2106-EZ E mployee Business Expenses

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 6765, PAGE 1 of 6
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄2 ")  279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

6765

Form
(Rev. April 2006)

Department of the Treasury
Internal Revenue Service

Action

Revised proofs
requested

OMB No. 1545-0619

Credit for Increasing Research Activities
䊳

Signature

O.K. to print

2005

Attach to your tax return.

Name(s) shown on return

Part I

Date

Attachment
Sequence No.

81

Identifying number

Current Year Credit (Members of controlled groups or businesses under common control, see instructions.)

Section A—Regular Credit. Skip this section and go to Section B if you are electing or previously elected the alternative incremental credit.
1
1 Certain amounts paid or incurred to energy consortia after August 8, 2005 (see instructions)
2
2 Basic research payments to qualified organizations (see instructions)
3
3 Qualified organization base period amount
4
4 Subtract line 3 from line 2. If zero or less, enter -0Wages for qualified services (do not include wages used in figuring the
5
work opportunity credit)
6
6 Cost of supplies
7
7 Rental or lease costs of computers (see instructions)
8
8 Enter the applicable percentage of contract research expenses (see instructions)
9
9 Total qualified research expenses. Add lines 5 through 8
%
10
10 Enter fixed-base percentage, but not more than 16% (see instructions)
11
11 Enter average annual gross receipts (see instructions)
12
12 Multiply line 11 by the percentage on line 10
13
13 Subtract line 12 from line 9. If zero or less, enter -014
14 Multiply line 9 by 50% (.50)
15
15 Enter the smaller of line 13 or line 14
16
16 Add lines 1, 4, and 15
17 Regular credit. If you are not electing the reduced credit under section 280C(c), multiply line 16
by 20% (.20), enter the result, and see the instructions for the schedule that must be attached.
If you are electing the reduced credit, multiply line 16 by 13% (.13) and enter the result. Also,
write “Sec. 280C” on the dotted line to the left of the entry space. Go to Section C
17
Section B—Alternative Incremental Credit. Skip this section if you completed Section A.
18
18 Certain amounts paid or incurred to energy consortia after August 8, 2005 (see the line 1 instructions)
19
19 Basic research payments to qualified organizations (see the line 2 instructions)
20 Qualified organization base period amount (see the line 3 instructions) 20
21a
21a Subtract line 20 from line 19. If zero or less, enter -021b
21b Add lines 18 and 21a
22
22 Multiply line 21b by 20% (.20)
5

23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41

Wages for qualified services (do not include wages used in figuring the
23
work opportunity credit)
24
Cost of supplies
25
Rental or lease costs of computers (see the line 7 instructions)
Enter the applicable percentage of contract research expenses (see
26
the line 8 instructions)
27
Total qualified research expenses. Add lines 23 through 26
28
Enter average annual gross receipts (see the line 11 instructions)
29
Multiply line 28 by 1% (.01)
30
Subtract line 29 from line 27. If zero or less, enter -031
Multiply line 28 by 1.5% (.015)
32
Subtract line 31 from line 27. If zero or less, enter -033
Subtract line 32 from line 30
34
Multiply line 28 by 2% (.02)
35
Subtract line 34 from line 27. If zero or less, enter -036
Subtract line 35 from line 32
Multiply line 33 by 2.65% (.0265)
Multiply line 36 by 3.2% (.032)
Multiply line 35 by 3.75% (.0375)
Add lines 22, 37, 38, and 39
Alternative incremental credit. If you are not electing the reduced credit under section 280C(c),
enter the amount from line 40, and see the line 17 instructions for the schedule that must be
attached. If you are electing the reduced credit, multiply line 40 by 65% (.65) and enter the result.
Also, write “Sec. 280C” on the dotted line to the left of the entry space

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 13700H

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38
39
40

41
Form

6765

(2005) (Rev. 4-2006)

10
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 6765, PAGE 2 of 6
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄2 ")  279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 6765 (2005) (Rev. 4-2006)

Page

2

Section C—Current Year Credit for Increasing Research Activities
42
43

Part II
44
45
46
47a
b
c
d
e
f
48
49
50
51
52
53
54

42
43

Pass-through research credit(s) from a partnership, S corporation, estate, or trust
Current year credit. Add line 17 or line 41 to line 42, and go to Part II

Allowable Credit (See Who must file Form 3800 to find out if you complete Part II or file Form 3800.)

Regular tax (see instructions)
Alternative minimum tax (see instructions)
Add lines 44 and 45
47a
Foreign tax credit
47b
Credits from Form 1040, lines 48 through 54
47c
Possessions tax credit (Form 5735, line 17 or 27)
47d
Nonconventional source fuel credit (Form 8907, line 23)
47e
Other specified credits (see instructions)
Add lines 47a through 47e
Net income tax. Subtract line 47f from line 46. If zero, skip lines 49 through 52 and enter -0- on
line 53
49
Net regular tax. Subtract line 47f from line 44. If zero or less, enter -0Enter 25% (.25) of the excess, if any, of line 49 over $25,000 (see
50
instructions)
51
Tentative minimum tax (see instructions)
Enter the greater of line 50 or line 51
Subtract line 52 from line 48. If zero or less, enter -0Credit allowed for the current year. Individuals, estates, and trusts: Enter the smallest of
line 43, line 53, or the amount from the formula in the instructions for line 54 here and on Form
1040, line 55; or Form 1041, Schedule G, line 2c. Corporations: Enter the smaller of line 43 or
line 53 here and on Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 2; or the applicable
line of other returns. If line 54 is smaller than line 43, see instructions

General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.

What’s New
● The credit for increasing research
activities (research credit) is not allowed
for amounts paid or incurred after
December 31, 2005. However, pending
legislation may allow the credit for later
expenditures.
● Certain amounts paid or incurred to
energy research consortia after August
8, 2005, are eligible for the research
credit. See the line 1 instructions for
further details.
● Amounts paid or incurred to certain
small businesses, universities, and
federal laboratories after August 8, 2005,
can be treated as contract research
expenses. See the line 8 instructions for
further details.

Purpose of Form
Use Form 6765 to figure and claim the
credit for increasing research activities.

Who Must File
An individual, estate, trust, organization,
or corporation claiming a credit for
increasing research activities; or any S
corporation, partnership, estate, or trust
that allocates the credit to its
shareholders, partners, or beneficiaries
must complete this form and attach it to

its income tax return. If allocating the
credit, see the instructions for line 43.

Qualified Research
The research credit is generally allowed
for expenditures paid or incurred for
qualified research. Qualified research
means research for which expenditures
may be treated as section 174
expenses. This research must be
undertaken for discovering information
that is technological in nature, and its
application must be intended for use in
developing a new or improved business
component of the taxpayer. In addition,
substantially all of the activities of the
research must be elements of a process
of experimentation relating to a new or
improved function, performance,
reliability, or quality. The research credit
generally is not allowed for the following
types of activities.
● Research conducted after the
beginning of commercial production.
● Research adapting an existing product
or process to a particular customer’s
need.
● Duplication of an existing product or
process.
● Surveys or studies.
● Research relating to certain
internal-use computer software.
● Research conducted outside the
United States, Puerto Rico, or a U.S.
possession.

44
45
46

47f
48

52
53

54

● Research in the social sciences, arts,
or humanities.
● Research funded by another person
(or governmental entity).
If you incur qualified clinical testing
expenses relating to drugs for certain
rare diseases, you can elect to claim
the orphan drug credit for these
expenses instead of the research credit.
See Form 8820, Orphan Drug Credit.
See section 41 and Regulations
sections 1.41-2 and 1.41-4 for other
definitions and special rules.

Special Rules
See section 41(f) and Temporary
Regulations section 1.41-6T (Regulations
section 1.141-6 for tax years beginning
after December 31, 2004, and ending
before May 24, 2005) for special rules
related to:
● Aggregation of expenditures for
members of controlled groups and
businesses under common control;
● Allocation of the credit by
partnerships, estates, and trusts;
● Adjustments, if a major portion of a
business is acquired or disposed of; and
● Short tax years.
For special rules concerning the
allocation and apportionment of research
and experimental expenditures between
U.S. and foreign source income, see
sections 861 through 864.

Form

6765

(2005) (Rev. 4-2006)

10
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 6765, PAGE 3 of 6
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄2 ")  279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 6765 (2005) (Rev. 4-2006)

Specific Instructions
Part I—Current Year Credit
You can claim either the regular credit in
Section A or elect the alternative
incremental credit in Section B. Under
the alternative incremental credit, a
smaller three-tiered fixed-base
percentage and reduced three-tiered
credit rate apply. You may want to figure
your credit both ways to see which gives
you the larger credit. However, once
elected, the alternative incremental
credit applies to the current tax year and
all later tax years, unless:
1. For tax years ending after May 23,
2005 (see Temporary Regulations
section 1.41-8T), you revoke the election
by completing Section A of Form 6765,
or
2. For tax years beginning after
December 31, 2004, and ending before
May 24, 2005, you receive IRS consent
to revoke the election. In the year the
consent is granted, attach the consent
to Form 6765 and the return.
For tax years ending after May 23,
2005, the revocation must be on an
original return filed by the due date
(including extensions).

Members of Controlled
Groups or Businesses Under
Common Control
For purposes of figuring the credit, all
members of a controlled group of
corporations (as defined in section
41(f)(5) and Temporary Regulations
section 1.41-6T) (Regulations section
1.41-6 for tax years beginning after
December 31, 2004, and ending before
May 24, 2005)), and all members of a
group of businesses under common
control, are treated as a single taxpayer.
The credit allowed each member is
based on its proportionate share of
qualified research expenses and basic
research payments giving rise to the
group’s research credit. Use Section A
or B of Part I to figure the credit for the
entire group, but enter only this
member’s share of the credit on line 17
or line 41, whichever applies. Attach a
statement showing how this member’s
share of the credit was figured, and
write “See Attached” next to the entry
space for line 17 or line 41.

Section A—Regular Credit
Skip this section and go to Section B if:
1. You are electing the alternative
incremental credit, or
2. You previously elected the
alternative credit and (a) for tax years
ending after May 23, 2005, are not
revoking the election or (b) for tax years
beginning after December 31, 2004, and
ending before May 24, 2005, have not
received permission to revoke the
election.

Page

For special rules regarding the election
or revocation of the election by a
controlled group of corporations, see
Temporary Regulations section 1.41-8T.

Line 1
Enter the amounts you paid or incurred
to energy research consortia after
August 8, 2005. In general, an energy
research consortium is any organization
described in section 501(c)(3), exempt
from tax under section 501(a), organized
and operated primarily to conduct
energy research, and not a private
foundation. See section 41(f)(6) for
further details.
Do not include any amounts paid or
incurred for foreign energy research, i.e.,
energy research conducted outside the
United States, Puerto Rico, or any
possession of the United States.
Any amount included on line 1 cannot
be included elsewhere on the return.

Line 2
Enter the amounts the corporation (not
to include S corporations, personal
holding companies, and service
organizations) paid in cash, under a
written contract, for basic research to a
qualified university, scientific research
organization, or grant organization. See
section 41(e) for details, including the
definitions of qualified organizations.

Line 3
Enter the qualified organization base
period amount based on minimum basic
research amounts plus maintenance-ofeffort amounts for the three preceding
tax years. See section 41(e) for details.

Line 7
Enter the amount you paid or incurred
for the rental or lease of computers used
in qualified research. The computer must
be located off your premises and you
must not be the operator or primary user
of the computer. Reduce this amount by
the amount that you (or any member of
a controlled group of corporations or
businesses under common control)
received or accrued for the right to use
substantially identical property.

Line 8
Enter the amounts you paid or incurred,
subject to the following limitations.
● 100% of amounts you paid (or
incurred) after August 8, 2005, for
qualified energy research performed by:
an eligible small business, a university,
or a federal laboratory (see section
41(b)(3)(D) for definitions of those
entities). Also include payments to those
same entities to the extent they are
included as basic research payments in
line 2, not to exceed the base period
amount in line 3.

3

● 75% of amounts you paid (or incurred)
for qualified research by a qualified
research consortium (as defined by
section 41(b)(3)(C)(ii)). Also include 75%
of the payments to a qualified research
consortium to the extent they are
included as basic research payments in
line 2, not to exceed the base period
amount in line 3.
● 65% of amounts you paid (or incurred)
for all other qualified research by any
other person. Also include 65% of the
payments to that person to the extent
they are included as basic research
payments in line 2, not to exceed the
base period amount in line 3.
Note. Prepaid contract research
expenses are considered paid in the
year the research is actually done.

Line 10
The fixed-base percentage depends on
whether you are an existing company or
a start-up company.
A start-up company is a taxpayer that
had both gross receipts and qualified
research expenses either:
● For the first time in a tax year
beginning after 1983, or
● For fewer than 3 tax years beginning
after 1983 and before 1989.
The fixed-base percentage for a
start-up company is figured as follows.
● For the first 5 tax years beginning
after 1993 for which you have qualified
research expenses, the percentage
is 3%.
● For the 6th tax year beginning after
1993 for which you have qualified
research expenses, divide the aggregate
qualified research expenses for the 4th
and 5th such tax years by the aggregate
gross receipts for those tax years, then
divide the result by 6.
● For the 7th tax year beginning after
1993 for which you have qualified
research expenses, divide the aggregate
qualified research expenses for the 5th
and 6th such tax years by the aggregate
gross receipts for those tax years, then
divide the result by 3.
● For the 8th tax year beginning after
1993 for which you have qualified
research expenses, divide the aggregate
qualified research expenses for the 5th,
6th, and 7th such tax years by the
aggregate gross receipts for those tax
years, then divide the result by 2.
● For the 9th tax year beginning after
1993 for which you have qualified
research expenses, divide the aggregate
qualified research expenses for the 5th,
6th, 7th, and 8th such tax years by the
aggregate gross receipts for those tax
years, then divide the result by 1.5.

10
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 6765, PAGE 4 of 6
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄2 ")  279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 6765 (2005) (Rev. 4-2006)

● For the 10th tax year beginning after
1993 for which you have qualified
research expenses, divide the aggregate
qualified research expenses for the 5th
through 9th such tax years by the
aggregate gross receipts for those tax
years, then divide the result by 1.2.
● For the 11th and later tax years
beginning after 1993 for which you have
qualified research expenses, divide the
aggregate qualified research expenses
for any 5 of the 5th through 10th such
tax years by the aggregate gross
receipts for those tax years.
The fixed-base percentage for an
existing company (any company that is
not a start-up company) is figured by
dividing the aggregate qualified research
expenses for the tax years beginning
after 1983 and before 1989 by the
aggregate gross receipts for those tax
years.
The fixed-base percentage for all
companies (existing and start-up) must
be rounded to the nearest 1/100th of
1% (that is, four decimal places) and
cannot exceed 16%. In addition, when
figuring your fixed-base percentage, you
must reflect expenses for qualified
research conducted in Puerto Rico or a
U.S. possession for all prior tax years
included in the computation.
If short tax years are involved, see
Regulations section 1.41-3(b).
Reduce gross receipts by
returns and allowances. For a
foreign corporation, include
CAUTION only gross receipts that are
effectively connected with a trade or
business in the United States (or in
Puerto Rico or a U.S. possession, if
applicable).

Line 11
Enter the average annual gross receipts
(reduced by returns and allowances) for
the 4 tax years preceding the tax year
for which the credit is being determined.
You may be required to annualize gross
receipts for any short tax year. For a
foreign corporation, include only gross
receipts that are effectively connected
with a trade or business in the United
States (or in Puerto Rico or a U.S.
possession, if applicable).

Line 17
If you do not elect the reduced credit,
which can only be claimed on an original
timely filed return (with extensions), you
must reduce your otherwise allowable
deduction for qualified research
expenses or basic research expenses by
the amount of the credit on this line. If
the credit exceeds the amount allowed
as a deduction for the tax year, reduce
the amount chargeable to the capital
account for the year for such expenses
by the amount of the excess. Attach a
schedule to your tax return that lists the
deduction amounts (or capitalized
expenses) that were reduced. Identify

Page

the lines of your return (schedule or
forms for capitalized items) on which the
reductions were made.

Section B—Alternative Incremental
Credit
Complete this section only if, instead of
the regular credit:
1. You are electing the alternative
incremental credit, or
2. You previously elected the
alternative credit and on this return are
not revoking the election and have not
previously received permission to revoke
the election.
For special rules regarding the election
or revocation of the election by a
controlled group of corporations, see
Temporary Regulations section 1.41-8T
(Regulations section 1.41-6 for tax years
beginning after December 31, 2004, and
ending before May 24, 2005).

Section C—Current Year Credit
Line 43
Pass-through entities should report the
amount on line 43 as follows.
Estates and trusts. Allocate the credit
on line 43 between the estate or trust
and the beneficiaries in the same
proportion as income was allocated. In
the margin for line 43, the estate or trust
should enter its share of the credit. Label
it “1041 Portion” and use this amount in
Part II (or on Form 3800, if required) to
figure the credit to claim on Form 1041.
On Schedule K-1, report the share of
credit allocated to each beneficiary.
S corporations and partnerships.
Attach Form 6765 to your tax return, and
on Schedule K-1 report the credit
allocated to each shareholder or partner.
Electing large partnerships include this
credit in “general credits.”

Part II—Allowable Credit
The credit allowed for the current year
may be limited based on your tax
liability. Use Part II to figure the
allowable credit unless you must file
Form 3800, General Business Credit.
Who must file Form 3800. You must file
Form 3800 if you have:
● A research credit from a passive
activity,
● More than one credit included in the
general business credit (other than a
credit from Form 8844, Form 6478, or
Section B of Form 8835), or
● A carryback or carryforward of any of
those credits.
See the instructions for Form 3800 to
find out which credits are included in the
general business credit.

Line 44
Enter the regular tax before credits from
the following line of the appropriate form
or schedule.

4

● Individuals. Enter the amount from
Form 1040, line 44.
● Corporations. Enter the amount from
Form 1120, Schedule J, line 3; Form
1120-A, Part 1, line 1; or the applicable
line of your return.
● Estates and trusts. Enter the sum of
the amounts from Form 1041, Schedule
G, lines 1a and 1b, or the amount from
the applicable line of your return.

Line 45
Enter the alternative minimum tax (AMT)
from the following line of the appropriate
form or schedule.
● Individuals. Enter the amount from
Form 6251, line 35.
● Corporations. Enter the amount from
Form 4626, line 14.
● Estates and trusts. Enter the amount
from Form 1041, Schedule I, line 56.

Line 47e
Include on lines 47e any amounts
claimed on:
● Form 8834, Qualified Electric Vehicle
Credit, line 20;
● Form 8910, Alternative Motor Vehicle
Credit, line 18; and
● Form 8911, Alternative Fuel Vehicle
Refueling Property Credit, line 19.

Line 50
See section 38(c)(5) for special rules that
apply to married couples filing separate
returns, controlled corporate groups,
regulated investment companies, real
estate investment trusts, and estates
and trusts.

Line 51
Although you may not owe AMT, you
generally must still compute the tentative
minimum tax (TMT) to figure your credit.
For a small corporation exempt from the
AMT under section 55(e), enter zero.
Otherwise, complete and attach the
applicable AMT form or schedule. Enter
on line 51 the TMT from the following
line of the form or schedule.
● Individuals: Form 6251, line 33.
● Corporations: Form 4626, line 12.
● Estates and trusts: Form 1041,
Schedule I, line 54.

Line 54
For an individual, estate, or trust, the
credits on line 17 or 41, and line 42, are
limited to the amount of tax attributable
to your taxable income from the sole
proprietorship or your interest in the
partnership, S corporation, estate, or
trust (pass-through entity) generating the
credit. Figure the research credit
limitation separately for each business
enterprise by using the following
formula:
Taxable income attributable to the
sole proprietorship or your interest in
the pass-through entity
(Line 48 - Line 50) x

Taxable income for the year (Form
1040, line 43, or Form 1041, line 22)

10
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 6765, PAGE 5 of 6 (PAGE 6 IS BLANK)
MARGINS: TOP 13mm (1⁄2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄2 ")  279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 6765 (2005) (Rev. 4-2006)

The result figured above is limited to
the excess of line 48 over line 50. If in
the current tax year you had no taxable
income attributable to a particular
business interest, you cannot claim any
research credit this year for that
business.
If you cannot use all of the research
credit because of the tax liability limit or
the taxable income limit above (line 54 is
less than line 43), carry the unused
credit back 1 year then forward up to 20
years. See the instructions for Form
3800.
Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of
the United States. You are required to
give us the information. We need it to
ensure that you are complying with
these laws and to allow us to figure and
collect the right amount of tax.

Page

You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions must
be retained as long as their contents
may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103.
The time needed to complete and file
this form will vary depending on
individual circumstances. The estimated
burden for individual taxpayers filing this
form is approved under OMB control
number 1545-0074 and is included in
the estimates shown in the instructions
for their individual income tax return. The
estimated burden for all other taxpayers
who file this form is shown below. The
estimated average time is:

Printed on recycled paper

5

15 hr., 18 min.
Recordkeeping
Learning about the law
1 hr., 40 min.
or the form
Preparing and sending the form
2 hr.
to the IRS
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. See the instructions for the tax
return with which this form is filed.