If your S corporation amended its federal return to expense domestic research and development (R&D) costs under the One Big Beautiful Bill Act (OBBBA), you may have been advised to amend your Arizona personal return to reflect the reduced federal adjusted gross income (AGI). But now that the key deadline—July 6, 2025—has passed, what are your options?
Quick Recap: What Changed
The OBBBA restored full expensing of domestic R&D costs under IRC §174, retroactively applicable to tax years 2022 through 2024. Many S corporations amended their federal returns accordingly, reducing federal taxable income and AGI.
Arizona, however, conforms to the Internal Revenue Code only as amended through January 1, 2025 (A.R.S. § 43-105(A)(1)). This means the R&D expensing provision isn’t officially part of Arizona law yet. Despite this, the Arizona Department of Revenue (ADOR) has historically allowed passthrough income to flow through from federal returns—even when the state hasn’t formally conformed to the underlying federal changes.
What the Deadline Means
Under Rev. Proc. 2025-28 §3.03(3)(a), taxpayers had until July 6, 2025 to file amended returns or Administrative Adjustment Requests (AARs) to elect retroactive R&D expensing under the OBBBA. However, refund claims are subject to the earlier of:
- Three years from the original filing date (IRC §6511(a); A.R.S. § 42-1106(A)), or
- July 6, 2025, the final date to elect OBBBA retroactive treatment
This dual deadline structure means that some taxpayers may still have time to amend, while others are now closed out.
What Are Your Options Now?
If You Filed Before July 6, 2023:
You are likely past the deadline to amend your 2022 return for R&D expensing. The refund window closed on July 6, 2025, and you cannot retroactively expense those costs or claim a refund.
For 2023, the same rule applies—if your return was filed before July 6, 2023 and not amended by July 6, 2025, the opportunity has likely expired.
If You Filed After July 6, 2023:
You may still be within the standard three-year window to file a refund claim. For example, a 2023 return filed on October 15, 2023 would remain amendable until October 15, 2026.
In this case, you should:- Confirm your original filing date
- Coordinate with your S corporation to ensure amended K-1s and credit forms are issued
- File amended Arizona returns promptly
Evaluate 2024 and 2025 Returns:
The OBBBA expensing provisions remain in effect for 2024 and forward. Ensure your federal and Arizona filings reflect the correct treatment going forward, especially if your S corporation continues to expense R&D.
Document Your Position:
If you relied on ADOR’s informal guidance and historical conformity practices, retain documentation showing your rationale for any amended filings or refund claims. Arizona law starts with federal AGI (A.R.S. § 43-1001(2)), and ADOR has previously allowed passthrough conformity even without formal legislative adoption.
Monitor Legislative Updates:
Arizona may still formally adopt OBBBA provisions in future legislative sessions. If so, additional refund opportunities or retroactive conformity may be authorized.
Consult Your Tax Advisor:
If you’re unsure whether your return qualifies for amendment or refund, or if you need to correct prior filings, reach out. We can help assess your eligibility and prepare any necessary documentation.
Final Thought
While the July 6, 2025 deadline has passed, some taxpayers may still have options depending on their original filing dates. Arizona’s conformity posture remains informal and structurally ambiguous for passthrough entities, but federal AGI continues to be the starting point for Arizona taxable income. Careful documentation and timely action are key.
If you have questions or need help reviewing your return, contact your advisor. We’re here to help you stay compliant and make the most of your refund opportunities.