Instructions For Form 6765 - Credit For Increasing Research Activities

the partnership or S corporation and the partner or S

between U.S. and foreign source income, see sections 861

corporation shareholder meet the gross receipts test as

through 864.

discussed under Eligible Small Business, earlier, for the tax

Member of Controlled Group of

year that the credit is treated as a current year general

Corporations or Group of Trades or

business credit.

Businesses Under Common Control

Qualified Small Business (Payroll Tax Credit

Election)

(Controlled Group)

A qualified small business is a corporation (including an S

For purposes of figuring the credit, all members of a

corporation) or partnership with:

controlled group of corporations (as defined in section 41(f)

1. Gross receipts of less than $5 million for the tax year,

(1)(A) and (f)(5)) and all members of a group of trades or

and

businesses under common control (as defined in section

41(f)(1)(B) and Regulations section 1.41-6(a)(3)(ii)) are

2. No gross receipts for any tax year before the

treated as a single taxpayer. Use Section A or B to figure the

5-tax-year period ending with the tax year.

credit for the entire group. As a member, your credit is

Any other person may be considered a qualified small

determined on a proportionate basis to your share of the

business if the person meets the requirements of (1) and (2)

aggregate qualified research expenses for increasing

above, taking into account the aggregate gross receipts

research activities taken into account by the group for the

received in all the trades or businesses.

research credit. Enter your share of the credit on line 17 or

line 34, whichever applies. Attach a statement showing how

The term “gross receipts” for purposes of determining

your share of the credit was figured, the name and employer

whether your business is a qualified small business means

identification number or taxpayer identification number of the

gross receipts as determined under section 448(c)(3)

other members of the group, and the designated member.

(without regard to subparagraph (A) thereof) and Regulations

Write “See Attached” next to the entry space for line 17 or

sections 1.448-1T(f)(2)(iii) and (iv). The definition of gross

line 34.

receipts under section 41(c)(7) and Regulations section

1.41-3(c) does not apply for this purpose. Any reference to

If a member of a controlled group has filed its return using

your trade or business also includes a reference to any

a method different from that of the designated member, then

predecessor of your trade or business. Also, if your trade or

that member should file an amended return to conform to the

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

designated member's method.

receipts must be annualized by multiplying the gross receipts

A member of a controlled group cannot make an

for the short period by 12 and dividing the result by the

alternative simplified credit (ASC) election in a tax year on an

number of months in the short period.

amended return if any member of the controlled group for

A qualified small business does not include a tax-exempt

that tax year previously claimed the research credit using a

organization under section 501.

method other than the ASC on an original or amended return

for that year. For additional rules regarding the election (or

Payroll Tax Credit Election

revocation of the election) of the ASC in Section B by a

The payroll tax credit election is an annual election made by

controlled group of corporations, see Regulations sections

a qualified small business specifying the amount of research

1.41-9 and 1.41-9T.

credit, not to exceed $250,000, that may be used against the

For purposes of the reduced credit election, a member of

employer portion of social security liability. The credit is the

a controlled group may make the election under section

smallest of the current year research credit, an elected

280C(c)(3). However, only the common parent (within the

amount not to exceed $250,000, or the general business

meaning of Regulations section 1.1502-77(a)(1)(i)) of a

credit carryforward for the tax year (before the application of

consolidated group may make the election on behalf of the

the payroll tax credit election for the tax year). The general

members of a consolidated group.

business credit carryforward limitation does not apply to

partnerships or S corporations. The election must be made

For purposes of the payroll tax credit election, all

on or before the due date of the originally filed income tax

members of the same controlled group are treated as a

return (including extensions). An election cannot be made for

single taxpayer. Thus, the aggregate gross receipts of all

a tax year if an election was made for 5 or more preceding

members of such a group must be taken into account in

tax years. The election made by a partnership or S

determining whether a business is a qualified small business.

corporation is made at the entity level. Any election to take

Also see Qualified Small Business, earlier. In addition, a

the payroll tax credit may be revoked only with the consent of

member of such a group may not make a payroll tax credit

the IRS.

election if the member (or any other member of the member’s

group) has made a payroll tax credit election for 5 or more

Special Rules

preceding tax years.

See section 41(f) and Regulations sections 1.41-6, 1.41-6T,

Each member of a controlled group separately makes the

and 1.41-7 for special rules related to:

payroll tax credit election. The amount that each member of

Aggregation of expenses for members of controlled

the group can separately elect is limited to the least of: (a) the

groups and businesses under common control;

electing member’s allocable share of the group credit

Allocation of the credit by partnerships, estates, and trusts;

(determined under the rules discussed above), (b) the

Adjustments, if a major portion of a business is acquired or

electing member’s allocable share of the $250,000 amount,

disposed of; and

or (c) in the case of an electing member other than a

Short tax years.

partnership or S corporation, the amount of the electing

For special rules concerning the allocation and

member’s business credit carryforward under section 39

apportionment of research and experimental expenses

carried from the tax year (determined before the application

-2-

Instructions for Form 6765 (2016)

Instructions For Form 6765 - Credit For Increasing Research Activities - 2016 Page 2

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