Form 6765 Credit for Increasing Research Activities

Caution: DRAFT TAX PRODUCT
This is an advance proof copy of an IRS tax form,
instructions, or publication. It may be subject to
change and OMB approval before it is officially
released.
If you have any comments on this draft, you can
submit them to us on our IRS.gov page titled
Comment on Forms and Publications, where you
may make comments anonymously if you wish.
You can also email us at [email protected]. Please
include the form or publication number in the
subject. We cannot respond to all comments due to
the high volume we receive, but we will carefully
consider each suggestion. Please note that we may
not be able to consider some comments until the
subsequent revision of the product.

Form

6765

Department of the Treasury
Internal Revenue Service
Name(s) shown on return

OMB No. 1545-0619

Credit for Increasing Research Activities
▶

2011

Attach to your tax return.

Attachment
Sequence No. 81
Identifying number

f
o
s
a
1
t
1
f
0
a
2
r
/
D /22
7
0

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.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

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) . . . . . . . . . . . . . . . .
5
Cost of supplies
. . . . . . . . . . . . . . . . . .
6
Rental or lease costs of computers (see instructions) . . . . . .
7
Enter the applicable percentage of contract research expenses (see
instructions) . . . . . . . . . . . . . . . . . . . .
8
Total qualified research expenses. Add lines 5 through 8 . . . . .
9
Enter fixed-base percentage, but not more than 16% (see instructions)
.
10
%
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) . . . . . . . . . . . . . . .
14
Enter the smaller of line 13 or line 14
. . . . . . . . . . . . . . . . . . . .
15
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 . . . . . .
17

Section B—Alternative Simplified Credit. Skip this section if you are completing Section A.
18
19
20
21
22
23
24
25
26
27
28
29

30
31
32

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) .
20
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
25
Cost of supplies
. . . . . . . . . . . . . . . . . .
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
30
Divide line 29 by 6.0 . . . . . . . . . . . . . . . . .
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

.

.

.

18

.
.
.

.
.
.

.
.
.

21
22
23

.

.

.

32
Form 6765 (2011)

Page 2

Form 6765 (2011)

Section B—Alternative Simplified Credit (continued)
33
34

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 . . . . . .

Section C—Summary

33

f
o
s
a
1
t
1
f
0
a
2
r
/
D /22
7
0

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) . . . . . . . . . . . .

36
37
38

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, stop here
and report this amount on Schedule K. All others, stop here and report this amount on line 1c of
Form 3800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39
40

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

.
.

.
.

34

35
36
37

38
39
40
Form 6765 (2011)

Page 3

Form 6765 (2011)

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

Purpose of Form

Special Rules

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.

f
o
s
a
1
t
1
f
0
a
2
r
/
D /22
7
0

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

Who Must File

See section 41 and Regulations sections
1.41-2 and 1.41-4 for other definitions and
special rules.

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.

Qualified Research
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.
• 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.
• 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(f) and Regulations sections
1.41-6, 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 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 from that of the designated member,
then that member should file an amended
return to conform to the designated member's
method.
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 1.41-9.

Specific Instructions
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 1.41-9. 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.

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 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

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-of-effort 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.

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.

Page 4

Form 6765 (2011)

• 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 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
only gross receipts that are
CAUTION
effectively connected with a trade or business
in the United States (or in Puerto Rico or a
U.S. possession, if applicable).

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).

f
o
s
a
1
t
1
f
0
a
▲
2
r
/
D /22
7
0

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.
• 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.

!

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).
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.

Section C—Summary
Line 35

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.
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.