On December 20, 2024, the Internal Revenue Service (IRS) released draft instructions for Form 6765, on which taxpayers report their research and experimentation (R&E) credit for the tax year. The draft instructions are to be used in conjunction with a new, expanded Form 6765. The IRS intends to issue the revised Form 6765 and these instructions in final form by end of January 2025, in time to file 2024 federal tax returns.

The revised Form 6765 adds three new sections aimed at obtaining more information to evaluate R&E credit claims. 

• New Section E asks taxpayers high-level questions regarding its determination of qualified research expenses (QREs), such as the total number of business components generating QREs, the wages of corporate officers reported as QREs, and whether taxpayer determined their QREs under the ASC 730 Directive. 
• New Section F requests details regarding the make-up of taxpayers' QREs. 
• New Section G requests qualitative information regarding the business components to which 80 percent of taxpayers' QREs are attributable. 

The draft instructions provide guidance on completing the new sections. Importantly, the draft instructions confirm that Section G is optional for tax years beginning before 2025. 

Taxpayers claiming the R&E credit should familiarize themselves with the new Form 6765 and the draft instructions. The revised form significantly increases the amount of information taxpayers must include with their return. In a release issued concurrently with the draft instructions, the IRS requested taxpayer feedback by June 30, 2025. It specifically requested feedback on the instructions for new Section G with respect to controlled groups, taxpayers that determine QREs under the ASC 730 Directive, the business component detail, and taxpayers that use statistical sampling to support their reporting position. 

For more information, please contact:

Robert J. Kovacev, rkovacev@milchev.com, 202-626-5857

George A. Hani, ghani@milchev.com, 202-626-5953

Samuel A. Lapin, slapin@milchev.com, 202-626-5807

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