Rev. Proc. 2026-32 and the Section 174A Form 3115: What Changed and Who Files

Rev. Proc. 2026-32 changes the rules for any Section 174A Form 3115 filed after September 4, 2026. It creates no new research method change, because the Section 174, Section 174A and foreign research changes already existed. It modifies sections 7 and 19 of Rev. Proc. 2025-23 and makes three moves. It rewrites the Section 481(a) rules for correcting 2022 to 2024 research costs. It extends the waiver of two eligibility bars to taxable years beginning before 2028. And it adds an automatic change for residential construction contracts under Section 460.

Check it if a client has domestic research capitalized under the old Section 174, domestic research now deducted under Section 174A, foreign research, or residential construction contracts entered into in taxable years beginning after July 4, 2025. A client who must change method needs the Commissioner's consent under Section 446(e), and this is the procedure that supplies it. Two dates drive most clients: September 4, 2026 for the new terms, and November 15, 2026 for one transition option. I covered the statute in the Section 174 expensing post and the form mechanics in the Form 3115 filing guide.

What Does Rev. Proc. 2026-32 Change for a Section 174A Form 3115?

It rewrites five paragraphs of section 7, restates section 19.01 in full, and adds section 19.03. The research entries sit in section 7 of Rev. Proc. 2025-23 as restated by Rev. Proc. 2025-28, which assigns the designated automatic change numbers: 265 for domestic research under the old Section 174 (section 7.01), 273 for the move to Section 174A (section 7.02), and 274 for foreign research (section 7.03). The construction entries sit in section 19 of Rev. Proc. 2025-23: 236 for section 19.01 and 275 for the new section 19.03.

Number 236 is a construction number. Do not put it on a research change.

The Section 174A move is a cut-off change on a statement in lieu of a Form 3115 under section 7.02(5) of Rev. Proc. 2025-28. Of that change's terms, Rev. Proc. 2026-32 modifies only the eligibility waiver.

How Does the Section 481(a) Adjustment Work for the 2022 to 2024 Research Change?

A Section 481(a) adjustment is the catch-up that reconciles the old method to the new one. For the section 7.01 change, section 3.01 of the Rev. Proc. limits it to a modified adjustment that "takes into account only expenditures paid or incurred in taxable years beginning after December 31, 2021, and before January 1, 2025." That rule carries one exception: "If a change described in section 7.01(3)(a)(i) of this revenue procedure results in a modified § 481(a) adjustment that is negative, the taxpayer may instead choose to implement the change on a cut-off basis."

A cut-off change carries no adjustment, so the option gives up a negative adjustment, which is a deduction. I would not elect it without a reason.

The new part ties this change to the OBBBA recovery of the unamortized balance, which lets a taxpayer deduct the remaining unamortized 2022 to 2024 domestic research either in full in the first taxable year beginning after December 31, 2024, or ratably over the 2 years starting then. Where the taxpayer previously changed to that recovery method, the adjustment "must reflect application of the taxpayer's recovery of unamortized amount method." A net positive adjustment is then spread over the period the taxpayer elected for the recovery method, or over the period remaining if the election came earlier. That displaces the default four-year spread in section 7.03(1) of Rev. Proc. 2015-13.

An illustration, with arithmetic that is mine. A calendar-year client deducted $200,000 of 2023 research immediately. Capitalized on the 5-year midpoint convention, allowable amortization is $20,000 for 2023 and $40,000 for 2024, a $140,000 positive adjustment, which falls in 2025 if the client also takes the recovery in full that year. Rev. Proc. 2025-28 limits the "remaining unamortized amount" to amounts "charged to capital account by the taxpayer under TCJA § 174." Rev. Proc. 2026-32 does not say whether corrected amounts count.

Which Eligibility Rules Does Rev. Proc. 2026-32 Waive, and Until When?

Two rules of Rev. Proc. 2015-13 are waived for the research changes, now for taxable years beginning before January 1, 2028. Section 5.01(1)(d) requires that "the requested year of change is not the final year of the trade or business," subject to exceptions. Section 5.01(1)(f), the five-year bar, requires that "the taxpayer has not made or requested a change for the same item during any of the five taxable years ending with the year of change," also subject to exceptions.

Section 3.02 says: "The eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to a change described in section 7.01(1)(a) of this revenue procedure for any taxable year beginning before January 1, 2028." Sections 3.03 and 3.05 give the same date to changes described in sections 7.02(3) and 7.03(1)(a). Rev. Proc. 2025-28 had limited the section 7.01 waiver to years beginning in 2023 or 2024.

Three limits matter. The waiver names only (d) and (f), so by its text the overall-method rule in section 5.01(1)(e) stays. Section 3.02 also restates the successive-year rule in these words: "for which it has used an impermissible method of accounting for only one taxable year (that is, for which it has used an impermissible method of accounting in the taxable year prior to the year of change)." The older text was broader, and the Rev. Proc. does not explain the narrowing.

The third is the Section 174A scope. Section 7.02(3)(a) of Rev. Proc. 2025-28 reads "for a taxable year beginning after December 31, 2024, and before January 1, 2026, change to the § 174A(a) deduction method." Rev. Proc. 2026-32 does not modify that language, and I cannot tell what the 2028 date adds for it. Read section 7.02(3) as written before promising a client a 2026 or 2027 Section 174A change.

Does Foreign Research Move to Section 174A?

No. Section 2.02(2) says Section 174 "applies only to foreign research or experimental expenditures and that such expenditures continue to be charged to capital account and amortized ratably over a 15-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred."

The change is procedural. Section 3.04 rewrites section 7.03(1)(a), and section 2.05(3)(e)(i) describes the effect as "[t]o remove the limitation on the applicability of a change in method of accounting for foreign research or experimental expenditures to comply with § 174 that currently limits such change to taxable years beginning before January 1, 2026." Changes under number 274 are no longer cut off at 2026.

What Does the New Residential Construction Change Do?

Section 4.02 adds section 19.03, number 275, for residential construction contracts entered into in taxable years beginning after July 4, 2025. It covers a move from the percentage-of-completion method, or the percentage-of-completion/capitalized-cost method, to an exempt contract method, or starting to capitalize costs under Section 263A for contracts outside the Section 460(e)(1)(B)(i) and (ii) requirements.

The background is OBBBA Section 70430, which extended the home construction contract exception to all residential construction contracts, those that would be home construction contracts but for the dwelling-unit limit. Section 4.01 revises section 19.01, number 236, so a taxpayer can stop capitalizing under Section 263A for residential contracts that meet those requirements.

Both are cut-off changes. Section 19.03(3) says: "This change is made on a cut-off basis and applies only to contracts entered into on or after the first day of the year of change that are subject to the method change. Accordingly, a § 481(a) adjustment is neither permitted nor required." Earlier contracts stay on their existing method. Both use a reduced Form 3115, and section 19.03(4) lists the parts to complete.

A taxpayer that filed a return on or before September 21, 2026 for a taxable year beginning after July 4, 2025 "is deemed to have complied with the general procedures under § 446(e), § 1.446-1(e), and this section 19.03" if it properly applied the new methods on that return. For 19.03 changes the five-year bar and final-year rule are waived for the first or second taxable year beginning after July 4, 2025, which for a calendar-year taxpayer means 2026 and 2027.

What Are the Dates and the Duplicate-Copy Traps?

• September 4, 2026. Under section 6.01, and subject to the exceptions below, the modified sections are "effective for a Form 3115 filed after September 4, 2026."
• September 21, 2026. A non-automatic Form 3115 filed before this date and still pending with the national office on that date may be converted to the automatic procedure (section 6.03).
• October 21, 2026. A taxpayer converting must notify the national office before the later of this date or the issuance of a letter ruling.
• November 15, 2026. A taxpayer that properly files the duplicate copy for a section 7 or 19.01 change under the pre-modification terms by this date is not subject to the new effective date.

Section 6.02(2) then gives a taxpayer who remains eligible and has not yet filed the original return a choice between the old and modified terms, "but not both." Choosing the modified terms means resubmitting a signed duplicate to Ogden with this legend atop page 1: "FILED UNDER REV. PROC. 2026-32, AS PROVIDED IN SECTION 6.02(2)(b) OF REV. PROC. 2026-32." The resubmission counts as filed on the original duplicate's date for the eligibility rules, but "This section 6.02(2)(b) does not extend the date the taxpayer must file either the resubmitted duplicate copy or original Form 3115 under section 6.03(1)(a) of Rev. Proc. 2015-13."

Section 6.02 names sections 7 and 19.01. Section 19.03 is new and has no pre-modification version, so I read the November 15 option as not reaching it. A section 7.02 change, which is the Section 174A move, uses a statement in lieu of a Form 3115 with the duplicate copy waived (section 7.02(5) of Rev. Proc. 2025-28), so I read the November 15 option as mainly relevant to section 7.01 and 7.03 research changes and to 19.01.

What Does the Revenue Procedure Not Establish?

It does not bless the method. Rev. Proc. 2025-28 says consent for a section 7.02 change "is not a determination by the Commissioner that the new method of accounting is a permissible method of accounting," and sections 3 and 4 of Rev. Proc. 2026-32 replace only specific paragraphs, none of them that one. It says nothing about state conformity, so a federal Section 174A change can still sit beside a state that capitalizes; the conformity post covers that issue.

If a Form 3115 for a client is in progress, check its filing date against September 4. For a section 7.01, 7.03 or 19.01 change, then check the pre-modification options before November 15.