Form 6765 Section G and claim transparency

1Summary

Form 6765, Credit for Increasing Research Activities, is the form on which businesses figure and claim the federal research credit.1 Between 2023 and 2025 the IRS redesigned it. The revised form adds a Section E with other information about the claim, a Section F summarizing qualified research expenses, and a Section G for reporting business component detail.2

Section G is optional for tax years beginning before 2026 and required, subject to exemptions, for tax years beginning after 2025.1 A filer that must complete it reports, by business component, at least 80 percent of its total qualified research expenses, up to a maximum of 50 business components, and reports the rest in aggregate.1 The IRS has said the changes are intended to make reporting more consistent and improve the information it receives, because research credit claims are examined in a substantial number of cases and consume significant resources.2

This paper sets out what Section E and Section G ask, how the requirements were narrowed after public comment, and which filers are exempt. It then considers what business component reporting reveals about a claim and what it does not. It finds that the new form shows how a claimed amount is distributed across projects and types of work, but not the reasoning behind each judgment, not the substantiation, and not how the person who prepared the claim was paid.

2The credit is decided by business component

Section 41 requires its test for qualified research to be applied separately to each business component of the taxpayer.3 A business component is any product, process, computer software, technique, formula or invention that is to be held for sale, lease or license, or used in the taxpayer's trade or business.3 Research qualifies only if it meets what the IRS calls the four-part test, applied component by component.1

Before the redesign, the IRS did not receive information by business component with the credit. Its 2021 refund claim guidance shows why that matters. Describing a refund case in which the claims did not identify business components, IRS Chief Counsel recorded the government's argument that without them it "could not apply the four-part test" as the statute requires.4 Since January 2022 refund claims have had to identify their business components.5 Section G applies a version of the same idea to original returns.

3How the redesign developed

Date	Step
15 September 2023	IRS releases a preview of proposed changes, including a new business component detail section, and asks for comments, including on whether the section should be optional for some taxpayers6
21 June 2024	IRS releases a revised draft form that reduces the scope of business component reporting, makes it optional for some filers, and makes Section G optional for tax year 20246
12 and 20 December 2024	IRS releases a revised draft form and draft instructions, and asks for feedback on Section G2
18 June 2025	IRS clarifies the January 2025 instructions on qualified research expenses and group reporting7
1 October 2025	IRS makes Section G optional for tax year 2025 and mandatory, with exemptions, for tax year 2026, and extends the comment period on the instructions through 31 March 20268

Figure 1. The redesign of Form 6765. Sources as cited.

In December 2024 the IRS had said Section G would be mandatory for tax year 2025.2 In October 2025 it deferred that by a year. It said stakeholders had asked for more time to give feedback, extended the comment period on the instructions "to alleviate taxpayer burden and in the interest of fair and effective tax administration", and made Section G optional for tax year 2025 "While stakeholder engagement continues".8 The current instructions, revised in December 2025, state that Section G is optional for all filers for tax years beginning before 2026 and required for tax years beginning after 2025.1

4Why the IRS says it made the change

In its December 2024 release, the IRS said: "Annually, the IRS receives thousands of returns claiming the research credit that involve hundreds of millions of dollars. There are a substantial number of cases examining research credit issues, which consume significant resources of both taxpayers and the IRS." It said the improvements "are intended to make tax reporting more consistent, improve the information received for tax administration and build an ongoing effort to manage resources in a more effective and efficient way".2

In June 2024 it said the revisions made after comments would "alleviate taxpayer burden, provide taxpayers with a consistent and predefined format and improve the information received for tax administration".6 No IRS publication found for this paper sets out how the IRS will use Section G data.

5What the new sections ask

5.1Section E: other information

Every filer that reports qualified research expenses must complete Section E.1 It asks for:19

the total number of business components generating the qualified research expenses, not only those reported in Section G;
the amount of officers' wages included in qualified wages;
whether the business acquired or disposed of a major portion of a trade or business in the year;
whether any new categories of expenses are included as current year qualified research expenses; and
whether any expenses were determined under the ASC 730 Directive, an IRS directive available to certain larger taxpayers with audited financial statements.

The question on new categories of expenses connects to the statutory rule that base period expenses must be determined on a basis consistent with the credit year.31 The 2008 IRS examiner guide for research credit claims identified consistency and base period issues as areas examiners should address.10

5.2Section G: business component information

A filer required to complete Section G must report, for at least 80 percent of total qualified research expenses and no more than 50 business components, the information in Figure 2, listing components in descending order of qualified research expenses.1 Remaining components are reported as a single line labeled "Aggregate Business Components".1

Column	What is reported
49(a) and 49(b)	The employer identification number of the entity conducting the research and its principal business activity code
49(c)	The business component's name or a unique identifier consistent with the books and records that substantiate the research
49(d)	The type of component: product, process, or all others
49(e)	For software, whether it is internal use software, dual function software, non-internal use software, or excepted from internal use treatment
49(f)	A description of the information sought to be discovered, required only on amended returns claiming a new or increased credit
50 to 52	Wages for persons conducting the research, directly supervising it, and directly supporting it
53 to 56	Total qualified wages, supplies, computer rental costs and contract research expenses

Figure 2. Section G columns. Sources: Instructions for Form 6765 (Rev. December 2025) and Form 6765 (Rev. December 2024).19

The 80 percent and 50 component limits are generally determined at the controlled group level. A member of a controlled group that files a separate return reports at least 80 percent of its own qualified research expenses, not the group's, by business component.17

Special rules apply to filers using the ASC 730 Directive, who report one aggregate line for those expenses, and to filers using statistical sampling, who must still report their largest business components and mark those that were sampled.1

5.3Who is exempt

Section G is not required for two groups:1

a qualified small business, as defined in Section 41(h)(3), that has checked the box to claim the payroll tax credit; and
a taxpayer whose total qualified research expenses, determined at the controlled group level, are $1.5 million or less, whose average annual gross receipts for the prior three years are $50 million or less, and which is reporting the credit on an original return.

5.4The burden the IRS estimates

The instructions estimate the time needed by filers other than individual and business taxpayers, whose burden is included in their main return estimates, at 10 hours 31 minutes for recordkeeping, 2 hours 25 minutes for learning about the law or the form, and 5 hours 6 minutes for preparing and sending it.1 The instructions do not give a separate estimate for completing Section G.

6How Section G compares with the refund claim requirements

Section G is not the first time the IRS has asked for research credit information by business component. Since January 2022 a refund claim that includes the research credit has had to carry specific information, and since 18 June 2024 the required items are the business components, the research activities for each, and the expense totals.5 Figure 3 compares the two.

Information	Refund claims since 18 June 2024	Section G on original returns
Business components	All components to which the claim relates5	At least 80 percent of qualified research expenses, up to 50 components, rest in aggregate1
Research activities	Identified for each component5	Not asked1
Individuals and information sought	Waived at filing; may be requested on examination5	Not asked, except column 49(f) on amended returns1
Expense totals	Wages, supplies and contract research for the year5	By component, with wages split by type of work1
Who must provide it	Every research credit refund claim5	Most filers, for tax years beginning after 20251

Figure 3. Refund claim information and Section G compared. Sources as cited.

The comparison shows a design choice. On refund claims, the IRS asks for a description of the activities and screens each claim for validity before paying it.5 On original returns, it asks for a structured breakdown of the numbers but not a description of the work.16

7What business component reporting reveals

7.1Where the money went

Section G shows how a claimed amount is distributed. A reader of the form can see which business components account for most of the claim, how much of each is wages, supplies, computer costs and contract research, and how many components lie behind the total.1 Because the statutory test applies to each component separately, that is the level at which the IRS assesses whether research qualifies.3

7.2How concentrated a claim is

Because components are listed in descending order and Section E asks for the total number of components, the form shows whether a claim rests on a few large projects or many small ones.1 A claim in which one component accounts for most of the expenses presents a different picture from one spread across dozens. The form does not say which is more likely to be correct, but it shows the IRS where the money is.

7.3The kind of work claimed

The split of wages into actual conduct, direct supervision and direct support follows the statutory definition of qualified services.31 The instructions explain that direct supervision means first-line management and does not include higher-level managers, and that direct support does not include general administrative services.1 Reporting these amounts separately shows how much of a claim depends on supervision and support rather than on the research itself, and Section E separately shows how much is officers' wages.1

7.4Software claims

Column 49(e) shows whether a component is software and, if so, its type.1 The distinction matters because research on internal use software qualifies only if the software also meets the high threshold of innovation test, and dual function software is presumed to be internal use software.1

7.5A link to the books

Column 49(c) asks for an identifier "consistent with how you maintain the books and records that substantiate the qualified research activities".1 The regulations require a taxpayer to keep records in sufficiently usable form and detail to substantiate the credit.11 The identifier gives the IRS a point of reference if it later asks for those records.

8What business component reporting does not reveal

8.1The research itself

Section G reports labels and numbers. It does not describe what was done. The September 2023 preview had proposed both quantitative and qualitative information for each component.6 After comments, the IRS removed, for original returns, "the narrative requirement (for original returns) that describes the information sought to be discovered", together with questions on whether a component was new or improved and whether it was for sale, license or lease.6 Column 49(f) now applies only to amended returns.1

8.2Substantiation

Reporting a component is not proof that it qualifies. The instructions state, in the context of sampling, that filing and acceptance of Form 6765 "does not constitute acceptance by the IRS" of a sample as adequate substantiation, and that the taxpayer must keep the records the regulations require.111

8.3The smallest claimants

The exemptions remove from Section G the qualified small businesses claiming the payroll tax credit and smaller claimants filing original returns.1 Those are businesses that may have the least in-house capacity to assess a claim prepared for them. For them, the form records the totals in Section F, the information in Section E, and nothing at component level.1

8.4The remainder

A filer reports by component only until it reaches 80 percent of its qualified research expenses or 50 components, and the rest appears as one aggregate line.1 Up to a fifth of a claim, or more for a filer with many components, can therefore be reported without component detail.

8.5How the claim was prepared and paid for

Form 6765 contains no question about who prepared the credit computation, what study supports it, or how the preparer was paid.91 The income tax return to which it is attached identifies a paid preparer: the Internal Revenue Code requires a return or refund claim prepared by a tax return preparer to bear the preparer's identifying number, and Form 1120 has a paid preparer section with the preparer's name, PTIN and firm.1213 Neither form asks whether the fee was fixed, hourly or a percentage of the credit.

8.6Whether the claim holds

Section G is filed with the return. It shows what was claimed, not what survives examination. No IRS publication found for this paper reports how often research credit claims are adjusted on examination, by how much, or for which kinds of component or expense. Without that, neither the IRS's published material nor Section G itself can show whether claims prepared in one way hold up better than claims prepared in another.

8.7Public information

Tax returns and return information are generally confidential under section 6103.1 The IRS Statistics of Income program publishes tables on corporations claiming the research credit, but the tables listed on its website run only to tax year 2014.14 No IRS publication found for this paper reports aggregate Section G data or how claims vary by type of preparer.

9Does better reporting answer the concern about fees?

9.1The case that it does

There is a reasonable argument that Section G reduces the need for any rule on fees. On this view, the problem with contingent fees is that they may reward larger claims, and the remedy is better information. If the IRS can see which components drive a claim and how wages are allocated, it can focus examinations where risk is highest, and a weak claim prepared for any fee is more likely to be found. Supporters of contingent fees can add that the IRS has reduced the burden of Section G in response to stakeholder concerns, showing that disclosure can be calibrated, while a fee prohibition cannot.68 And they can point out that a well-prepared claim under a contingent fee will produce exactly the same Section G entries as one under a fixed fee. If the form shows the IRS where to look, the argument runs, the way the adviser was paid matters less.

9.2The answer

Section G improves what the IRS can see. It does not change what the adviser is paid for. A fee calculated as a percentage of the credit still rises with each judgment that enlarges the claim: which projects count as components, which activities were experimentation, how much of each person's time was qualified, and which expenses belong in supplies or contract research.315 Section G records the results of those judgments. It does not record how they were made, and it does not make the incentive behind them visible. Two claims with the same Section G entries may rest on very different levels of analysis and substantiation, and the form cannot tell them apart.111

Detection and prevention also work at different times. Section G helps the IRS decide what to examine after a return is filed. A rule about fees operates before the claim is prepared, when the judgments are made.

The record also limits how far disclosure goes today. Section G is not mandatory until tax years beginning after 2025, has already been deferred, and excludes the smallest claimants.18 The narrative of the research has been removed for original returns.6 Nothing on the form records how the preparer was paid.9 And because the consequences of an overstated credit fall on the taxpayer, better detection after the fact protects the revenue more than it protects the business that relied on the claim.16

Treasury has itself treated the incentive as the problem. In proposing in December 2024 to treat contingent fees for preparing returns and refund claims as disreputable conduct, Treasury and the IRS said: "A practitioner with a direct, financial interest in the tax benefits of a client may be incentivized to increase such tax benefits."15 That proposal has not been finalized.15

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 on Form 6765 helps the IRS see what was claimed, but it does not change the incentive a fee calculated on the credit creates. Swanson Reed, which publishes this paper, is a fixed-fee R&D tax adviser. It has a direct commercial interest in the outcome: it does not charge success fees, and a ban would remove a pricing model it competes against.

10What the record shows

The redesigned Form 6765 asks most research credit claimants, for tax years beginning after 2025, to show how their qualified research expenses are spread across business components and types of work.1 It aligns the form with the level at which the law tests whether research qualifies.3 The IRS has explained it as a response to the resources research credit claims consume.2

The form still does not describe the research on original returns, does not substantiate it, does not cover the smallest claimants at component level, and does not record how a claim was prepared or paid for.169 No official data yet shows what Section G reporting has revealed. When it exists, it will describe claims. It will not, on its own, describe the incentives of the people who prepared them.

References

Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), "What's New", "Purpose of Form", "Definitions" (Qualified Research, Business Component, Research With Respect to Software, "80%/Top 50" business components, Aggregate Business Components), "Section E", "Section F", "Section G" (Requirements To Complete Section G, How To Complete Section G, ASC 730 Directive Single Entry, Statistical Sampling, Columns 49(a) to 56) and "Paperwork Reduction Act Notice". 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
Office of the Law Revision Counsel, 26 U.S.C. 41, Credit for increasing research activities, subsections (b)(2)(B), (c)(5)(A), (d)(1) and (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
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and question 21 (page last reviewed or updated 1 October 2026). https://www.irs.gov/businesses/corporations/research-credit-claims-section-41-on-amended-returns-frequently-asked-questions (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, Clarification to the January 2025 version of the Instructions for Form 6765 regarding qualified research expenses and group reporting (page last reviewed or updated 28 June 2026); date of the clarification from About Form 6765, Credit for Increasing Research Activities, "Recent developments". https://www.irs.gov/forms-pubs/clarification-to-the-january-2025-version-of-the-instructions-for-form-6765-regarding-qualified-research-expenses-and-group-reporting and https://www.irs.gov/forms-pubs/about-form-6765 (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), Sections E, F and G. https://www.irs.gov/pub/irs-pdf/f6765.pdf (accessed 11 October 2026). Back
Internal Revenue Service, Large and Mid Size Business Division, Research Credit Claims Audit Techniques Guide (RCCATG): Credit for Increasing Research Activities Section 41, LMSB-04-0508-030 (May 2008), introductory note and Chapter II "Consistency and base period issues". The guide states that it is not an official pronouncement of IRS position. https://www.irs.gov/businesses/research-credit-claims-audit-techniques-guide-rccatg-credit-for-increasing-research-activities-section-41 (accessed 11 October 2026). Back
Treasury Department, 26 CFR 1.41-4, paragraph (d), Recordkeeping for the research credit. 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
Internal Revenue Service, Form 1120, U.S. Corporation Income Tax Return (2025), page 1, "Paid Preparer Use Only". https://www.irs.gov/pub/irs-pdf/f1120.pdf (accessed 11 October 2026). Back
Internal Revenue Service, SOI Tax Stats: Corporation research credit, table list. https://www.irs.gov/statistics/soi-tax-stats-corporation-research-credit (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; Federal Register search on that date showed no final rule). Back
Office of the Law Revision Counsel, 26 U.S.C. 6676, Erroneous claim for refund or credit, subsection (a), 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-chap68-subchapB-partI-sec6676.htm (accessed 11 October 2026). Back

Cite this paper

Summary

1Summary

2The credit is decided by business component

3How the redesign developed

4Why the IRS says it made the change

5What the new sections ask

5.1Section E: other information

5.2Section G: business component information

5.3Who is exempt

5.4The burden the IRS estimates

6How Section G compares with the refund claim requirements

7What business component reporting reveals

7.1Where the money went

7.2How concentrated a claim is

7.3The kind of work claimed

7.4Software claims

7.5A link to the books

8What business component reporting does not reveal

8.1The research itself

8.2Substantiation

8.3The smallest claimants

8.4The remainder

8.5How the claim was prepared and paid for

8.6Whether the claim holds

8.7Public information

9Does better reporting answer the concern about fees?

9.1The case that it does

9.2The answer

10What the record shows

References

About this paper

Cite this paper

Summary

1Summary

2The credit is decided by business component

3How the redesign developed

4Why the IRS says it made the change

5What the new sections ask

5.1Section E: other information

5.2Section G: business component information

5.3Who is exempt

5.4The burden the IRS estimates

6How Section G compares with the refund claim requirements

7What business component reporting reveals

7.1Where the money went

7.2How concentrated a claim is

7.3The kind of work claimed

7.4Software claims

7.5A link to the books

8What business component reporting does not reveal

8.1The research itself

8.2Substantiation

8.3The smallest claimants

8.4The remainder

8.5How the claim was prepared and paid for

8.6Whether the claim holds

8.7Public information

9Does better reporting answer the concern about fees?

9.1The case that it does

9.2The answer

10What the record shows

References

About this paper

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