IRS Releases Draft Form 6765 and Instructions

On Dec. 12, 2024, the IRS released an updated draft Form 6765, incorporating only minor grammatical corrections compared to the draft that was released on June 21, 2024. On Dec. 20, 2024, the IRS followed up with news release IR 2024-313, which contained the draft Form 6765 and instructions, and requested feedback through June 30, 2025, particularly related to the following:

• Section G (Business Component Information) reporting for controlled groups
• Accounting Standards Codification (ASC) 730, “Research and Development,” directive
• Section G business component detail
• Statistical sampling

The changes to Form 6765 are the most significant modifications to the form in its history.

Summary of key dates and requirements

Consistent with the June 2024 draft form release, Section E (Other Information) contains new requirements effective for tax years beginning before 2025. This includes:

• Reporting the total number of business components generating qualified research expenses (QREs)
• Identifying the amount of officers’ wages included as wage QREs, where the definition of corporate officers is based on the laws of the state of incorporation
• Confirming whether the claim is consistent with historical filings
• Indicating whether the ASC 730 directive is used for any portion of the claim

Section G is optional for all tax years beginning before 2025 and required for tax years beginning after 2024. Exceptions for taxpayers who are not required to complete this section are consistent with the June version of the draft. For applicable taxpayers, Section G mandates reporting both quantitative and qualitative information. This section requires taxpayers to submit a significant amount of information that previously was not required to claim the R&D tax credit, including the following:

• The business components making up the top 80% of QREs, or the top 50 business components
• The total amount of qualified wages separated into three distinct categories: direct performance, direct supervision, and direct support of qualified research activities
• Additional details on attachments and significant support related to claims that include statistical sampling or on amended returns at the time of filing
• Clarification that line 49(f), which states, “describe the information sought to be discovered,” is required only on an amended return

Form 6765 has historically been quantitative-only, with the requirement that taxpayers maintain qualitative documentation in the event of an exam. The revisions to Form 6765 significantly increase the amount of qualitative data required to be provided with the return.

Crowe observation

The new requirements for business component-level reporting by name and type, attachment of statistical sampling plans to the tax return, and several additional disclosure requirements upon filing will accelerate R&D credit study timing. These new requirements will prompt taxpayers to evaluate if and when this information is ready for submission by compliance deadlines.

Looking ahead

Although the complex Section G will not apply to most taxpayers for their 2024 tax year, taxpayers should put a process in place to gather the information necessary to meet the new requirements for the 2025 tax year. The new requirements will increase the amount of information that needs to be gathered and analyzed to calculate and substantiate credits. They also will increase the time needed to complete the form and required attachments. Additionally, taxpayers should reevaluate whether a statistical sampling approach continues to make sense and whether there are opportunities to claim some QREs using the ASC 730 directive, if eligible. Taxpayers should consult with their tax advisers to understand how changes to the Form 6765 and instructions could affect their credit claim approach and timing.