{"id":2121,"date":"2020-11-09T16:31:13","date_gmt":"2020-11-09T16:31:13","guid":{"rendered":"https:\/\/gtmtax.com\/insight\/unsafe-harbor-safe-again-asc-730-directive\/"},"modified":"2025-07-23T20:03:19","modified_gmt":"2025-07-23T20:03:19","slug":"unsafe-harbor-safe-again-asc-730-directive","status":"publish","type":"insight","link":"https:\/\/gtmtax.com\/insight\/unsafe-harbor-safe-again-asc-730-directive\/","title":{"rendered":"An Opportunity To Make An \u201cUn\u201dsafe Harbor Safe Again: Getting The Most Out Of The ASC 730 Directive"},"content":{"rendered":"
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When the Large Business and International (\u201cLB&I\u201d) Division of the IRS announced the ASC 730 Directive back in September 2017 (<\/span>LB&I-04-0917-005<\/span><\/a>) <\/span>there was much rejoicing throughout the land. The directive was intended to eliminate much of the uncertainty around R&D tax credit claims for LB&I taxpayers. It provided a safe harbor for credit claims by employing a step-by-step method for using audited financial statements as a starting point to dramatically reduce the amount of time spent by taxpayers to calculate credits, the IRS to audit credits, and allow taxpayers to minimize or eliminate their tax credit reserves. The concept was a great idea, and many taxpayers were eager to use it.<\/p>\n

In practice, however, it did not materialize as expected. This became clear when the IRS began to audit the safe harbor, and the safe harbor became, well, unsafe. The main issue was that the IRS did not have confidence that even after following the steps per the directive, the calculated qualified research expenses (\u201cQREs\u201d) met the requirements of section 41.\u00a0 <\/span>There were several reasons for this, including:<\/p>\n