On Friday, September 15th the Internal Revenue Service (the “Service”) released a preview of proposed changes to several sections of IRS Form 6765, titled “Credit for Increasing Research Activities” and is requesting feedback from stakeholders by October 31st. As a background, the Federal-Level R&D Tax Credit program was originally introduced into the Internal Revenue Code through President Ronald Reagan’s Economic Recovery Tax Act of 1981 and the program has continued to evolve both from a quantitative and qualitative perspective over the past four decades.
The Service has provided a preview of their proposed changes to Form 6765 in an effort to solicit feedback from stakeholders in advance of the formal draft release expected later this year. Just some of the proposed changes address previous feedback received from taxpayers and tax professionals alike in recent years during IRS examinations. It should be duly noted that each year, the Service receives thousands of tax returns from taxpayers claiming the Federal-Level R&D Tax Credit. R&D Tax Credit issues are currently examined in a substantial number of cases year-over-year and consume significant resources from both taxpayers and the Service alike. To provide more effective tax administration of the Federal-Level R&D Tax Credit program, the Service must ensure taxpayers truly comprehend the complete scope and application of the program’s requirements to support claiming the R&D Tax Credit with a sustainable tax return filing position per Circular 230. To that end, the proposed changes to Form 6765 will require taxpayers to identify, gather, and document additional data on this enhanced form before filing their tax returns. The primary proposed changes to Form 6765 include:

 A new Section E with five additional questions seeking further information;
 A new Section F for reporting quantitative and qualitative information for each business component as required pursuant to I.R.C. § 41; and
 Moving the “reduced credit” election question and the “controlled groups or businesses under common control” question from line 17 and line 34 to the top of Form 6765.
The Service is also requesting feedback on whether Section F should be optional for certain taxpayers, including those:
 With qualified R&D expenditures less than a certain dollar amount at a controlled group level;
 With a R&D Tax Credit less than a certain dollar amount at a controlled group level; or
 Statutorily defined Qualified Start-Up Businesses claiming the Payroll Tax Credit.
In summary, the proposed changes to IRS Form 6765 will provide taxpayers with a consistent and predefined format for tax reporting and improve the information received by the Service for enhanced tax administration. The Service is considering making the changes effective beginning with tax year 2024.
The preview of the proposed changes to Form 6765 can be referenced at https://www.irs.gov/pub/irs-utl/form-6765-proposed-changes-fy24.pdf
Please note that all feedback on the proposed form changes, potential Section F options and questions about these changes are due by October 31st and should be submitted to Lbi.rt.team@irs.gov with the subject line: “Feedback/Questions F6765”.

Have a question? Contact Peter Scalise, SAX LLP. New York, NY

Peter J. Scalise

About the Author
Peter J. Scalise serves as the National Partner-in-Charge of the Federal Tax Credits and Incentives Practice at SAX CPAs LLP. Peter is a highly distinguished member of the Accounting Today Top 100 Influencers and has approximately thirty years of progressive Big 4 and Top 100 public accounting firm experience developing, managing, and leading large scale tax advisory practices on a regional, national, and global level.
Peter also serves as a passionate philanthropist and a member of several Boards of Directors and Boards of Advisors for local, regional, and national charities in connection with poverty and hunger alleviation; economic development; environmental conservation; health and social services; supporting veteran and military service personnel along with preserving arts and cultural programs.