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 unless otherwise noted.

Special Rules

General Instructions

See section 41(f) and Regulations section 1.41 for

special rules related to:

Purpose of Form

•

Aggregation of expenditures for members of controlled

Use Form 6765 to figure and claim the credit for

groups and businesses under common control;

•

increasing research activities (research credit).

Allocation of the credit by partnerships, estates, and

trusts;

Who Must File

•

Adjustments, if a major portion of a business is

An individual, estate, trust, organization, or corporation

acquired or disposed of; and

•

claiming a credit for increasing research activities; or any

Short tax years.

S corporation, partnership, estate, or trust that allocates

For special rules concerning the allocation and

the credit to its shareholders, partners, or beneficiaries

apportionment of research and experimental

must complete this form and attach it to its income tax

expenditures between U.S. and foreign source income,

return. See the instructions for line 41 if allocating the

see sections 861 through 864.

credit.

Additional Information

Qualified Research

See section 41 and Regulations section 1.41 for more

The research credit is generally allowed for qualified

details.

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

Part I—Current Year Credit

or improved business component of the taxpayer. In

addition, substantially all of the activities of the research

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

must be elements of a process of experimentation

alternative incremental credit (Section B). Under the

relating to a new or improved function, performance,

alternative incremental credit, a smaller three-tiered

reliability, or quality.

fixed-base percentage and reduced three-tiered credit

The research credit generally is 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.

•

Members of Controlled Groups or

Duplication of an existing product or process.

•

Businesses Under Common Control

Surveys or studies.

•

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 Regulations section 1.41 – 6), and all

Rico, or a U.S. possession.

members of a group of businesses under common

•

Research in the social sciences, arts, or humanities.

control, are treated as a single taxpayer. The credit

•

Research funded by another person (or governmental

allowed each member is based on its proportionate share

entity).

of qualified research expenses and basic research

If you incur qualified clinical testing expenses relating

payments giving rise to the group’s research credit. Use

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

Section A or B of Part I to figure the credit for the entire

the orphan drug credit for these expenses instead of

group, but enter only this member’s share of the credit on

taking the research credit. See Form 8820, Orphan Drug

line 16 or line 39, whichever applies. Attach a statement

Credit.

showing how this member’s share of the credit was

See section 41 and Regulations sections 1.41 – 2 and

figured, and write “See attached” next to the entry space

1.41 –4 for other definitions and special rules.

for line 16 or line 39.

Cat. No. 13701S

Instructions For Form 6765 - Credit For Increasing Research Activities - 2002

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