General Instructions

Purpose of Form

Use Form 6765 to figure and claim the credit for increasing research activities or to elect the reduced credit under section 280C.

Partnerships and S corporations must file this form to claim the credit. All others are generally not required to complete or file this form if their only source for this credit is a partnership, S corporation, estate, or trust. Instead, they can report this credit directly on Form 3800, General Business Credit. The following exception applies: you are a taxpayer that is an estate or trust and the credit can be allocated to beneficiaries. For more details, see the instructions for Form 1041, Schedule K-1, box 13.

Note.

Corporations filing an amended return to claim a credit or refund of the research credit, see Notice 2008-39, I.R.B. 2008-13 684, available at www.irs.gov/irb/2008-13_IRB/ar12.html for information on where to file.

Qualified Research

The research credit is generally allowed for expenses paid or incurred for qualified research. Qualified research means research for which expenses may be treated as section 174 expenses. This research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer. In addition, substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality. All of the research activities must be applied separately with respect to each business component of the taxpayer. The research credit generally is not allowed for the following types of activities.

  • Research conducted after the beginning of commercial production.

  • Research adapting an existing product or process to a particular customer’s need.

  • Duplication of an existing product or process.

  • Surveys or studies.

  • Research relating to certain internal-use computer software.

  • Research conducted outside the United States, Puerto Rico, or a U.S. possession.

  • Research in the social sciences, arts, or humanities.

  • Research funded by another person (or governmental entity).

If you incur qualified clinical testing expenses relating to drugs for certain rare diseases, you can elect to claim the orphan drug credit for these expenses instead of the research credit. See Form 8820, Orphan Drug Credit.

See section 41 and Regulations sections 1.41-2 and 1.41-4 for other definitions and special rules.

Special Rules

See section 41(f) and Regulations sections 1.41-6 (except section 1.41-6(c) and parts of section 1.41-6(e) do not apply; see Notice 2013-20, I.R.B. 2013-15, available at www.irs.gov/irb/2013-15_IRB/ar18.html, for details) and 1.41-7 for special rules related to:

  • Aggregation of expenses for members of controlled groups and businesses under common control;

  • Allocation of the credit by partnerships, estates, and trusts;

  • Adjustments, if a major portion of a business is acquired or disposed of; and

  • Short tax years.

For special rules concerning the allocation and apportionment of research and experimental expenses between U.S. and foreign source income, see sections 861 through 864.

Member of Controlled Group or Business Under Common Control

For purposes of figuring the credit, all members of a controlled group of corporations (as defined in section 41(f)(1)(A) and (f)(5)) and all members of a group of businesses under common control (as defined in section 41(f)(1)(B)), are treated as a single taxpayer. Use Section A or B to figure the credit for the entire group. As a member, your credit is determined on a proportionate basis to your share of the aggregate qualified research expenses for increasing research activities taken into account by the group for the research credit. Enter your share of the credit on line 17 or line 34, whichever applies. Attach a statement showing how your share of the credit was figured, the name and employer identification number or taxpayer identification number of the other members of the group, and the designated member. Write “See Attached” next to the entry space for line 17 or line 34.

If a member of a controlled group of corporations or businesses under common control has filed its return using a method different from that of the designated member, then that member should file an amended return to conform to the designated member's method.

A member of a controlled group cannot make an alternative simplified credit (ASC) election in a tax year on an amended return if any member of the controlled group for that tax year previously claimed the research credit using a method other than the ASC on an original or amended return for that year. For additional rules regarding the election (or revocation of the election) of the ASC in Section B by a controlled group of corporations, see Regulations sections 1.41-9 and 1.41-9T.

For purposes of the reduced credit election, a member of a controlled group of corporations (within the meaning of section 41(f)(5)), or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section 41(f)(1)(B)), may make the election under section 280C(c)(3). However, only the common parent (within the meaning of section 1.1502-77(a)(1)(i)) of a consolidated group may make the election on behalf of the members of a consolidated group.


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