Businesses involved in research and development activities have long benefited from the R&D tax credit, helping to offset costs associated with innovation. However, the landscape for claiming this credit is changing with the introduction of the revised Form 6765, Credit for Increasing Research Activities. Starting with the 2024 tax return, this new version demands significantly more detailed information, impacting how businesses prepare and file for this valuable tax benefit.

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Key Changes to Form 6765

The IRS first introduced revisions to Form 6765 during a preview period in September 2023, seeking feedback on proposed changes. After reviewing input, the IRS released a draft version in June 2024, followed by updated drafts and instructions in December 2024. The finalized Form and Instructions have just been released by the IRS (February 2025). These revisions bring about several critical changes:

1. New Items A and B

These are two yes-no questions that appear before the calculation sections:

• Item A asks if the company intends to elect the reduced credit under section 280C.
• Item B asks if the company is part of a controlled group or under common control.

2. Revisions to Sections A and B

Sections A and B, which cover the Regular Credit and Alternative Simplified Credit methods, have been simplified. The detailed breakdown of qualified research expenses (QREs) has been moved to the new Section F, with only the total QREs displayed in Sections A and B.

3. Introduction of New Sections

• Section E: Captures information about the number of business components, officer’s wages, acquisitions, new expense categories, and ASC 730 compliance.
• Section F: Summarizes qualified research expenses by category, including wages, supplies, contract research, computer rental/lease costs, and basic research costs.
• Section G: Requests detailed information for each business component, including names, descriptions of research objectives, and expenses.

4. New Section G’s Detailed Reporting Requirements

Section G demands a breakdown of the 80%/Top 50 business components by expense type and requires the following details:

• Entity and company code
• Type of business component (e.g., product, process, or software)
• Information sought through research
• Detailed wage expense categories (e.g., direct engagement, supervision, support)

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Impact on the 2024 Tax Return (Processing Year 2025)

For the 2024 tax return, new Section G is optional, providing temporary relief from detailed reporting requirements. However, businesses must still complete Items A and B, as well as Sections E and F. This allows companies to adjust to the new requirements while preparing for mandatory compliance in the following years.

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Looking Ahead: 2025 and Beyond

For the 2025 tax return and beyond, new Section G becomes mandatory for all businesses filing a research credit claim, except for:

• Qualified Small Businesses claiming the credit against payroll tax
• Businesses with $1,500,000 or less in total QREs and $50,000,000 or less in gross receipts

Businesses required to complete Section G must provide detailed information on each business component at the time of filing. Early preparation, understanding the draft requirements, and strategic planning are essential for a smooth transition.

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Preparing for the Transition

The changes to Form 6765 introduce more complexity but also offer opportunities to optimize R&D tax credit claims through meticulous reporting. Here’s how businesses can prepare:

1. Review the Draft Requirements: Familiarize your team with the new sections and reporting requirements.
2. Organize Detailed Documentation: Ensure that all business components and research expenses are meticulously documented.
3. Evaluate Exemptions: Determine if your business qualifies for any exemptions, such as the payroll tax credit option or revenue thresholds.
4. Consult with Tax Specialists: Engage with tax professionals experienced in R&D credits to navigate the new requirements effectively.

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Need Help Navigating the New Form 6765?

The transition to the new Form 6765 will require strategic planning and detailed documentation. If your business needs assistance, Swanson Reed’s R&D tax specialists are ready to guide you through the changes. Reach out today to ensure a smooth and compliant filing process for the 2024 tax return and beyond.

For more information, contact our team or consult with your Swanson Reed tax advisor to understand how these changes impact your business.

Dash Systems, Inc. has spent the past few years working on realizing their vision: to deliver any package, anywhere, in nearly any weather condition. They have recently delivered a true proof of concept, successfully delivering packages to remote areas with no airports.

This California-based shipping company uses aircrafts to deliver packages in helipad-size areas without ever needing to land and therefore no airport required. Dash launched commercially in 2019 as a part of the TechStars los Angeles Accelerator, but has made more than 400 airdrops since their start in 2017.

Their aircrafts are guided by technology that allows them to release and land delivery pods which were custom developed in house. These delivery pods are capable of carrying up to 50 pounds of cargo. Dash has used their Cessna 208B Grand Caravan for test runs and proof of concept deliveries to remote areas every week. Dash received investments back in December and used it to further their research and development. Part of this included making proof of concept deliveries to the University of Alaska Fairbanks and 20 other remote locations in Alaska. 

Dash could deliver medicine, infrastructure components and mail to the more than 300 remote villages in Alaska that are not located on all-weather roads. “We’re talking about truly remote … hundreds of miles away from a road,” said Mark Billingsley, director of the Office of Intellectual Property and Commercialization at University of Alaska. “The only way (residents) get their mail and all of their supplies, really, is through the air. There are some critical supplies that can be delivered by Dash in a hurry without even having to land the airplane.”

Are you developing new software for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

The UK has a great record of R&D, contributing 25% of the top prescription medicines, and home to many recognized experts in AI and machine learning technology. However, as a whole, the UK invests just 1.7% of GDP on R&D. Leading nations such as South Korea are investing 4.3% and the OECD average is just over 2.3%. It’s been shown that every pound spent on medical research delivers an annual return of 25 pence every year thereafter. Despite the ongoing benefits of R&D, the investment is just not there.

In the recent budget released in March, the UK has pledged to raise this investment to 2.4% by 2027, which still falls short of the leading nations. But how are they planning on reaching this goal? The Chancellor pledges to review the R&D tax relief scheme, hoping to enhance and broaden the horizons. The government reports that their new budget will bring government invested funding in R&D to £14.9 billion in 2021/22 . With the inclusion of the 130% super deduction in the budget, they are hoping investment spending could accelerate R&D.

This commitment to R&D also relies on the expansion of venture capitals. UK tech companies attracted a record USD15 billion in funding in 2020. As this sector gets bigger and broader, more startups are able to pop up – and stay afloat. While the government has shown its commitment to increasing innovation, they need companies to follow suit. Most R&D claims are concentrated in manufacturing, information & communication, and professional sectors. With just 60, 000 claims in the 2018/19 tax year, it is clear that there is a lack of companies applying for the tax relief. Is it because companies don’t think they qualify? Or because they can’t take on that financial risk? If venture capitals and investment managers took on a more portfolio-wide view to R&D, they might push for a broader range of investments. 

Companies also often limit themselves, falling prey to the assumption that R&D is limited to those in lab coats. A new product, service, or process could qualify. Even a failed project might have started with R&D. The benefits that companies get from the R&D tax credit relief schemes can provide them with capital to invest back into their business, creating a cycle of innovation and improvements. 

If the UK hopes to catch up to nations leading in R&D, it’s on the companies to actually perform the research, and on the government to help fund it. It seems the budget will make room for increased R&D – so if you own a business, you might want to consider claiming or getting involved in some innovation!

MediCircle was announced the final winner of the Brown Venture Prize Pitch Competition, receiving $25,000 and mentorship opportunities. This competition runs annually, providing an opportunity for Brown University and Rhode Island School of Design students to pitch their ideas and create “impact at scale”.

The pitch for MediCircle addresses health disparities and aims to use unused cancer medications for a new purpose. As treatments are adjusted, patients return unused medication. They collect leftover oral chemotherapeutic pills and redistribute them to those who cannot afford them on their own. Medical redistribution is legal in 39 states, and with MediCircle’s plans to evaluate all returned medicine for quality control, they believe they could reduce the cost of medicine for cancer patients and entice pharmacists to participate with tax credits. The prize money will go to funding a pilot program.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.