The updated version of FORM 6765 and its instructions are available from the IRS.

Key Takeaways

• Taxpayers must report the number of business components generating QREs and the total amount of wages paid to executives included in the calculation of the credit.
• Taxpayers must provide information for their QREs and Business Component. The new Section G requires to report for each business component information and details related to their QREs.

The IRS recently released the updated version of Form 6765, which is used to claim the Credit for Increasing Research Activities. Among other things, new sections have also been added, including Section E (Other Information) requiring additional details in their submissions, including the number of distinct business components that are generating Qualified Research Expenses (QREs).

In addition, a new section (Section G) to provide detailed information on the Business Component used to generate credit for the tax year in which the R&D expenses are incurred has been included in Form 6765. This new section requires significantly more detailed information related to the projects and business components (BC), ensuring greater transparency and accuracy in the data presented.

For each business component, taxpayers must provide specific information about the types of expenses related to each project, including wages, supplies, contract research, and cloud service rentals. The expense category and its respective amount should be properly documented and clearly identified for each business component, resulting in the need for greater controls on the part of the companies, as well as a greater workload for the departments involved directly or indirectly in the R&D projects in order to allow the respective surveys and compilation of this information for the correct enjoyment of the tax credit.

A specific rule has been included regarding the sampling of projects to be included in the form when the volume exceeds 50, linked to the most representative expenditure volume of the year’s research investment (80%).

From FI Group’s perspective, the new IRS requirements are neither surprising nor have any impact on our way of working, as the additional level of detail the IRS is requesting was already part of our working method (which even provides more detailed information than the IRS is currently requesting). It is important that companies prepare for these changes or seek advice on this new regulation, which will begin to apply in 2025.