Specific Instructions
You can:
- Claim the regular credit in Section A, or
- Elect the alternative simplified credit (ASC) 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 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).
After figuring your credit, you can elect to treat a portion of
the credit as a payroll tax credit. Complete Section D to
determine the payroll tax credit portion. Taxpayers other than
partnerships and S corporations must complete Form 3800
before completing Section D.
Section A—Regular Credit
Skip this section and go to Section B if:
- You are electing the ASC, or
-
You previously elected the ASC and aren’t revoking
the election on this return.
Enter the amounts you paid or incurred to energy research
consortia for energy research. Energy research doesn’t
include any research that isn’t 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 can’t 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, scientific tax-exempt 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 3 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 mustn’t 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.
Line 8
- 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 on line 2, not to exceed the base period
amount on 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 on line 2, not to exceed
the base period amount on 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 on line 2, not to exceed the base
period amount on 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 isn’t 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 can’t 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 effectively connected with a trade or
business in the United States (or in Puerto Rico or a U.S.
possession, if applicable).
Line 1
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 4 tax years preceding the
termination tax year is prorated for the number of days the
credit applied during the tax year.
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.
Checking the box on line 17 or line 34 to elect the
reduced research credit when no research credits
are claimed on the original return doesn’t mean that
you are claiming the regular research credit or that you are
making the ASC election.
If you don’t 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.
If you make an election to claim a portion of your research
credit as a payroll tax credit, the amount elected is treated as
a research credit for purposes of the reduced credit.
Section B—Alternative Simplified
Credit (ASC)
Complete this section only if, instead of the regular credit:
-
You are electing the ASC, or
-
You previously elected the ASC and aren’t revoking
the election on this return.
Electing the ASC. You elect the ASC by completing
Section B and attaching the completed Form 6765 to your
timely filed (including extensions) original return for the tax
year the election applies. An ASC election can be made on
an amended return for a tax year only if you hadn’t previously
claimed the research credit on an original return or amended
return for that tax year. An extension of time to make the ASC
election will not be granted.
Line 29
Enter your qualified research expenses for the prior 3 tax
years. If the credit terminates during the tax year, prorate the
qualified research expenses for the prior 3 tax years for the
number of days the credit applied during the tax year.
Section C—Current Year Credit
Line 35
If the credit on line 17 or line 34 includes amounts paid to
employees as wages, and you are 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 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 37
Enter total credit for increasing research activities from:
-
Schedule K-1 (Form 1065), Partner's Share of Income,
Deductions, Credits, etc., box 15 (code M);
-
Schedule K-1 (Form 1120S), Shareholder's Share of
Income, Deductions, Credits, etc., box 13 (code M); and
-
Schedule K-1 (Form 1041), Beneficiary's Share of Income,
Deductions, Credits, etc., box 13 (code I).
Partnerships and S corporations report the above credits
on line 37. Also, estates and trusts that can allocate the
source credit to beneficiaries report the above credits on
line 37. All other filers figuring a separate credit on earlier
lines also report the above credits on line 37. All others not
using earlier lines to figure a separate credit can report the
above credits directly on Form 3800, Part III, as follows.
-
Eligible small businesses, report the credit on line 4i. See
the definition of "eligible small business" under Definitions, earlier. Also see Treatment of partners
and S corporation
shareholders, earlier.
-
All others, report the credit on line 1c.