IRS Releases Preview of Proposed Changes to Form 6765 for Research Credit Reporting

The IRS on September 15 released a preview of proposed changes to some sections of Form 6765, Credit for Increasing Research Activities. The credit is also known as the research credit.  

The proposed changes, likely to become effective the beginning of the 2024 tax year, include:

  • A new Section E with five questions seeking miscellaneous information.
  • A new Section F for reporting quantitative and qualitative information for each business component, 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.

The IRS is also requesting feedback on whether Section F should be optional for some taxpayers, including those:

  • With qualified research expenditures that are less than a specific dollar amount at a controlled group level.
  • With a research credit that is less than a specific dollar amount at a controlled group level.
  • That are Qualified Small Businesses for payroll tax credit purposes.

It is important to note that if Section F were made optional for certain taxpayers, it would not exempt them from the requirement to maintain books and records or provide Section F information in a similar format, if requested; and it would not apply to amended returns for the research credit.

The deadline for submitting feedback is October 31, 2023. Currently, the IRS receives a significant number of returns claiming the research credit, which requires substantial examination resources from both taxpayers and the IRS. To ensure effective tax administration for this issue, the IRS aims to clarify the requirements for claiming the research credit by considering all feedback received from stakeholders before finalizing any changes to Form 6765.

To ensure taxpayers are making the most of these potential changes and are able to continue optimizing the research credit, it is important to partner with a trusted tax advisor to ensure accurate and compliant reporting.