The IRS is seeking feedback from stakeholders on proposed changes to Form 6765, Credit for Increasing Research Activities, also known as the research credit. The IRS is considering making these changes effective beginning with tax year 2024 (IR 2023-173, 9/15/2023).
Claiming the research credit.
Taxpayers use Form 6765 to figure and claim the credit for increasing research activities, to elect the reduced credit under Code Sec. 280C, and to elect to claim a certain amount of the credit as a payroll tax credit against the employer portion of Social Security taxes. Partnerships and S corporations must file this form to claim the research credit.
However, other taxpayers are generally not required to complete or file Form 6765 if their only source for the credit is a partnership, S corporation, estate, or trust. Instead, these taxpayers can report the credit directly on Form 3800, General Business Credit, unless the taxpayer is an estate or trust and the credit can be allocated to beneficiaries.
Changes to Form 6765.
The proposed changes to Form 6765 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 Code Sec. 41.
- 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.
In addition to feedback on the above changes, the IRS is also requesting feedback on whether Section F should be optional for certain taxpayers, including those:
- With qualified research expenditures less than a certain dollar amount at a controlled group level,
- With a Research Credit less than a certain dollar amount at a controlled group level, or
- That are a Qualified Small Business for the Payroll Tax Credit.
According to the News Release, the IRS’ changes to Form 6765 aim to provide taxpayers with a consistent and predefined format for tax reporting and improve the information received for tax administration.
Where to send feedback.
Stakeholder feedback should address the justification, limitation amounts, and pros/cons of each change. Feedback is requested by October 31, 2023, and should be submitted to Lbi.firstname.lastname@example.org with the subject line: “Feedback/Questions F6765.”
The IRS will consider all stakeholder feedback before finalizing any Form 6765 changes.
For more information about the credit for increasing research activities, see Checkpoint’s Federal Tax Coordinator ¶ L-15300.
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