O

Credit for Increasing Research Activities

Form 6765

Department of the Treasury

Internal Revenue Service

 Attach to your tax return.

Name(s) shown on return Identifyi

Current Year Credit (Members of controlled groups or businesses under common control, s

1 Basic research payments paid or incurred to qualified organizations (see instructions) 1

2 Qualified organization base period amount 2

3 Subtract line 2 from line 1. If zero or less, enter -0- 3

4 Wages for qualified services (do not include wages used in figuring the work opportunity credit) 4

5 Cost of supplies 5

6 Rental or lease costs of computers (see instructions) 6

7 Enter the applicable percentage of contract research expenses (see instructions) 7

8 Total qualified research expenses. Add lines 4 through 7 8

9 9 

10 Enter average annual gross receipts (see instructions) 10

11 Multiply line 10 by the percentage on line 9 11

12 Subtract line 11 from line 8. If zero or less, enter -0- 12

13 Multiply line 8 by 50% (.50) 13

14 Enter the smaller of line 12 or line 13 14

15 Add lines 3 and 14 15

Regular credit. If you are not electing the reduced credit under section 280C(c), multiply line 15

by 20% (.20), enter the result, and see the instructions for the schedule that must be attached.

If you are electing the reduced credit, multiply line 15 by 13% (.13) and enter the result. Also,

write “Sec. 280C” on the dotted line to the left of the entry space. Go to Section C

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For Paperwork Reduction Act Notice, see page 2. 

Part I

Cat. No. 13700H

Enter fixed-base percentage, but not more than 16% (see instructions)

Section A—Regular Credit. Skip this section and go to Section B if you are electing or previously elected the alter

credit.

Section B—Alternative Incremental Credit. Skip this section if you completed Section A.

Multiply line 26 by 1% (.01)

Subtract line 27 from line 25. If zero or less, enter -0-

Multiply line 26 by 1.5% (.015)

Subtract line 29 from line 25. If zero or less, enter -0-

Subtract line 30 from line 28

Multiply line 26 by 2% (.02)

Subtract line 32 from line 25. If zero or less, enter -0-

Subtract line 33 from line 30

Multiply line 31 by 2.65% (.0265)

Multiply line 34 by 3.2% (.032)

Multiply line 33 by 3.75% (.0375)

Add lines 20, 35, 36, and 37

Alternative incremental credit. If you are not electing the reduced credit under section 280C(c),

enter the amount from line 38, and see the line 16 instructions for the schedule that must be

attached. If you are electing the reduced credit, multiply line 38 by 65% (.65) and enter the result.

Also, write “Sec. 280C” on the dotted line to the left of the entry space

Pass-through research credit(s) from a partnership, S corporation, estate, or trust

Current year credit. Add line 16 or line 39 to line 40, and go to Part II on the back

17 Basic research payments paid or incurred to qualified organizations (see the line 1 instructions)

18 Qualified organization base period amount

19 Subtract line 18 from line 17. If zero or less, enter -0-

20 Multiply line 19 by 20% (.20)

21 Wages for qualified services (do not include wages used in figuring the work opportunity credit)

22 Cost of supplies

23 Rental or lease costs of computers (see the line 6 instructions)

24 Enter the applicable percentage of contract research expenses (see the line 7 instructions)

25 Total qualified research expenses. Add lines 21 through 24

26 Enter average annual gross receipts (see the line 10 instructions)

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Section C—Current Year Credit for Increasing Research Activities
Form 6765 (2004) 

Part II Allowable Credit (See Who must file Form 3800 to find out if you complete Part II or file 

Credit allowed for the current year. Individuals, estates, and trusts: Enter the smallest of

line 41, line 51, or the amount from the formula in the instructions for line 52 here and on Form

1040, line 54; or Form 1041, Schedule G, line 2c. Corporations: Enter the smaller of line 41 or

line 51 here and on Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 2; or the applicable

line of other returns. If line 52 is smaller than line 41, see instructions

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● Individuals. Enter the amount from Form 1040, line 43

42 ● Corporations. Enter the amount from Form 1120, Schedule J, line 3; Form 1120-A,

Part I, line 1; or the amount from the applicable line of your return

45a 45a

Credits from Form 1040, lines 47 through 53 45b b

45d

Foreign tax credit

d

Possessions tax credit (Form 5735, line 17 or 27)

f

Credit for fuel from a nonconventional source

Qualified electric vehicle credit (Form 8834, line 20)

Add lines 45a through 45e 45f

46

46 Net income tax. Subtract line 45f from line 44. If zero, skip lines 47 through 50 and enter -0- on

line 51

43 Alternative minimum tax:

● Individuals. Enter the amount from Form 6251, line 35

● Corporations. Enter the amount from Form 4626, line 14 43

● Estates and trusts. Enter the amount from Form 1041, Schedule I, line 56

47

Tentative minimum tax (see instructions):

● Individuals. Enter the amount from Form 6251, line 33

47

● Corporations. Enter the amount from Form 4626, line 12

● Estates and trusts. Enter the amount from Form 1041,

Schedule I, line 54

48 Enter 25% (.25) of the excess, if any, of line 47 over $25,000 (see

instructions)

50

Subtract line 50 from line 46. If zero or less, enter -0-

50

51



c 45c

42 Regular tax :

44 Add lines 42 and 43 44

49

Enter the greater of line 48 or line 49

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49

● Estates and trusts. Enter the sum of the amounts from Form 1041, Schedule G, lines

1a and 1b, or the applicable line of your return

Net regular tax. Subtract line 45f from line 42. If zero or less, enter

-0-

51



e 45e

The time needed to complete and file t

depending on individual circumstances. T

average time is:

Recordkeeping 

Learning about the law

or the form 

Preparing and sending the form

to the IRS 

If you have comments concerning the 

these time estimates or suggestions for m

simpler, we would be happy to hear from 

instructions for the tax return with which 

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.
Form 6765 (2004) 

Use Form 6765 to figure and claim the

credit for increasing research activities

(research credit).

Who Must File

Qualified Research

If you incur qualified clinical testing

expenses relating to drugs for certain

rare diseases, you may elect to claim

the orphan drug credit for these

expenses instead of the research credit.

See Form 8820, Orphan Drug Credit.

Special Rules

For special rules concerning the

allocation and apportionment of research

and experimental expenditures between

U.S. and foreign source income, see

sections 861 through 864.

Specific Instructions

Part I—Current Year Credit

Members of Controlled

Groups or Businesses Under

Common Control

Section A—Regular Credit

Line 1

Line 2

Line 6

Line 7

Line 9

The fixed-base perce

start-up company is fig

General Instructions

Section references are to the Internal

Revenue Code unless otherwise noted.

Purpose of Form

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 allocating the

credit, see the instructions for line 41.

● 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).

See section 41 and Regulations

sections 1.41-2 and 1.41-4 for other

definitions and special rules.

The research credit is generally allowed

for expenditures paid or incurred for

qualified research. Qualified research

means research for which expenditures

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.

See section 41(f) and Regulations

section 1.41–6 for special rules related

to:

● Aggregation of expenditures 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.

You can claim either the regular credit in

Section A or elect the alternative

incremental credit in Section B. Under

the alternative incremental credit, a

smaller three-tiered fixed-base

percentage and reduced three-tiered

credit rate apply. You may want to figure

your credit both ways to see which gives

you the larger credit. However, once

elected, the alternative incremental

credit applies to the current tax year and

all later tax years, unless you receive IRS

consent to revoke the election. In the

year the consent is granted, attach the

consent to Form 6765 and the return.

For purposes of figuring the credit, all

members of a controlled group of

corporations (as defined in section

41(f)(5) and Regulations section 1.41-6),

and all members of a group of

businesses under common control, are

treated as a single taxpayer. The credit

allowed each member is based on its

proportionate share of qualified research

expenses and basic research payments

giving rise to the group’s research credit.

Use Section A or B of Part I to figure the

credit for the entire group, but enter only

this member’s share of the credit on line

16 or line 39, whichever applies. Attach

a statement showing how this member’s

share of the credit was figured, and

write “See Attached” next to the entry

space for line 16 or line 39.

Skip this section and go to Section B if

you are electing or previously elected

the alternative incremental credit (and

have not received permission to revoke

the election).

Corporations (other tha

personal holding comp

organizations) may be e

research credit if paym

qualified university or s

organization (under a w

exceed a base period a

their general university 

other maintenance-of-e

3 preceding years). Ent

on this line. See sectio

Enter the qualified orga

period amount as defin

41(e). The amount on li

exceed the amount on 

not eligible for the basi

can be treated as cont

expenses on line 7 sub

(or 75%) limitation.

Enter the amount you p

for the rental or lease o

in qualified research. T

be located off your pre

must not be the operat

of the computer. Reduc

the amount that you (o

a controlled group of c

businesses under com

received or accrued for 

substantially identical p

Include 65% of any am

incurred for qualified re

on your behalf. Prepaid 

research expenses are 

in the year the research 

Also include 65% of th

line 1 basic research p

does not exceed the lin

amount. However, use 

65% for payments mad

research consortium. A 

research consortium is 

organization described 

501(c)(3) or 501(c)(6) th

and operated primarily 

scientific research and 

foundation.

The fixed-base percent

whether you are an exi

a start-up company.

A start-up company 

had both gross receipt

research expenses eith

● For the first time in a 

beginning after 1983 o

● For fewer than 3 tax 

after 1983 and before 1

● For the first 5 tax yea

after 1993 for which yo

research expenses, the 

3%.
Form 6765 (2004) 

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.

Line 10

Line 16

Section B—Alternative Incremental

Credit

Line 18

Section C—Current Year Credit

Line 41

S corporations and partnerships.

Attach Form 6765 to your tax return, and

on Schedule K-1 report the credit

allocated to each shareholder or partner.

Electing large partnerships include this

credit in “general credits.”

Part II—Allowab

See the instructions 

find out which credits a

general business credit

Line 48

Line 49

Line 52

(Line 46 - Line 48) x

Taxable inc

1040, line 4

The result figured ab

the excess of line 46 o

the current tax year yo

income attributable to 

business interest, you c

research credit this yea

business.

If you cannot use all 

credit because of the ta

the taxable income lim

less than line 41), carry 

credit back 1 year then 

years. See the instructi

3800.

● 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 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.

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).

If short tax years are involved, see

Regulations section 1.41-3(b).

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).

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 the 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.

Complete this section only if you are

electing or previously elected the

alternative incremental credit instead of

the regular credit (and have not received

permission to revoke the election).

Enter the qualified organization base

period amount as defined in section

41(e). The amount on line 18 (not to

exceed the amount on line 17), although

not eligible for the basic research credit,

can be treated as contract research

expenses on line 24 subject to the 65%

(or 75%) limitation.

Pass-through entities should report the

amount on line 41 as follows. 

The credit allowed for t

may be limited based o

liability. Use Part II to f

allowable credit unless 

Form 3800, General Bu

Who must file Form 3

Form 3800 if you have

● A research credit from 

activity,

● More than one credit 

general business credit 

credit from Form 8844, 

Section B of Form 883

● A carryback or carryf

those credits.

See section 38(c)(5) for 

apply to married couple

returns, controlled corp

regulated investment c

estate investment trust

and trusts.

Although you may not 

minimum tax (AMT), yo

still compute the tentat

(TMT) to figure your cre

corporation exempt fro

section 55(e), enter zer

complete and attach th

AMT form or schedule.

For an individual, estat

credits on line 16 or 39

limited to the amount o

to your taxable income 

proprietorship or your i

partnership, S corporat

trust (pass-through ent

credit. Figure the resea

limitation separately for 

enterprise by using the 

formula:

Taxable inc

sole proprie

the pass-th

Estates and trusts. Allocate the credit

on line 41 between the estate or trust

and the beneficiaries in the same

proportion as income was allocated. In

the margin for line 41, the estate or trust

should enter its share of the credit. Label

it “1041 Portion” and use this amount in

Part II (or on Form 3800, if required) to

figure the credit to claim on Form 1041.

On Schedule K-1, report the share of

credit allocated to each beneficiary.

CAUTION