2025: A look back
What a year
As everyone heads back into the office and prepares for a new year (and new filing season), I wanted to pause and look back on 2025. Credits and incentives had a wild year last year. Today’s issue will take a look at some of the highs and lows of the year. As a quick note, all past issues (including the ones linked below) are available to everyone for a limited time.
Photo by nika kakalashvili.
Research tax credit
Highs: How can the repeal of 174 amortization be anywhere other than the top of the list? The One Big Beautiful Bill Act (OBBBA) finally brought about the long-promised fix for 174. Unsurprisingly, this will not be the last time the OBBBA is mentioned in this issue.
On the heels of the new law, the IRS published (mostly) favorable guidance that helped taxpayers navigate the 174 transition.
Taxpayers also saw limited wins in court, pushing back on the IRS’s extremely narrow reading of contracts.
Lows: But taxpayers lost in other cases, further driving home the idea that documentation is paramount for sustaining the credit.
And while the new 174A code section allows for immediate deduction of research expenses, the transition will be messy for a while.
Employee Retention Credit
Highs: It is hard to see how any of the news in 2025 was purely positive for ERC. The OBBBA did not fully adopt the ERC killer bill language. Instead, we are left with a partial repeal and an IRS that is still dragging its feet on processing claims.
Lows: There is much to say here. PEOs repeatedly made the headlines when their clients found out the hard way that ERC refunds may not belong to them or even be processed at all.
The IRS won a court case validate the Notice 2021-20. While this is a bittersweet victory for the IRS, the taxpayer lost on all points.
Bankruptcy courts saw their fair share of ERC cases and left taxpayers with some very questionable results.
Energy Credits
Highs: Again, this is a mixed bag. The OBBBA made some sweeping changes to the energy credits established under the Inflation Reduction Act, but most credits survived in some form.
While the IRS was tasked with “strictly enforc[ing] the termination of clean” energy credits, the result was a relatively mild.
Lows: Apart from the OBBBA changes, any doubt that energy credits were subject to the passive activity rules was put to rest.
Miscellaneous
Finally, we have two items worth mentioning. First, tribal tax credits continued to make the news in all the wrong ways. And second, the Work Opportunity Tax Credit is left wondering whether it will be renewed; it was left out of the OBBBA and has not seen much traction since then, as Congress has been dealing with a myriad of other issues. Both of these items are likely to continue affecting taxpayers into this year, if not beyond.
That’s a wrap for 2025. The year brought many changes to credits and incentives, and to me personally. I have had the fantastic opportunity to meet many readers, both in person and virtually, and I look forward to meeting many more of you this year. Happy New Year!
Wrap-up
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The content of this article is for informational purposes only and should not be taken as tax, legal, benefits, financial, or HR advice. I am a lawyer, but receiving this newsletter does not mean I am your lawyer. Since rules and regulations change over time and can vary by location, consult a lawyer or HR expert for specific guidance.