Instructions For Form 6765 - Credit For Increasing Research Activities

2016

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

respect to each business component of the taxpayer. The

otherwise noted.

research credit generally is not allowed for the following

types of activities.

Future Developments

Research conducted after the beginning of commercial

production.

For the latest information about developments related to

Research adapting an existing product or process to a

Form 6765 and its instructions, such as legislation enacted

particular customer’s need.

after they were published, go to

Duplication of an existing product or process.

What’s New

Surveys or studies.

Research relating to certain internal-use computer

The credit for increasing research activities has been

software.

made permanent.

Research conducted outside the United States, Puerto

The credit for increasing research activities of an eligible

Rico, or a U.S. possession.

small business may offset alternative minimum tax.

Research in the social sciences, arts, or humanities.

Qualified small businesses may elect to apply up to

Research funded by another person (or governmental

$250,000 of the credit against the employer portion of social

entity).

security taxes.

Section D—Qualified Small Business Payroll Tax Election

If you incur qualified clinical testing expenses relating to

and Payroll Tax Credit, was added to reflect that a qualified

drugs for certain rare diseases, you can elect to claim the

small business may elect to claim a certain amount of its

orphan drug credit for these expenses instead of the

research credit as a payroll tax credit

research credit. See Form 8820, Orphan Drug Credit.

General Instructions

See section 41 and Regulations sections 1.41-2 and

1.41-4 for other definitions and special rules.

Purpose of Form

Eligible Small Business (For Purposes of

Use Form 6765 to figure and claim the credit for increasing

Offsetting AMT Only)

research activities (research credit), to elect the reduced

An eligible small business is:

credit under section 280C, and to elect to claim a certain

A corporation whose stock is not publicly traded,

amount of the credit as a payroll tax credit against the

A partnership, or

employer portion of social security taxes.

A sole proprietorship.

Partnerships and S corporations must file this form to

The average annual gross receipts of the corporation,

claim the credit. All others are generally not required to

partnership, or sole proprietorship for the 3-tax-year period

complete or file this form if their only source for this credit is a

preceding the tax year of the credit cannot exceed $50

partnership, S corporation, estate, or trust. Instead, they can

million. Gross receipts for any tax year must be reduced by

report this credit directly on Form 3800, General Business

returns and allowances made during the year. Any reference

Credit. The following exception applies: you are a taxpayer

to your business also includes a reference to any

that is an estate or trust and the credit can be allocated to

predecessor of your business. If your business was not in

beneficiaries. For more details, see the instructions for Form

existence for the entire 3-year period, base your average

1041, Schedule K-1, box 13.

annual gross receipts on the period your business existed.

Note. Corporations filing an amended return to claim a credit

Also, if your business had a tax year of less than 12 months,

or refund of the research credit, see Notice 2008-39, 2008-13

your gross receipts must be annualized by multiplying the

I.R.B. 684, available at

gross receipts for the short period by 12 and dividing the

ar12.html, for information on where to file.

result by the number of months in the short period.

Definitions

Note. Gross receipts must meet the definition under section

448(c)(2) and (3) and Regulations section 1.448-1T(f)(2)(iv).

Qualified Research

Member of controlled group, business under common

control, or affiliated group. For purposes of the gross

The research credit is generally allowed for expenses paid or

receipts test, all members of a controlled group of

incurred for qualified research. Qualified research means

corporations (as defined in section 52(a)) and all members of

research for which expenses may be treated as section 174

a group of businesses under common control (as defined in

expenses. This research must be undertaken for discovering

section 52(b)), are treated as a single person; and all

information that is technological in nature, and its application

employees of the members of an affiliated service group (as

must be intended for use in developing a new or improved

defined in sections 414(m) and (o)) shall be treated as

business component of the taxpayer. In addition,

employed by a single person.

substantially all of the activities of the research must be

elements of a process of experimentation relating to a new or

Treatment of partners and S corporation

improved function, performance, reliability, or quality. All of

shareholders. A partner or S corporation shareholder

the research activities must be applied separately with

cannot be treated as an eligible small business unless both

Feb 14, 2017

Cat. No. 13701S

Instructions For Form 6765 - Credit For Increasing Research Activities - 2016

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