Form 6765 Credit for Increasing Research Activities

Form

6765

Department of the Treasury
Internal Revenue Service

OMB No. 1545-0619

Credit for Increasing Research Activities
▶

2012

▶ Attach to your tax return.
Information about Form 6765 and its instructions is at www.irs.gov/form6765.

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) . . . . . . . . . . . . . . . .
5
Cost of supplies
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6
Rental or lease costs of computers (see instructions) . . . . . .
7
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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%
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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
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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 statement that must be attached. Members of controlled groups or businesses
under common control: see instructions for the statement 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) . . . . . . . . . . . . . . . . . . . .
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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
. . . . . . . . . . . . . . . . . .
25
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 (2012)

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Form 6765 (2012)

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 statement that must be attached. Members of controlled groups or businesses
under common control: see instructions for the statement 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, stop here
and report this amount on Schedule K. All others, stop here and 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 amount on line 1c of Form 3800

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General Instructions

Qualified Research

Special Rules

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.
• 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 and Regulations sections
1.41-2 and 1.41-4 for other definitions and
special rules.

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.

Future Developments
For the latest information about
developments related to Form 6765 and its
instructions, such as legislation enacted
after this form and instructions were
published, go to www.irs.gov/form6765.

What's New
The credit for increasing research activities
has been extended through 2013.

Purpose of Form
Use Form 6765 to figure and claim the
credit for increasing research activities or
to elect the reduced credit under section
280C.

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.

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. As a
member, your credit is determined on a
proportionate basis to your share of the
aggregate qualified expenses for increasing
research activities taken into account by
the group for the research credit. Enter
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.

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Form 6765 (2012)

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.
For purposes of the reduced credit
election, a member of a controlled group of
corporations (within the meaning of section
41(f)(5)), or a trade or business which is
treated as being under common control
with other trades or businesses (within the
meaning of section 41(f)(1)(B)), may make
the election under section 280C(c)(3).
However, only the common parent (within
the meaning of section 1.1502-77(a)(1)(i)) of
a consolidated group may make the
election on behalf of the members of a
consolidated group.

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 (ASC) applies to the current tax year
and all later years. A current tax year's ASC
election may not be revoked. You may
revoke the election for a later tax year by
completing Section A relating to the regular
credit and attaching the Form 6765 to your
timely filed (including extensions) original
return for the year to which the revocation
applies. See Regulations section 1.41-9(b)
(3).

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.
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.

Line 1
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.
• 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.
• 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 fixedbase 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.
Form 6765 (2012)

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Form 6765 (2012)

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).

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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 are electing the reduced research
credit, you must complete Form 6765 (even
if no research credits are claimed on the
original return) and clearly indicate your
intent to make the election. In order for the
election to apply, the Form 6765 must be
filed with your original timely filed (including
extensions) return for the tax year. Once
made, the election is irrevocable for that
tax year.
If you do not elect the reduced credit,
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 statement 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 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.
If the estate or trust is subject to the
passive activity rules, include on line 37
any credit for increasing research from
passive activities disallowed for prior years
and carried forward to this year. Complete
Form 8582-CR, Passive Activity Credit
Limitations, to determine the allowed credit
that must be allocated between the estate
or trust and the beneficiaries. For details,
see the instructions for Form 8582-CR.

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.