Form 6765 Credit for Increasing Research Activities

Form

6765

OMB No. 1545-0619

Credit for Increasing Research Activities

Department of the Treasury
Internal Revenue Service

▶

2010

Attach to your tax return.

Attachment
Sequence No. 81
Identifying number

Name(s) shown on return

Section A—Regular Credit. Skip this section and go to Section B if you are electing or previously elected (and are not revoking) the
alternative simplified credit.
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Certain amounts paid or incurred to energy consortia (see instructions) . . . . . . . . .
1
Basic research payments to qualified organizations (see instructions) .
2
Qualified organization base period amount . . . . . . . . . .
3
Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . .
4
Wages for qualified services (do not include wages used in figuring the
work opportunity credit) . . . . . . . . . . . . . . . .
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Cost of supplies
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Rental or lease costs of computers (see instructions) . . . . . .
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Enter the applicable percentage of contract research expenses (see
instructions) . . . . . . . . . . . . . . . . . . . .
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Total qualified research expenses. Add lines 5 through 8 . . . . .
9
Enter fixed-base percentage, but not more than 16% (see instructions)
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%
11
Enter average annual gross receipts (see instructions) . . . . . .
Multiply line 11 by the percentage on line 10 . . . . . . . . .
12
Subtract line 12 from line 9. If zero or less, enter -0- . . . . . . .
13
Multiply line 9 by 50% (.50) . . . . . . . . . . . . . . .
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Enter the smaller of line 13 or line 14
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Add lines 1, 4, and 15 . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Are you electing the reduced credit under section 280C? ▶ Yes
No
If “Yes,” multiply line 16 by 13% (.13). If “No,” multiply line 16 by 20% (.20) and see the
instructions for the schedule that must be attached. Members of controlled groups or businesses
under common control: see instructions for the schedule that must be attached . . . . . .
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Section B—Alternative Simplified Credit. Skip this section if you are completing Section A.
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Certain amounts paid or incurred to energy consortia (see the line 1 instructions) . . .
Basic research payments to qualified organizations (see the line 2
instructions) . . . . . . . . . . . . . . . . . . . .
19
Qualified organization base period amount (see the line 3 instructions) .
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Subtract line 20 from line 19. If zero or less, enter -0- . . . . . . . . . . . .
Add lines 18 and 21 . . . . . . . . . . . . . . . . . . . . . . .
Multiply line 22 by 20% (.20) . . . . . . . . . . . . . . . . . . . .
Wages for qualified services (do not include wages used in figuring the
work opportunity credit) . . . . . . . . . . . . . . . .
24
Cost of supplies
. . . . . . . . . . . . . . . . . .
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Rental or lease costs of computers (see the line 7 instructions) . . .
26
Enter the applicable percentage of contract research expenses (see the
line 8 instructions) . . . . . . . . . . . . . . . . . .
27
Total qualified research expenses. Add lines 24 through 27 . . . .
28
Enter your total qualified research expenses for the prior 3 tax years. If
you had no qualified research expenses in any one of those years, skip
lines 30 and 31 . . . . . . . . . . . . . . . . . . .
29
Divide line 29 by 6.0 . . . . . . . . . . . . . . . . .
30
Subtract line 30 from line 28. If zero or less, enter -0- . . . . . .
31
Multiply line 31 by 14% (.14). If you skipped lines 30 and 31, multiply line 28 by 6% (.06) .

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 13700H

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Form 6765 (2010)

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Form 6765 (2010)

Section B—Alternative Simplified Credit (continued).
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Add lines 23 and 32 . . . . . . . . . . . . . . . . . . . . . . . . . .
Are you electing the reduced credit under section 280C? ▶
Yes
No
If “Yes,” multiply line 33 by 65% (.65). If “No,” enter the amount from line 33 and see the line 17
instructions for the schedule that must be attached. Members of controlled groups or businesses
under common control: see instructions for the schedule that must be attached . . . . . .

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Section C—Summary
35

Enter the portion of the credit from Form 8932, line 2, that is attributable to wages that were also
used to figure the credit on line 17 or line 34 (whichever applies) . . . . . . . . . . . .

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Subtract line 35 from line 17 or line 34 (whichever applies). If zero or less, enter -0- . . . . .
Credit for increasing research activities from partnerships, S corporations, estates, and trusts . .
Add lines 36 and 37. Estates and trusts go to line 39; partnerships and S corporations, report this
amount on Schedule K; all others, report this amount on line 1c of Form 3800 . . . . . . .

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Amount allocated to beneficiaries of the estate or trust (see instructions) . . . . . . .
Estates and trusts: subtract line 39 from line 38. Report the credit on line 1c of Form 3800 .

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Form 6765 (2010)

General Instructions

Qualified Research

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

The research credit is generally
allowed for expenses paid or incurred
for qualified research. Qualified
research means research
for which expenses 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.

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 you are a
taxpayer that is not a partnership or
S corporation, and your only source of
this credit is from a partnership,
S corporation, estate, or trust, you are
not required to complete or file this
form, with the following exception: you
are a taxpayer that is an estate or trust
and the credit can be allocated to
beneficiaries. For more details, see the
Instructions for Form 1041, Schedule
K-1, box 13.
Note. Corporations filing an amended
return to claim a credit or refund of the
research credit, see Notice 2008-39,
I.R.B. 2008-13 684, available at
http://www.irs.gov/irb/2008-13_IRB/
index.html for information on where to
file.

• 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 internaluse computer software.
• Research conducted outside the
United States, Puerto Rico, or a U.S.
possession.
• 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 Regulations
sections 1.41-6, 1.41-6T, and 1.41-7
for special rules related to:
• Aggregation of expenses 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 expenses
between U.S. and foreign source
income, see sections 861 through 864.

Member of Controlled Group
or Business Under Common
Control
For purposes of figuring the credit, all
members of a controlled group of
corporations (as defined in section
41(f)(1)(A) and (f)(5)) and all members of
a group of businesses under common

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Form 6765 (2010)

control (as defined in section 41(f)(1)(B)),
are treated as a single taxpayer. Use
Section A or B to figure the credit for the
entire group, but enter only your share of
the credit on line 17 or line 34, whichever
applies. Attach a statement showing how
your share of the credit was figured, the
name and employer identification number
or taxpayer identification number of the
other members of the group, and the
designated member. Write "See
Attached" next to the entry space for line
17 or line 34.
If a member of a controlled group of
corporations or businesses under
common control has filed its return using
a method different than that of the
designated member, then that member
should file an amended return to conform
to the designated member's method.

Line 1
Enter the amounts you paid or incurred to
energy research consortia for energy
research. Energy research does not
include any research that is not qualified
research. 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.
Any amount included on line 1 cannot
be included elsewhere on the return.

Line 2

For special rules regarding the election
(or revocation of the election) of the
alternative simplified credit in Section B
by a controlled group of corporations,
see Regulations section 1.41-9T.

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.

Specific Instructions

Line 3

You can:
• Claim the regular credit in Section A or
• Elect the alternative simplified credit in
Section B.
You may want to figure your credit
using both of the methods for which you
are eligible to get the maximum credit
allowed.
Once elected, the alternative simplified
credit applies to the current tax year and
all later tax years, unless you revoke the
election. The revocation for the alternative
simplified credit must be made on an
original return filed by the due date
(including extensions). See Regulations
section 1.41-9T. The revocation of the
alternative simplified credit may not be
made on an amended return. To revoke a
previous election of the alternative
simplified credit, complete Section A.
Generally, any expenses used to
calculate the qualifying therapeutic
discovery project credit cannot be used
when calculating the research credit. See
the line 3 instructions for an exception.

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.
For purposes of determining the base
period expenses, expenses used to
calculate the qualifying therapeutic
discovery project credit in a preceding
year can be used to determine base
period research expenses.

Section A—Regular Credit
Skip this section and go to Section B if:
1. You are electing the alternative
simplified credit or
2. You previously elected the
alternative simplified credit and are not
revoking the election on this return.

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)
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.

• 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 startup 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.

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Form 6765 (2010)

• 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.
• 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,
CAUTION
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).

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For a tax year that the credit
terminates, the average annual gross
receipts for the four tax years preceding
the termination tax year is prorated for
the number of days the credit applied
during the tax year. For more information,
see section 41(h).

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

Section B—Alternative Simplified
Credit
Complete this section only if, instead of
the regular credit:
1. You are electing the alternative
simplified credit or
2. You previously elected the
alternative simplified credit and are not
revoking the election on this return.

Line 29
Enter your qualified research expenses
for the prior three tax years. If the credit
terminates during the tax year, prorate
the qualified research expenses for the
prior three tax years for the number of
days the credit applied during the tax
year. For more information, see section
41(h).

Section C—Summary

Line 11

Line 35

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).

If the credit on line 17 or 34 includes
amounts paid to employees as wages,
and you are also claiming a credit for
employer differential wage payments
based on payments you made to the
same employees, enter on line 35 the
portion of the credit from Form 8932, line
2, that is attributable to wages that were
also used to figure the credit on line 17 or
line 34 (whichever applies).

See Form 8932, Credit for Employer
Differential Wage Payments, for more
information on the credit.

Line 39
Estates and trusts. Allocate the credit
for increasing research activities on line
38 between the estate or trust and the
beneficiaries in the same proportion as
income was allocated and enter the
beneficiaries’ share on line 39.
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.
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:
Recordkeeping . . .
10 hr., 2 min.
Learning about the law
or the form . . . . . 2 hr., 5 min.
Preparing and sending
the form to the IRS . . . 2 hr., 20 min.
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.