What the Park-Ohio Case Signals About the Future of R&D Refund Claims

The Park-Ohio Case: Why Every Tax Team Should Pay Attention

If your company is filing or considering an R&D refund claim, a case quietly moving through the courts could have a major impact on your process and risk profile. The case is Park-Ohio Holdings Corp. v. United States, and its outcome may force the IRS to rethink just how much information is required for a valid claim.

The Backdrop: IRS Raises the Bar on Refund Claims

In October 2021, the IRS issued new guidance dramatically increasing the disclosure requirements for R&D refund claims. The new policy, delivered through an Office of Chief Counsel memo, states that for a claim to be considered valid, the taxpayer must:

• Identify all business components for which a refund is being claimed.
• For each business component, identify:
  • All research activities performed.
  • The individuals who performed those activities.
  • The information each individual sought to discover.

In effect, the IRS is demanding line-by-line, person-by-person explanations of the R&D work behind every claimed refund.

For many taxpayers, this presents a substantial new burden—one not clearly supported by the underlying statute or regulations.

The Park-Ohio Case: A Direct Legal Challenge

Park-Ohio Holdings Corp., a manufacturing company, filed a refund claim that included:

• An 11-page addendum identifying the job titles of engineers and the types of new or improved products and processes they worked on.

The IRS rejected the claim with an “Initial No-Consideration Letter,” stating that it would not even review the claim unless Park-Ohio provided the detailed disclosures outlined above—within 45 days.

Park-Ohio responded with a 28-page supplement describing its qualified activities in more detail. The IRS again refused to consider the claim.

Now, Park-Ohio is suing the IRS in federal court (N.D. Ohio, filed April 14, 2025), arguing that:

• The IRS’s new policy is contrary to established law.
• The policy was issued without proper procedures and violates the Administrative Procedure Act (APA).
• Existing case law, including Burlington Northern Inc. v. United States, holds that a refund claim need only fairly apprise the IRS of the grounds for recovery.
• Treasury Regulations (1.41-4(d)) do not require taxpayers to create new records solely for the purpose of filing a claim.
• Congress has stated that eligibility for the credit should not depend on “unreasonable recordkeeping requirements.”

Park-Ohio is asking the court to vacate the IRS’s policy and require the IRS to audit its claim.

What’s at Stake

The outcome of this case could have major ripple effects for all companies filing R&D refund claims.

• If Park-Ohio wins, the IRS may be forced to scale back its demands, reverting to a more reasonable standard of disclosure.
• If the IRS prevails, its current requirements will likely become the de facto standard for refund claims, raising compliance costs and risks across the board.

It’s also possible that we’ll see a patchwork environment where some IRS exam teams adhere strictly to the 2021 policy, while others take a more balanced approach—creating uncertainty for taxpayers.

What Tax Teams Should Do Now

Whether your company is currently pursuing refund claims or considering them in the future, this case offers an important wake-up call. Here are four steps to take:

1. Monitor the Case Closely

Keep your tax leadership, legal counsel, and advisors updated as Park-Ohio progresses. The decision may arrive at any time in the coming year.

2. Document Defensively

While the case is pending, assume that the IRS will enforce its current disclosure expectations. Build documentation that connects business components to activities, individuals, and discovery efforts as clearly as possible.

For practical guidance, see Optimizing Your R&D Tax Credit Process Using Today’s Technology, which covers tools and techniques to streamline this kind of documentation effort.

3. Engage Cross-Functional Teams

Engineering, legal, and finance all play a role in developing robust support for R&D refund claims. Consider cross-training SMEs to better understand documentation needs. MASSIE’s How to Train SMEs for R&D Tax Documentation offers excellent tips for building a scalable SME-friendly process.

4. Evaluate Refund Claim Strategy

Work with your advisors to assess whether pursuing refund claims is still attractive under current IRS scrutiny. In some cases, it may make more sense to focus on optimizing current-year credits and future filings until more clarity emerges.

Why This Fits a Bigger Pattern

The Park-Ohio case is not happening in isolation. It is part of a broader trend we’ve seen in IRS exam tactics:

• Higher expectations for activity-level detail.
• Greater focus on business components.
• Increased use of “paper-only” audits that rely entirely on documentation.

Bottom Line

Park-Ohio Holdings Corp. v. United States may set the tone for R&D refund claims for years to come. No matter how the case turns out, tax teams should take this moment to strengthen their documentation and align their processes with emerging IRS expectations.

Doing so won’t just protect your refund claims—it will also make your entire R&D credit strategy more resilient, defendable, and audit-ready.

If your team would like to discuss strategies for optimizing your R&D credit process or review how ready your current documentation is, we’re here to help. Contact us for a consultation.

Stephen Whiteaker, CPA

As MASSIE’s Director of Controversy, Stephen specializes in audit risk assessment and quality review. His proficiency in navigating complex tax law makes him an essential resource in addressing tax technical challenges for clients. His exten...