March 4, 2025 New Form 6765: Changes and Implications for Tax Returns

The IRS has released Form 6765 for R&D credits, requiring relevant businesses to implement the new form for this year’s tax return season.

By Michelle Abel, principal and firm leader of credits and incentives at Baker Tilly

What is Form 6765?

Form 6765 is a tax form that is required for businesses across industries that perform research and development activities and would like to claim a research (R&D) tax credit. This form allows businesses to increase their research activities while receiving tax credits in return.  

The week of February 10, 2025, the IRS replaced the former version of Form 6765 and instructions with the revised form that was released in December 2024, signaling to taxpayers that the revised Form 6765 and instructions are now in effect. While the IRS is accepting feedback on the instructions for the form through June 30, 2025, the use of new Form 6765 will be required for the 2024 tax return.

What is New and Different?

So, what are the important changes to Form 6765? There are quite a few. The changes include the addition of new Items A and B, and Sections E, F and G. Sections C and D did not receive any changes or updates.

Items A and B

These new items are found on the first page as two yes or no questions that precede sections of the form. Item A asks if the company intends to elect the reduced credit under section 280C and Item B asks whether the company is in a controlled group or business under common control.

Sections A and B Revisions

Previously, sections A and B included two types of calculation methods, Regular Credit and Alternative Simplified Credit, in addition to separate lines for each type of qualified research expense (QRE). In the revised version, the QREs are now delineated in new Section F with only the total QRE amounts included on Section A, Line 5 and Section B, Line 20.  

New Sections

• Section E: The new section includes questions regarding the number of business components, the amount of officer’s wages included in qualified wages, whether there were any acquisitions or dispositions and whether any new categories of expenses were included in the calculation. There is also a question for businesses that utilize the ASC 730 Directive to confirm whether their total QREs were calculated in line with requirements for ASC 730 and to include the amount from Appendix C, Line 19 as well as Appendices A, B, C and D (this is specifically related to the Directive method).
  
  
• Section F: New Section F includes the QREs Summary, itemizing the total QREs for wages, supplies, contract research, rental or lease cost of computers and basic research costs for all business components. This information was previously required in Sections A and B.
  
  
• Section G: New Section G is the largest new component of Form 6765. This section requests detailed information on each business component associated with the QREs included in the calculation. Businesses are required to complete new Section G unless the company is a Qualified Small Business and has checked the box to claim the credit against payroll tax. Businesses are also not required to complete new Section G if the company has equal to or less than $1,500,000 in total QREs and equal to or less than $50,000,000 in gross receipts for credits claimed on an original filed return.
  
  If a company is required to complete new Section G, the company must report on 80% of the total QREs but no more than 50 business components (80%/Top 50), determined at the controlled group level. The 80%/Top 50 business components must be reported in new Section G in descending order by total QREs by business component.
  
  Additionally, for companies utilizing the ASC 730 directive, the number of business components required to report on is impacted by the amount of ASC 730 expenses asserted. New Section G also has requirements for companies utilizing statistical sampling in determining business components and how those business components should be reported. Business components that remain after identifying the 80%/Top 50 business components will be reported as “aggregate BCs” and the aggregate amounts for each type of expense will be reported in each column for the related expenses in new Section G.
  
  New Section G requires business components to be listed by entity and company code as well as the type of business component, such as product, process or all others (including formula, technique, invention or software). Additionally, new Section G requires the 80%/Top 50 business components to be listed by name or alphanumeric identifier.
  
  For businesses engaged in software development activities, additional information is required in new Section G regarding whether the software is for internal use (IUS), non-internal use, dual function software or an exception to IUS.
  
  New Section G also requests additional information regarding wages, supplies, rental or lease cost of computers and contract research, itemized by business component for the 80%/Top 50 business components. For wage expenses in the 80%/Top 50 business components, for each business component these must be further segmented by research conducted in-house by persons directly engaged in, directly  supervising or directly supporting research activities.

What Does This Mean for Future Tax Returns?     

For all businesses filing a research credit claim on the 2024 tax return (processing year 2025), new Section G will be optional. Items A and B, as well as all other sections, are required to be completed for the 2024 tax return.

Making new Section G optional for the 2024 tax return will give businesses temporary relief from completing the new Form 6765 requirements, which require detailed information for each business component. However, new Section E will require information about the number of business components to be provided at the time of filing the research claim, as well as completion of other questions pertaining to officers’ wages, acquisitions or dispositions, new categories of expenses and ASC 730.

When it comes to the 2025 tax return (processing year 2026), new Section G will be required for all relevant businesses, as well as Items A and B and new Sections E and F. Businesses will continue to be exempt from completing new Section G if the business is a Qualified Small Business claiming the credit against payroll tax or if the business has equal or less than $1,500,000 in total QREs and equal to or less than $50,000,000 in gross receipts.

Implementing New Form 6765 Changes

The changes to Form 6765 will require some more heavy lifting from businesses going forward. Businesses have the time to prepare for this change by becoming familiar with the draft Form 6765 requirements and planning for next year.

About the Author:
Michelle Abel is a principal and firm leader of credits and incentives within Baker Tilly’s specialty tax practice. Michelle has more than 20 years of innovation credits and fixed assets experience. As the leader of the credits and incentives group, she is responsible for executing strategic and operational oversight of innovation credits (research and development (R&D) tax credits), fixed assets and statutory credits within the specialty tax team.

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