Instructions For Form 6765 - Credit For Increasing Research Activities

years by the aggregate gross receipts for those tax years,

(schedule or forms for capitalized items) on which the

then divide the result by 1.2.

reductions were made.

For the 11th and later tax years beginning after 1993 for

If you make an election to claim a portion of your research

which you have qualified research expenses, divide the

credit as a payroll tax credit, the amount elected is treated as

aggregate qualified research expenses for any 5 of the 5th

a research credit for purposes of the reduced credit.

through 10th such tax years by the aggregate gross receipts

for those tax years.

Section B—Alternative Simplified

The fixed-base percentage for an existing company (any

Credit

company that is not a start-up company) is figured by dividing

Complete this section only if, instead of the regular credit:

the aggregate qualified research expenses for the tax years

beginning after 1983 and before 1989 by the aggregate

1. You are electing the alternative simplified credit, or

gross receipts for those tax years.

2. You previously elected the alternative simplified credit

and are not revoking the election on this return.

The fixed-base percentage for all companies (existing and

start-up) must be rounded to the nearest 1/100th of 1% (that

Electing the alternative simplified credit (ASC). You

is, four decimal places) and cannot exceed 16%. In addition,

elect the ASC by completing Section B and attaching the

when figuring your fixed-base percentage, you must reflect

completed Form 6765 to your timely filed (including

expenses for qualified research conducted in Puerto Rico or

extensions) original return for the tax year the election

a U.S. possession for all prior tax years included in the

applies. An ASC election can be made on an amended return

computation.

for a tax year only if you had not previously claimed the

If short tax years are involved, see Regulations section

research credit on an original return or amended return for

1.41-3(b).

that tax year. An extension of time to make the ASC election

will not be granted.

Reduce gross receipts by returns and allowances.

For a foreign corporation, include only gross receipts

Line 29

that are effectively connected with a trade or

CAUTION

Enter your qualified research expenses for the prior 3 tax

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

years. If the credit terminates during the tax year, prorate the

possession, if applicable).

qualified research expenses for the prior 3 tax years for the

Line 11

number of days the credit applied during the tax year. For

more information, see section 41(h).

Enter the average annual gross receipts (reduced by returns

Section C—Current Year Credit

and allowances) for the 4 tax years preceding the tax year for

which the credit is being determined. You may be required to

Line 35

annualize gross receipts for any short tax year. For a foreign

corporation, include only gross receipts that are effectively

If the credit on line 17 or line 34 includes amounts paid to

connected with a trade or business in the United States (or in

employees as wages, and you are also claiming a credit for

Puerto Rico or a U.S. possession, if applicable).

employer differential wage payments based on payments

you made to the same employees, enter on line 35 the

For a tax year that the credit terminates, the average

portion of the credit from Form 8932, line 2, that is

annual gross receipts for the 4 tax years preceding the

attributable to wages that were also used to figure the credit

termination tax year is prorated for the number of days the

credit applied during the tax year. For more information, see

on line 17 or line 34 (whichever applies).

section 41(h).

See Form 8932, Credit for Employer Differential Wage

Line 17

Payments, for more information on the credit.

Line 37

If you are electing the reduced research credit, you must

complete Form 6765 (even if no research credits are claimed

Enter total credit for increasing research activities from:

on the original return) and clearly indicate your intent to make

Schedule K-1 (Form 1065), Partner's Share of Income,

the election. In order for the election to apply, the Form 6765

Deductions, Credits, etc., box 15 (code M);

must be filed with your original timely filed (including

Schedule K-1 (Form 1120S), Shareholder's Share of

extensions) return for the tax year. Once made, the election

Income, Deductions, Credits, etc., box 13 (code M); and

is irrevocable for that tax year.

Schedule K-1 (Form 1041), Beneficiary's Share of Income,

Checking the box on line 17 or line 34 to elect the

Deductions, Credits, etc., box 13 (code I).

reduced research credit when no research credits

TIP

are claimed on the original return does not mean that

Partnerships and S corporations must always report the

above credits on line 37. Also, estates and trusts that can

you are claiming the regular research credit or that you are

allocate the source credit to beneficiaries must always report

making the ASC election.

the above credits on line 37. All other filers figuring a

If you do not elect the reduced credit, you must reduce

separate credit on earlier lines must also report the above

your otherwise allowable deduction for qualified research

credits on line 37. All others not using earlier lines to figure a

expenses or basic research expenses by the amount of the

separate credit can report the above credits directly on Form

credit on this line. If the credit exceeds the amount allowed

3800, Part III, as follows.

as a deduction for the tax year, reduce the amount

Eligible small businesses, report the credit on line 4i. See

chargeable to capital account for the year for such expenses

the definition of “Eligible Small Business” under Definitions,

by the amount of the excess. Attach a statement to your tax

earlier. Also see Treatment of partners and S corporation

return that lists the deduction amounts (or capitalized

shareholders, earlier.

expenses) that were reduced. Identify the lines of your return

All others, report the credit on line 1c.

-4-

Instructions for Form 6765 (2016)

Instructions For Form 6765 - Credit For Increasing Research Activities - 2016 Page 4

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