American companies conducting qualified research and development (R&D) may claim the Credit for Increasing Research Activities (i.e., the federal R&D tax credit) to increase their cash flow, reduce their tax liability, and maximize their time. 

Businesses can claim the federal R&D tax credit by documenting qualified R&D activities, capturing qualified research expenses (QREs) – including wages for qualified services and supply costs – and reporting the calculated credit amount when filing their annual tax returns.

The IRS recently updated Form 6765. The current version for the tax year 2024, called Rev. December 2024, is now required and includes new sections and detailed reporting requirements. While the completion instructions were revised in January 2025, the Internal Revenue Service (IRS) is accepting feedback through June 30, 2025.

Understanding these policy changes is essential for remaining in compliance with accurate, complete filings.

Key Changes to Form 6765

Let’s review the new sections and items of Form 6765.

• Items A & B: 

• Address the reduced credit election and controlled group status.

• Section E—Other Information: 

• Captures data about business components, officer wages, acquisitions, and ASC 730 compliance.

• Section F—Qualified Research Expenses Summary: 

• Provides a comprehensive QRE overview.

• Section G—Business Component Information:

• Constitutes the most significant update to Form 6765. 
  • For 2024 returns, Section G is optional.
  • For 2025 returns and later, Section G becomes mandatory for most businesses to complete. Exemptions include:
    • Qualified small businesses claiming the credit against payroll tax.
    • Businesses with less than $1.5 million in QREs and $50 million in gross receipts.
• Solicits detailed data describing each business component, including any internal-use software.
  • Termed the IRS' 80%/Top 50 rule, it is mandatory to report on 80% percent of the total QREs but no more than 50 business components.
• Requests the technical information sought to be discovered to create or improve each business component.

Takeaways by Tax Year

• Tax Year 2024:

  • While populating Section G remains optional, businesses must complete Items A & B and Sections E & F.
  • Prepare to meet the increased reporting requirements of Section E.
• Tax Years 2025 and later:
  • Complying with Section G will require the meticulous record-keeping of business components.
  • Businesses should prepare now. Schedule a free consultation today to receive immediate assistance from Randy Eickhoff, CPA, Founder & Head Coach at Acena. 
    • Develop documentation systems for tracking business components and their associated QREs.
    • Understanding the new rules related to ASC 730 expensing and reporting at least 80 percent of total QREs.

Stay Informed

• Sign up for our free, monthly webinar, next on March 18: “Cracking the (Tax) Code for R&D.”
  • This workshop provides one CPE credit for professionals who are keeping up with continuing education.
• Visit our Acena Events page to stay abreast of all upcoming events.

//

Edited by Laura Whittenburg, MSBME, Sr. Technical Writer at Acena Consulting.