Major changes to the Research & Development (R&D) tax credit could be coming for tax years starting in 2024, as the IRS has proposed adjustments to Form 6765, “Credit for Increasing Research Activities”. Form 6765 is the form taxpayers attach to an original or amended federal tax return to report qualifying research expenditures (QREs) and their associated claim for the R&D tax credit. These changes, if implemented, could place a substantial burden on taxpayers looking to claim the R&D tax credit.
Proposed Changes
On September 15, 2023, the IRS released a preview of the proposed changes to Form 6765. Proposed changes include:
- A new Section E with five questions seeking miscellaneous business information.
- A new Section F requesting detailed quantitative and qualitative information for each business component is required under Section 41 of the Internal Revenue Code.
- Moving the "reduced credit" election question and the "controlled groups or businesses under common control" question from line 17 and line 34 to the top of Form 6765.
How Will This Impact Me?
These proposed changes are going to require some taxpayers to change the methodology employed to identify and document QREs, as the Form 6765 changes require a significant amount of detailed quantitative and qualitative information broken out at each business component level.
What’s Next?
Whether the IRS chooses to adopt these proposed changes or not, this move provides insights into the IRS’ increased interest in R&D tax credit submissions. Just last year the IRS instituted changes to the R&D tax credit that require taxpayers to submit similarly burdensome information with R&D tax refund claims filed on amended federal tax returns.
Contact Us
If there are any questions regarding the impact these proposed changes will have on the evaluation, identification, and documentation of your R&D tax credit claim, please reach out to a member of Withum’s R&D Tax Credit Services Team.
