Form 6765 Section G and claim transparency (brief) | Research Credit Integrity Alliance

Key points

Section G is optional for tax years beginning before 2026 and required, with exemptions, for tax years beginning after 2025.1
Filers must report at least 80 percent of qualified research expenses by business component, up to 50 components, with wages split by type of work.1
The IRS says the redesign is meant to make reporting more consistent and improve the information it receives, because research credit claims consume significant resources.2
After comments, the IRS removed the narrative of the information sought to be discovered for original returns. In June 2024 it made Section G optional for all filers for tax year 2024, and in October 2025, having said in December 2024 that Section G would be mandatory for tax year 2025, it made Section G optional for tax year 2025 as well.324
Qualified small businesses claiming the payroll tax credit and smaller claimants filing original returns are exempt, and nothing on Form 6765 records how the preparer was paid.15

Why business components matter

Section 41 applies its test for qualified research separately to each business component, meaning each product, process, software, technique, formula or invention.6 Before the redesign, Form 6765 did not report the credit at that level. In its 2021 refund claim guidance, IRS Chief Counsel recorded the government's argument in one case that without identified business components it "could not apply the four-part test".7

How the redesign developed

The IRS released a preview of proposed changes on 15 September 2023, including a business component section with quantitative and qualitative information.3 In June 2024 it narrowed that section after comments.3 In December 2024 it released draft instructions and said Section G would be mandatory for tax year 2025.2 In October 2025 it made Section G optional for tax year 2025 "While stakeholder engagement continues", and mandatory, with exemptions, from tax year 2026.4

The IRS explained: "There are a substantial number of cases examining research credit issues, which consume significant resources of both taxpayers and the IRS." The changes "are intended to make tax reporting more consistent, improve the information received for tax administration" and help manage resources.2

What Section G asks

Column	Information
49(a) to 49(e)	Entity, business component name or identifier, type, and software type
49(f)	Information sought to be discovered, on amended returns only
50 to 56	Wages for conducting, directly supervising and directly supporting research; supplies; computer rental; contract research

Figure 1. Section G columns. Source: Instructions for Form 6765 (Rev. December 2025).1

Components are listed in descending order of expenses; the rest are reported as one aggregate line.1 Section E, which all filers reporting qualified research expenses complete, also asks for the total number of components, officers' wages, acquisitions and new categories of expenses.1

Section G is not required for a qualified small business claiming the payroll tax credit, or for a taxpayer with qualified research expenses of $1.5 million or less and average gross receipts of $50 million or less that reports the credit on an original return.1

What it reveals

Section G shows where a claim's money went: which components drive it, how much is wages, supplies or contract research, and how much depends on supervision and support rather than on the research itself.1 It flags software claims, where internal use software must meet a higher test.1 It links each component to the taxpayer's books, which the regulations require to substantiate the credit.18

What it does not reveal

The research. The IRS removed the narrative requirement for original returns.3
Substantiation. The instructions say acceptance of the form does not mean acceptance of a statistical sample as substantiation.1
The smallest claimants. Exempt filers report no component detail.1
The remainder. Expenses beyond 80 percent or 50 components are reported in aggregate.1
The fee. Form 6765 asks nothing about how the claim was prepared or paid for.51 The return identifies a paid preparer by identifying number, but not the fee basis.9
Outcomes. No IRS publication found for this brief reports Section G data or how claims fare on examination.

Is disclosure enough?

Supporters of contingent fees can argue that better data lets the IRS target weak claims whatever the fee, and that disclosure can be calibrated in a way a fee rule cannot.34 That is a fair argument. But Section G records the results of an adviser's judgments, not the incentive behind them, and it works after the claim is filed. Two claims with identical entries may rest on very different analysis. Treasury and the IRS have said that a practitioner with a financial interest in a client's tax benefits "may be incentivized to increase such tax benefits", in a 2024 proposal that has not been finalized.10

Our position

Congress should prohibit contingent fees, commonly called success fees, in federal research and development tax credit engagements under Section 41, so that advisers are paid for the work they perform rather than for the size of the claim they produce. Better reporting helps the IRS see what was claimed but does not change the incentive a fee calculated on the credit creates. Swanson Reed, which publishes this brief, is a fixed-fee R&D tax adviser with a direct commercial interest: SR Tax Services LLC does not charge success fees, and a ban would remove a pricing model it competes against.

References

Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), "What's New", "Definitions", "Section E", "Section G" and "Statistical Sampling". https://www.irs.gov/instructions/i6765 (accessed 11 October 2026). Back
Internal Revenue Service, IRS requests feedback on draft Instructions for Form 6765, Credit for Increasing Research Activities, News release IR-2024-313, 20 December 2024. https://www.irs.gov/newsroom/irs-requests-feedback-on-draft-instructions-for-form-6765-credit-for-increasing-research-activities (accessed 11 October 2026). Back
Internal Revenue Service, IRS releases revised draft Form 6765, Credit for Increasing Research Activities, following public comment, News release IR-2024-171, 21 June 2024. https://www.irs.gov/newsroom/irs-releases-revised-draft-form-6765-credit-for-increasing-research-activities-following-public-comment (accessed 11 October 2026). Back
Internal Revenue Service, IRS extends the period for feedback on Form 6765, News release IR-2025-99, 1 October 2025. https://www.irs.gov/newsroom/irs-extends-the-period-for-feedback-on-form-6765 (accessed 11 October 2026). Back
Internal Revenue Service, Form 6765, Credit for Increasing Research Activities (Rev. December 2024). https://www.irs.gov/pub/irs-pdf/f6765.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 41, Credit for increasing research activities, subsection (d)(2), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleA-chap1-subchapA-partIV-subpartD-sec41.htm (accessed 11 October 2026). Back
IRS Office of Chief Counsel, Memorandum 20214101F, I.R.C. 41 Research Credit Refund Claims, dated 17 September 2021, released 15 October 2021, Law and Analysis part B.2.b. https://www.irs.gov/pub/irs-lafa/20214101f.pdf (accessed 11 October 2026). Back
Treasury Department, 26 CFR 1.41-4, paragraph (d). https://www.ecfr.gov/current/title-26/section-1.41-4 (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6109, Identifying numbers, subsection (a)(4), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap61-subchapB-sec6109.htm (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, 89 FR 104915 (26 December 2024), Explanation of Provisions part B. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026). Back