New York State has decoupled from federal tax rules by requiring businesses to amortize research and experimental (R&E) expenses over 60 months, effective for tax years beginning on or after January 1, 2025. This retroactive legislation requires taxpayers to file amended returns if they previously utilized immediate federal expensing for state purposes.
This change was passed as part of the 2026–2027 New York State budget, which was approved by the state legislature on May 28, 2026.
- If a 2025 tax return has been filed, an amended return must be filed to report the modifications described in this notice.
- If a 2025 tax return has not yet been filed, the modifications described in this notice must be reported on a timely filed 2025 return.
Penalty and interest relief is available to taxpayers that timely file or amend a tax year 2025 return reporting the modifications described in this notice. Taxpayers that receive a bill or notice that includes penalties and interest related to these modifications should attach a written explanation with their response indicating that the underpayment is related to H.R. 1 modifications.
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.
