The Internal Revenue Service (IRS) recently released a preview of proposed changes to Form 6765, Credit for Increasing Research Activities, also known as the R&D Tax Credit. We will explore the key proposed changes to Form 6765 and their potential impact on taxpayers.

New Sections and Reporting Requirements

The proposed changes to Form 6765 include the addition of a new Section E, which consists of five questions seeking miscellaneous information. This section aims to gather additional details that may be relevant to the research credit claim. Additionally, a new Section F is introduced to report quantitative and qualitative information for each business component, as required under Section 41 of the Internal Revenue Code. This section will provide a more comprehensive understanding of the research activities conducted by taxpayers.

Reorganization of Questions

To improve the flow and organization of the form, the proposed changes involve 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. This reorganization will make it easier for taxpayers to locate and answer these important questions.

Optional Section F for Certain Taxpayers

The IRS is seeking feedback on whether Section F should be optional for certain taxpayers. This includes taxpayers with qualified research expenditures below a specific dollar amount at a controlled group level, those with a research credit below a specific dollar amount at a controlled group level, and Qualified Small Businesses for payroll tax credit purposes. If Section F were made optional for these taxpayers, it would not exempt them from maintaining books and records or providing Section F information if requested. It would also not apply to amended returns for the research credit.

Importance of Feedback

The IRS is actively seeking feedback from stakeholders on the proposed changes to Form 6765. The deadline for submitting feedback is October 31, 2023. The IRS recognizes the significance of the research credit and aims to ensure effective tax administration for this issue. By considering feedback from taxpayers and tax professionals, the IRS can make informed decisions and clarify the requirements for claiming the research credit.

To ensure accurate and compliant reporting, it is crucial for taxpayers to partner with a trusted tax advisor. A tax advisor can provide guidance on navigating the proposed changes, optimizing the research credit claim, and ensuring compliance with the revised form.

Taxpayers are encouraged to provide feedback to the IRS before the October 31, 2023 deadline to ensure their voices are heard.

If you would like to learn more about the proposed changes to the form 6765 or the Research and Development Tax Credit, please reach out to a member of the RCIS (Research Credits & Incentives Services) team for more information.