Section 280C and the R&D Tax Credit: What Ohio CFOs and CPAs Should Model Before Filing

The Section 280C R&D Tax Credit decision affects both the amount of the research credit and the tax treatment of domestic research expenditures. For Ohio CFOs and CPAs, this is a filing decision that should be modeled before the original return is submitted, not treated as a routine checkbox at the end of the process.

Under the current Form 6765 instructions, taxpayers must answer “Yes” or “No” to the Section 280C reduced-credit election on a timely filed original return, including extensions. Once made for that tax year, the election cannot be changed on an amended return.



Since 2004, RCG Tax Partners has completed more than 25,000 R&D tax credit studies and identified over $750 million in tax savings. Its team includes CPAs, tax specialists, engineers, technical writers, and architects who support R&D Tax Credit studies with technical activity analysis, qualified expense review, and detailed supporting documentation.

The Decision CFOs Need to Understand  

Section 280C is essentially a coordination rule. It prevents a taxpayer from receiving the full benefit of both the R&D Tax Credit and deductions or capitalization for the same research expenditures without an adjustment.



A taxpayer generally has two paths.

For 2026 planning, this interaction is especially important because Section 174A generally allows current deductions for qualifying domestic research or experimental expenditures. 

How Much Does the Reduced Research Credit Change the Calculation?  

The exact mechanics depend on whether the taxpayer uses the regular research credit or the Alternative Simplified Credit.

Under the current Form 6765 instructions:

•  The regular credit calculation uses a 15.8% rate at the applicable step when the reduced-credit election is made instead of 20%.
• Under the Alternative Simplified Credit, the computed credit is generally multiplied by 79% when Section 280C is elected.

Those percentages show why a full vs reduced R&D credit comparison should consider more than the face amount of the credit.

The larger question is the after-tax result once the related Section 174A expense treatment is included..

A Better Way to Model the 280C Election  

Rather than asking, “Which option gives us the larger credit?” CFOs and CPAs should model both outcomes.

Scenario A: Elect Section 280C  

Calculate the reduced R&D Tax Credit and determine the resulting federal tax impact.

Scenario B: Keep the Full Credit  

Calculate the unreduced credit, then account for the required reduction to domestic research or experimental expenditures otherwise deducted or capitalized under Section 174A.

Compare the Net Tax Result  

The preferable approach may depend on the taxpayer’s:

•  Research credit amount
• Domestic Section 174A expenditures
• Entity type
• Taxable income
• Applicable tax rate
• Credit limitations and carryforwards
• State tax treatment

This is why the 280C election is better treated as a modeling decision than a default filing practice.

Form 6765 Makes the Election Explicit  

The current Form 6765 places the Section 280C election at Item A near the top of the form.

A taxpayer must indicate whether it elects the reduced credit. If the answer is “Yes,” Form 6765 must be filed with the timely original return for the election to apply, even in circumstances where no research credit is ultimately claimed on that original return.

The IRS instructions also state that the election cannot be made or changed on an amended return and is irrevocable for that tax year.



That makes pre-filing review especially important.

What Happens If the Reduced Credit Is Not Elected?  

When a taxpayer does not make the Section 280C election, the current rules generally require a reduction to domestic research or experimental expenditures under Section 174A that would otherwise be deducted or capitalized.

The Form 6765 instructions also require an attached statement identifying the deduction or capitalized amounts that were reduced and where those adjustments appear on the return.



For Ohio businesses, this means the R&D credit calculation and Section 174A analysis should be coordinated before final tax return preparation.

Four Questions to Answer Before Filing  

Ohio CFOs and CPAs should resolve these questions before making the election:

What is the credit under both approaches?
Model the full research credit and the reduced Section 280C credit.

How does each option affect Section 174A?
Determine the deduction or capitalization consequences of not making the election.

Are there credit limitations or carryforwards?
A larger calculated credit does not necessarily mean the entire amount produces an immediate tax benefit.



Is the election ready before the original return deadline?
Because the election generally cannot be changed on an amended return, the analysis should occur before filing.

FAQs About Section 280C  

Model the Election Before the Return Is Filed  

The Section 280C R&D Tax Credit decision should be evaluated alongside Section 174A research-expense treatment rather than viewed as a standalone Form 6765 election.



RCG Tax Partners supports Ohio businesses and their CPAs with technical R&D Tax Credit studies, qualified expense analysis, and detailed documentation that provides the information tax professionals need when evaluating the credit and related filing decisions.