Instructions For Form 6765 - Credit For Increasing Research Activities

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Department of the Treasury

Internal Revenue Service

Instructions for Form 6765

Credit for Increasing Research Activities

Section references are to the Internal Revenue Code.

Special Rules

General Instructions

See section 41(f) for special rules related to:

•

Aggregation of expenditures for members of controlled

Purpose of Form

groups and businesses under common control;

•

Allocation of the credit by partnerships, estates, and

Use Form 6765 to figure and claim the credit for

trusts;

increasing research activities (research credit).

•

Adjustments if a major portion of a business is

acquired or disposed of; and

Who Must File

•

Short tax years.

An individual, estate, trust, organization, or corporation

For special rules concerning the allocation and

claiming a credit for increasing research activities; or any

apportionment of research and experimental

S corporation, partnership, estate, or trust that allocates

expenditures between U.S. and foreign source income,

the credit to its shareholders, partners, or beneficiaries

see sections 861 through 864.

must complete this form and attach it to its income tax

If you cannot use the research credit because of the

return.

tax liability limit, carry it back 1 year then forward up to 20

years. See Form 3800, General Business Credit, for

Qualified Research

details, and see the instructions for Part II for when and

The research credit is generally allowed for qualified

how any suspended credit may be claimed.

research. Qualified research means research for which

expenditures may be treated as section 174 expenses.

This research must be undertaken for discovering

Specific Instructions

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

Part I—Current Year Credit

addition, substantially all of the activities of the research

must be elements of a process of experimentation

You may claim the regular credit (Section A) or elect the

relating to a new or improved function, performance,

alternative incremental credit (Section B). Under the

reliability, or quality.

alternative incremental credit, a smaller three-tiered

fixed-base percentage and reduced three-tiered credit

The research credit is generally not allowed for the

rate apply. You may want to figure your credit both ways

following types of activities.

•

to see which gives you the larger credit. However, once

Research conducted after the beginning of commercial

elected, the alternative incremental credit applies to the

production.

current tax year and all later tax years, unless you

•

Research adapting an existing product or process to a

receive IRS consent to revoke the election.

particular customer’s need.

•

Duplication of an existing product or process.

Members of Controlled Groups or

•

Surveys or studies.

Businesses Under Common Control

•

Research relating to certain internal-use computer

For purposes of figuring the credit, all members of a

software.

•

controlled group of corporations (as defined in section

Research conducted outside the United States, Puerto

41(f)(5)), and all members of a group of businesses

Rico, or a U.S. possession.

•

under common control, are treated as a single taxpayer.

Research in the social sciences, arts, or humanities.

•

The credit allowed each member is based on its

Research funded by another person (or governmental

proportionate share of qualified research expenses and

entity).

basic research payments giving rise to the group’s

If you incur qualified clinical testing expenses relating

research credit. Use Section A or B of Part I to figure the

to drugs for certain rare diseases, you may elect to claim

credit for the entire group, but enter only this member’s

the orphan drug credit for these expenses instead of

share of the credit on line 16 or line 39, whichever

taking the research credit. See Form 8820, Orphan Drug

applies. Attach a statement showing how this member’s

Credit.

share of the credit was figured, and write “See attached”

See section 41 for other definitions and special rules.

next to the entry space for line 16 or line 39.

Cat. No. 13701S

Instructions For Form 6765 - Credit For Increasing Research Activities - 2001

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