On June 21, 2024, the Internal Revenue Service (IRS) announced the release of a revised draft of Form 6765, used to claim the Research & Development (R&D) Tax Credit. The accompanying draft instructions were subsequently issued on December 20, 2024. The revised form, effective beginning with the 2024 tax year, introduces several significant changes, including the required reporting of quantitative and qualitative information for each business component and other miscellaneous questions. The goal of these changes was to reduce R&D Tax Credit issues and manage resources more efficiently; however, it has shifted a significant burden onto taxpayers.
Introducing the New Section G
Section G of the revised Form 6765 contains the bulk of the changes, requesting details of the name of each business component, the type of business component (i.e., product, process, software, formula, invention, technique), the information sought to be discovered and the qualified research expenses (QREs) associated with each business component.
Taxpayers are required to report business components representing 80% of the total QRE in descending order, but no more than 50 in total. However, taxpayers who meet at least one of the following requirements are exempt from completing Section G entirely:
- Qualified Small Businesses (QSBs).
- Taxpayers with QREs equal to or less than $1.5 million, determined at the controlled group level.
- Taxpayers with gross receipts equal to or less than $50 million, determined at the controlled group level.
To provide ample time to transition to the new form, Section G was optional for all taxpayers for the 2024 tax year. However, beginning with tax year 2025, this section will become mandatory for those who do not satisfy any of the exclusions listed above.
Additionally, if a return is being amended to claim the credit, Section G becomes mandatory for all taxpayers. The information requested in this section closely aligns with the requirements set forth for an amended claim for the R&D Tax Credit that became effective in early 2021.
Section E – Other Information
Section E also represents a new addition to the Form 6765 designed to gather additional, yet significant, details relevant to calculating the R&D Tax Credit. This section includes questions about the number of business components generating QREs, the amount of officers’ wages included within the total wage QREs, any acquisitions or dispositions during the tax year and whether any new categories of QREs were included in the current year’s calculation. Additionally, taxpayers are asked to confirm whether QREs were determined in accordance with the ASC 730 directive. Although this information should have already been considered when preparing the R&D Tax Credit claim, this marks the first time the information is being explicitly required at the time of filing.
Next Steps
It’s never too early to start preparing for these changes. Businesses may need help navigating these new additions to Form 6765 while ensuring they can continue to maximize their R&D Tax Credit while maintaining compliance with IRS requirements. Withum’s R&D Tax Credit Team is available to assist with expertise in preparing and reviewing the R&D Tax Credit claim, ensuring that it meets all requirements and is supported by robust documentation.
Author: Darcey Long | [email protected]
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For more information on this topic, please contact a member of Withum’s Tax Credits Services Team.
