Instructions For Form 6765 - Credit For Increasing Research Activities

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For the 6th tax year beginning after 1993 for which you

Section A—Regular Credit

have qualified research expenses, divide the aggregate

Skip this section and go to Section B if you are electing

qualified research expenses for the 4th and 5th such tax

or previously elected the alternative incremental credit

years by the aggregate gross receipts for those tax

(and have not received permission to revoke the

years, then divide the result by 6.

election).

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For the 7th tax year beginning after 1993 for which you

Line 1

have qualified research expenses, divide the aggregate

qualified research expenses for the 5th and 6th such tax

Corporations (other than S corporations, personal holding

years by the aggregate gross receipts for those tax

companies, and service organizations) may be eligible for

years, then divide the result by 3.

a “basic research” credit if payments in cash to a

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qualified university or scientific research organization

For the 8th tax year beginning after 1993 for which you

(under a written contract) exceed a base period amount

have qualified research expenses, divide the aggregate

(based on their general university giving and certain other

qualified research expenses for the 5th, 6th, and 7th such

maintenance-of-effort levels for the 3 preceding years).

tax years by the aggregate gross receipts for those tax

Enter your payments on this line. See section 41(e) for

years, then divide the result by 2.

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details.

For the 9th tax year beginning after 1993 for which you

have qualified research expenses, divide the aggregate

Line 2

qualified research expenses for the 5th, 6th, 7th, and 8th

Enter the qualified organization base period amount as

such tax years by the aggregate gross receipts for those

defined in section 41(e). The amount on line 2 (not to

tax years, then divide the result by 1.5.

exceed the amount on line 1), although not eligible for the

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For the 10th tax year beginning after 1993 for which

basic research credit, can be treated as contract

you have qualified research expenses, divide the

research expenses on line 7 subject to the 65% (or 75%)

aggregate qualified research expenses for the 5th

limitation.

through 9th such tax years by the aggregate gross

Line 6

receipts for those tax years, then divide the result by 1.2.

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For the 11th and later tax years beginning after 1993

Enter the amount you paid or incurred for the rental or

for which you have qualified research expenses, divide

lease of computers used in qualified research. The

the aggregate qualified research expenses for any 5 of

computer must be located off your premises and you

the 5th through 10th such tax years by the aggregate

must not be the operator or primary user of the computer.

gross receipts for those tax years.

Reduce this amount by the amount that you (or any

member of a controlled group of corporations or

The fixed-base percentage for an existing company

businesses under common control) received or accrued

(any company that is not a start-up company) is figured

for the right to use substantially identical property.

by dividing the aggregate qualified research expenses for

the tax years beginning after 1983 and before 1989 by

Line 7

the aggregate gross receipts for those tax years.

Include 65% of any amount you paid or incurred for

qualified research performed on your behalf. Prepaid

The fixed-base percentage for all companies (existing

contract research expenses are considered paid in the

and start-up) must be rounded to the nearest 1/100th of

year the research is actually done. Also include 65% of

1% (i.e., four decimal places) and cannot exceed 16%. In

that portion of the line 1 basic research payments that

addition, when figuring your fixed-base percentage, you

does not exceed the line 2 base amount.

must reflect expenses for qualified research conducted in

Puerto Rico or a U.S. possession for all prior tax years

However, use 75% in place of 65% for payments

included in the computation.

made to a qualified research consortium. A qualified

research consortium is a tax-exempt organization

If short tax years are involved, see Regulations section

described in section 501(c)(3) or 501(c)(6) that is

1.41 –3(b).

organized and operated primarily to conduct scientific

research and is not a private foundation.

Note: Reduce gross receipts by returns and allowances.

For a foreign corporation, include only gross receipts that

Line 9

are effectively connected with a trade or business in the

The fixed-base percentage depends on whether you are

United States (or in Puerto Rico or a U.S. possession, if

an existing company or a start-up company.

applicable).

A start-up company is a taxpayer that had both gross

Line 10

receipts and qualified research expenses either:

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Enter the average annual gross receipts (reduced by

For the first time in a tax year beginning after 1983 or

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returns and allowances) for the 4 tax years preceding the

For fewer than 3 tax years beginning after 1983 and

tax year for which the credit is being determined. You

before 1989.

may be required to annualize gross receipts for any short

The fixed-base percentage for a start-up company is

tax year. For a foreign corporation, include only gross

figured as follows.

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receipts that are effectively connected with a trade or

For the first 5 tax years beginning after 1993 for which

business in the United States (or in Puerto Rico or a U.S.

you have qualified research expenses, the percentage is

possession, if applicable).

3%.

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Instructions For Form 6765 - Credit For Increasing Research Activities - 2002 Page 2

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