The IRS released a new draft Form 6765, Credit for Increasing Research Activities, for claiming the research credit. The new draft form simplifies several features of a draft Form 6765 the IRS released last September. Draft instructions will be released later.
This latest draft Form 6765 features three new sections:
- Section E is for “other information,”
- Section F is a qualified research expense (QRE) summary, and
- Section G is for business components.
New Section E: Other information
Section E on the draft Form 6765 asks for more detail about some information provided elsewhere on the form, such as the number of business components generating QRE, the amount of officers’ wages included in total research wages, and the amount of QRE determined under the ASC 730 directive.
Section E also asks if the taxpayer acquired or disposed of a major portion of a trade or business, and whether QRE for the year includes any new expense categories.
New Section F: QRE summary
Section F on the draft Form 6765 summarizes the taxpayer’s total QRE. These expense are categorized as wages, supply costs, computer rental costs, and contract research expenses. Special instructions for section F will apply to taxpayers that must complete section G.
New Section G: Business component information
New Section G is the biggest change from the current Form 6765. Section G asks for information about business components, including the name or other identifier for each component, its type, and the information the research sought. Taxpayers should report 80% of total QREs in descending order by the amount of total QREs for each component, up to a maximum of 50 components. Relevant definitions will be provided in the form instructions.
The IRS expects Section G to be optional for all filers for tax year 2024 (processing year 2025), in order to allow taxpayers time to transition to its format. Section G will generally be required for tax year 2025 (processing year 2026). However, it will remain optional for:
- qualified small business taxpayers that check to box to claim a reduced payroll tax credit; and
- taxpayers with QREs of no more than $1.5 million and gross receipts of no more than $50 million.
