flows through electing PTEs may be able to skip filing a Maine individual return entirely if their credits cover the liability.

The bottom line: A win for Maine businesses

For high-income pass-through entity owners—especially those above the $500,000 MAGI threshold—the PTET election is likely the primary tool for capturing federal tax relief. For owners in the middle-income ranges, the interaction between the expanded personal SALT cap and the entity-level election needs careful modeling. And for everyone, that 10% non-refundable component means that a thoughtful calculation is needed before a decision is made.

This is a real win for Maine's business community—assuming it crosses the finish line. If you own a partnership or S corporation with Maine operations, now is the time to start the conversation so you're ready to move when it does. The election is annual, irrevocable once the deadline passes, and the first necessary actions will be approaching fast.

About BerryDunn

Our seasoned tax professionals partner with you to offer practical, accessible guidance and develop detailed strategies that support your unique needs. We excel at tax strategy and solutions, placing an emphasis on building long-term relationships. Our deep expertise spans a full range of tax concerns, tax services, and consulting to support individuals, businesses, and nonprofit organizations. Our tax consultants are specialists in their industry, working closely with colleagues across the firm to deliver integrated, comprehensive solutions. Learn more about our services and team.

Read this article if you are responsible for preparing or reviewing governmental financial statements for governmental agencies.

The Governmental Accounting Standards Board (GASB) issued Statement No. 105, Subsequent Events to enhance the transparency, consistency, and value of financial reporting related to events that occur after the financial statement date, but before the financial statements are issued. The statement realigns existing guidance by clearly describing the subsequent events' time frame, distinguishing between recognized and non-recognized subsequent events, and providing specific disclosure requirements. 

Why GASB issued Statement No. 105 

Preceding guidance on subsequent events existed within the GASB literature. However, governmental entities and auditors sometimes differed in their determination of what events should be recognized in the financial statements and what should be disclosed in the notes to the financial statements. Also, there were differing interpretations regarding how long subsequent events should be evaluated. As a result, GASB 105 seeks clarity by establishing clear definitions and precise disclosure requirements, with the intention of improving comparability and transparency for financial statement readers.

Defining subsequent events and the evaluation period 

GASB 105 clearly defines subsequent events as transactions or other events that occur after the date of the financial statements, but before the financial statements are available to be issued. 

The guidance defines the date the financial statements are available to be issued as the date when: 

• The financial statements are complete in form and format that comply with generally accepted accounting principles
• All approvals necessary for issuance have been obtained

This clarification is important because it provides an endpoint for evaluating subsequent events across all governmental entities. GASB 105 also stipulates that governmental entities disclose the date through which subsequent events were evaluated, providing financial statement readers more transparency pertaining to the scope of management review. 

Recognized and non-recognized subsequent events 

A critical feature of GASB 105 is the clear distinction between recognized and non-recognized subsequent events. 

Recognized subsequent events are those that provide additional context about conditions that existed as of the financial statement date. These occurrences impact amounts or estimates reported in the financial statements, and therefore, require adjustments to the financial statements. 

Examples may include the following: 

• Information received after year-end that confirms the impairment of an asset that existed at the financial statement date 
• Outcome of litigation that provides additional evidence about conditions present at year-end 

In these cases, the financial statements should be adjusted to reflect the new information. 

Non-recognized subsequent events are events that relate to conditions that came about after the financial statement date. These events do not impact the amounts reported in the financial statements for the period being reported. However, it may still be important to financial statement readers. 

Examples may include: 

• Issuance of long-term debt after year-end 
• Major natural disasters occurring after the financial statement date 
• Government combinations or disposals completed after year-end 

Although these events are not recognized in the financial statement, GASB 105 requires that significant non-recognized subsequent events be disclosed in the notes to the financial statements. 

Disclosure requirements for non-recognized events 

For non-recognized subsequent events that are significant, GASB 105 requirements specify that the following be disclosed: 

• A description of the nature of the event 
• An estimate of the financial effect, if such an estimate can be made 
• A statement that an estimate cannot be made, if applicable 

These disclosure requirements are intended to help financial statement readers receive relevant information about occurrences that could impact their understanding of a government’s financial position or future operations. 

What GASB 105 means for governments  

Although GASB 105 provides new recognition or measurement concepts, it may require governmental entities to revisit existing financial reporting practices. Specifically, governmental entities should seek to evaluate whether their financial statement preparation, review, and approval processes clearly identify the point at which financial statements are issued. In most cases, internal policies or governing body approval practices may need clarification to provide consistent application of the subsequent events evaluation period. 

Governmental entities should help ensure that staff responsible for financial reports understand the distinction between recognized and non-recognized subsequent events and are prepared to identify and document events occurring throughout the evaluation process. The use of an implementation checklist could aid in this process. 

What to avoid when implementing GASB 105 

As governments implement GASB 105, several common pitfalls may arise: 

• Assuming the audit report date defines the subsequent events evaluation period 
• Failing to disclose the date through which subsequent events were evaluated 
• Treating all subsequent events as disclosure-only items 
• Having inadequate documentation supporting the classification of events as recognized or non-recognized 

Effective date and transition 

The requirements of GASB 105 are effective for fiscal years beginning after June 15, 2026, and for all reporting periods thereafter. Earlier application is encouraged. 

Governmental entities that are considering early adoption should evaluate their financial reporting timelines and approval processes so they can appropriately identify and assess subsequent events through the newly defined “available to be issued” date. 

Audit considerations 

GASB 105 may impact audit planning by extending the period through which subsequent events must be evaluated and documented. Early communication between management and auditors can help support expectations related to timing, documentation, and disclosure of subsequent events. 

Governance and oversight implications 

Since subsequent events may involve significant financing decisions, legal matters, or operational changes, GASB 105 has implications beyond the accounting function. Governing bodies and oversight officials should be aware that events occurring after year-end but before financial statements are issued may still require evaluation and disclosure. Clear communication between management, governing bodies, and auditors can help ensure that significant events are appropriately identified, evaluated, and disclosed in a timely manner. 

Plan for implementation 

GASB 105 represents a meaningful refinement of subsequent events guidance for governmental entities. By defining the evaluation period, distinguishing between recognized and non-recognized events, and standardizing disclosure requirements, the statement enhances the usefulness and consistency of governmental financial reporting. Government entities should begin planning now for smooth implementation. 

BerryDunn’s team of governmental professionals is well-versed in helping entities implement new GASB standards. We can assist with assessing current processes for identification and evaluation of transactions or other events occurring during the subsequent events' time frame. We can also update financial statement templates so that the required subsequent event note disclosures are included. Contact us to learn how we can support you in preparing for the implementation of GASB 105. Learn more about our team and services. 

In 2025, our team completed projects in seven states and kicked off new work in 17 states, partnering with communities ranging from fewer than 12,000 residents to more than one million. These projects reflect the core of what our Parks, Recreation, and Libraries team does: helping agencies improve operations, drive innovation, identify improvements based on community need, and strengthen their brand and image. 

From master plans to feasibility studies to strategic and operational assessments, our 2025 work offered a clear look at what agencies are prioritizing—and where the field is heading. Here are the key trends we saw, along with what they mean for your agency. 

1. Sustainability is becoming a planning non‑negotiable 

Across communities in Colorado, North Carolina, Nevada, and beyond, agencies are increasingly incorporating sustainability into capital, operational, and master planning decisions. This aligns with our team's master planning approach, which integrates infrastructure assessments, levels of service analysis, and long-term operational considerations to build more resilient systems.  

What this means for agencies: 

• Consider lifecycle cost analysis for both new facilities and renovations. 
• Integrate sustainability and climate-resilience metrics into future master plans. 
• Use feasibility studies to evaluate long-term operational implications of amenities. 

2. Data-driven decision-making is accelerating 

Communities are increasingly turning to data to support transparent decision-making and long-term planning. Many 2025 projects—including fee studies, strategic plans, and PROST plans—highlighted the importance of diagnostic data collection, analysis, and community needs assessment so agencies can make informed decisions grounded in facts and local context.  

How this helps agencies: 

• Centralize the data you already collect (registration, attendance, maintenance). 
• Use data stories to better communicate funding needs to governing bodies. 
• Apply GIS mapping tools to identify equity gaps or underserved areas. 

3. Workforce resilience remains a top priority 

Staffing challenges, burnout, and shifting workforce needs emerged repeatedly throughout 2025—both in projects and in conversations at conferences. Many communities sought organizational assessments or strategic plans specifically to address staffing constraints, workload distribution, and long-term talent development. 

This trend aligns with our team’s emphasis on operational assessments and improving organizational effectiveness to help agencies create more sustainable internal systems and staff structures that support mission delivery.  

What agencies can do: 

• Revisit job descriptions to ensure they match current responsibilities. 
• Use organizational assessments to evaluate staffing structure and workload. 
• Invest in leadership development to build internal capacity. 

4. Community expectations are rising—and evolving 

Residents continue to voice strong expectations for transparency, access, and inclusivity in parks and recreation services. This aligns with our team’s strong emphasis on robust community engagement, which includes prioritizing needs, facilitating equitable input, and linking community feedback directly to planning recommendations.  

How agencies can respond: 

• Use engagement tools that reach a broad audience (mobile surveys, pop-up events). 
• Share “what we heard” summaries to build trust and accountability. 
• Ensure engagement findings directly inform budget and capital priorities. 

5. “One size fits all” planning no longer works 

In 2025, our team worked with communities ranging from small rural towns to large metropolitan regions. These widely different contexts confirm what our master planning methodology is built on: planning must be tailored to each community, grounded in local data, demographic realities, facility and system assessments, and achievable implementation strategies.  

How this helps agencies: 

• Use right-sized planning: mini master plans, targeted system reviews, or operational assessments. 
• Align planning scope and budget with your community’s capacity. 
• Use implementation tools like timelines, KPIs, and action plans to ensure follow-through. 

As you plan for the rest of the year, these patterns can help you benchmark your agency’s current priorities, consider emerging needs, and identify where additional planning, assessment, or visioning may support your goals. 

About BerryDunn

BerryDunn's parks, recreation, and libraries consultants work with you to improve operations, drive innovation, identify improvements to services based on community need, and elevate your brand and image―all from the perspective of our team’s combined 100 years of hands-on experience. We provide practical park solutions, recreation expertise, and library consulting. Learn more about our team and services.