OMB No. 1545-0619 6765 Credit for Increasing Research Activities Form

Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 81

© Attach to your tax return.

Name(s) shown on return Identifying number

Basic research payments to qualified organizations (see instructions) 2

Qualified organization base period amount

2

3

Subtract line 3 from line 2. 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 5 through 8

8

%

9 9

10

Enter average annual gross receipts (see instructions)

10

11

Multiply line 11 by the percentage on line 10

11

12

Subtract line 12 from line 9. If zero or less, enter -0-

12

13

Multiply line 9 by 50% (.50)

13

14

Enter the smaller of line 13 or line 14

14

15

Add lines 1, 4, and 15

15

17 Are you electing the reduced credit under Section 280C? © 

16

For Paperwork Reduction Act Notice, see instructions. Cat. No. 13700H Form 6765 (2007)

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

Section A—Regular Credit. Skip this section and go to Section B or C if you are electing or previously elected (and are not revoking)

the alternative incremental credit or the alternative simplified credit, respectively.

Section B—Alternative Incremental Credit. Skip this section if you are completing Section A or C.

Multiply line 29 by 1% (.01)

Subtract line 30 from line 28. If zero or less, enter -0-

Multiply line 29 by 1.5% (.015)

Subtract line 32 from line 28. If zero or less, enter -0-

Subtract line 33 from line 31

Subtract line 35 from line 28. If zero or less, enter -0-

Subtract line 36 from line 33

Basic research payments to qualified organizations (see the line 2

instructions) 

Qualified organization base period amount (see the line 3 instructions)

Subtract line 20 from line 19. If zero or less, enter -0-

19

Multiply line 22 by 20% (.20)

20

Wages for qualified services (do not include wages used in figuring

the work opportunity credit)

21

Add lines 18 and 21

23

Rental or lease costs of computers (see the line 7 instructions)

24

Enter the applicable percentage of contract research expenses (see

the line 8 instructions)

22

Total qualified research expenses. Add lines 24 through 27

26

Enter average annual gross receipts (see the line 11 instructions)

27

19

20

21

23

24

22

26

27

28

29

30

31

32

33

34

35

36

37

28

29

30

31

32

33

34

35

36

37

1 Certain amounts paid or incurred to energy consortia (see instructions) 1

17

16

18 Certain amounts paid or incurred to energy consortia (see the line 1 instructions) 18

If “Yes,” multiply line 16 by 13% (.13). If “No,” multiply line 16 by 20% (.20) and see the instructions 

for the schedule that must be attached. Members of controlled groups or businesses under

common control: see instructions for the schedule that must be attached

Yes No

25 Cost of supplies 25

Multiply line 29 by 2% (.02)

2007
Form 6765 (2007) Page 2

Credit for increasing research activities from partnerships, S corporations, estates, and trusts

62

63

Section D—Summary

62

63

Add line 17, line 42, or line 59 (whichever applies) to line 60. Estates and trusts go to line 62;

partnerships and S corporations, report this amount on Schedule K; all others, report this amount 

on line 1c of Form 3800

Amount allocated to beneficiaries of the estate or trust (see instructions)

Estates and trusts: subtract line 62 from line 61. Report the credit on line 1c of Form 3800

Form 6765 (2007)

Multiply line 34 by 3% (.03)

Multiply line 37 by 4% (.04)

Multiply line 36 by 5% (.05)

Add lines 23, 38, 39, and 40

38

39

40

38

39

40

41 41

42

42 Are you electing the reduced credit under Section 280C? © Yes No

If “Yes,” multiply line 41 by 65% (.65). If “No,” enter the amount from line 41 and see the line 17 

instructions for the schedule that must be attached. Members of controlled groups or businesses 

under common control: see instructions for the schedule that must be attached

Section B—Alternative Incremental Credit (continued)

Section C—Alternative Simplified Credit. Skip this section if you are completing Section A or B.

Certain amounts paid or incurred to energy consortia (see the line 1 instructions) 43

Basic research payments to qualified organizations (see the line 2

instructions) 44

43

44

Qualified organization base period amount (see the line 3 instructions) 45 45

46 Subtract line 45 from line 44. If zero or less, enter -0- 46

47 Add lines 43 and 46 47

48 Multiply line 47 by 20% (.20) 48

Wages for qualified services (do not include wages used in figuring the 

work opportunity credit) 49

49

Cost of supplies 50 50

Rental or lease costs of computers (see the line 7 instructions) 51 51

Enter the applicable percentage of contract research expenses (see

the line 8 instructions) 52

52

Total qualified research expenses. Add lines 49 through 52 53 53

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 55 and 56 54

54

Divide line 54 by 6.0 55 55

Subtract line 55 from line 53. If zero or less, enter -0- 56 56

57 Multiply line 56 by 12% (.12). If you skipped lines 55 and 56, multiply line 53 by 6% (.06) 57

58 Add lines 48 and 57 58

59

59

60 60

Are you electing the reduced credit under Section 280C? © 

61

61

Yes No

If “Yes,” multiply line 58 by 65% (.65). If “No,” enter the amount from line 58 and see the line 17

instructions for the schedule that must be attached. Members of controlled groups or businesses 

under common control: see instructions for the schedule that must be attached
Form 6765 (2007) Page 3

The credit for increasing research

activities is not allowed for amounts

paid or incurred after December 31,

2007. However, pending legislation

may allow the credit for later

expenditures.

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.

Special Rules

General Instructions

Section references are to the

Internal Revenue Code unless

otherwise noted.

What’s New

● Surveys or studies. 

● 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.

See section 41(f) and Regulations

sections 1.41-6 and 1.41-7 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.

proportionate share of qualified

research expenses and basic

research payments giving rise to the

group’s research credit for Section

A, B, or C. Enter your share of the

credit on line 17, 42, or 59,

whichever applies. Attach a

statement showing how your share

of the credit was figured, and write

“See Attached” next to the entry

space for line 17, 42, or 59.

● Research relating to certain

internal-use computer software.

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

You can:

For special rules regarding the

election (or revocation of the

election) of the alternative

incremental credit in Section B by a

controlled group of corporations, see

Regulations section 1.41-8.

● Claim the regular credit in 

Section A,

● Elect the alternative incremental

credit in Section B, or

● Elect the alternative simplified

credit in Section C.

You may want to figure your credit

using all of the methods for which

you are eligible to get the maximum

credit allowed.

Once elected, the alternative

incremental credit or the alternative

simplified credit applies to the

current tax year and all later tax

years, unless you revoke the

election. The revocation for the

alternative incremental credit must

be made on an original return filed

by the due date (including

extensions). See Regulations section

1.41-8. The revocation of the

alternative incremental credit may

not be made on an amended return.

To revoke a previous election of the

alternative incremental credit,

complete Section A or C.

Section A—Regular Credit

Skip this section and go to Section

B or C if:

1. You are electing the alternative

incremental credit,

3. You previously elected the

alternative incremental credit or the

alternative simplified credit and are

not revoking the election on this

return.

2. You are electing the alternative

simplified credit, or

Use Form 6765 to figure and claim

the credit for increasing research

activities.

Who Must File

Qualified Research

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 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.

● 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. 

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.

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. As a member,

compute your credit based on your
Form 6765 (2007) Page 4

Line 3

Line 7

Line 8

Line 10

The fixed-base percentage for a

start-up company is figured as

follows.

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.

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.

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.

● For the first 5 tax years beginning

after 1993 for which you have

qualified research expenses, the

percentage is 3%.

Enter the amounts you paid or

incurred, subject to the following

limitations.

● 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.

● 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

● 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.

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.

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.

● 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.

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 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.

Any amount included on line 1

cannot be included elsewhere on the

return.

● 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.

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).

CAUTION

Line 1 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.
Form 6765 (2007) Page 5

Section B—Alternative

Incremental Credit

Complete this section only if, instead

of the regular credit or the

alternative simplified credit:

1. You are electing the alternative

incremental credit, or

2. You previously elected the

alternative incremental credit and

are not revoking the election on this

return.

Line 17

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 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.

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.

Recordkeeping 16 hr., 15 min.

Learning about the law

or the form 2 hr., 22 min.

Preparing and sending the form

to the IRS 2 hr., 45 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.

The estimated burden for all other

taxpayers who file this form is

shown below. The estimated

average time is:

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.

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.

Section D—Summary

Line 62

Estates and trusts. Allocate the

credit for increasing research

activities on line 61 between the

estate or trust and the beneficiaries

in the same proportion as income

was allocated and enter the

beneficiaries’ share on line 62.

Section C—Alternative Simplified

Credit

Complete this section only if, instead

of the regular credit or the

alternative incremental 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 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).