On January 12, 2023 the IRS released a draft of revised instructions[1] for Form 6765, Credit for Increasing Research Activities that now contains the guidance the IRS announced previously regarding what must be submitted with an amended income tax return claiming a credit under IRC §41 for increasing research activities.

The requirements first were revealed in Field Service Advice 20214101F released in September 2021, followed by interim procedural guidance in LB&I Memorandum LB&I-04-0122-0001 in early 2022.

The draft instructions provide the following guidance in a section at the end of the instructions titled Research Credit Claims on Amended Returns:

If you are claiming a refund or credit on an amended return or administrative adjustment request (AAR)(as applicable) that includes a section 41 credit for increasing research activities that either (a) was not reported on your original filed return or (b) is increased from the amount reported on your original return, the following five items of information must be identified and provided with your claim for each business component.

1. The factual basis of your section 41 research credit claim.

2. The research activities performed.

3. The individuals who performed early research activity.

A taxpayer may instead identify the individuals who performed each research activity by listing the individual’s title or position.

4. The information each individual sought to discover.

5. The total qualified employee wage expenses, total qualified supply expenses, and total qualified contract expenses paid or incurred for section 41 research credit claim or complete the Form 6765.

If you submit a credit or other document, please identify the exact pages that contain the five items of information described above.[2]

Partnerships subject to the Bipartisan Budget Act audit rules are provided the following additional guidance:

BBA Partnerships must also submit Forms 8985 and 8986 to the IRS and send Forms 8986 to its partners. BBA Partnerships do not need to provide the five items of information on the Forms 8985 and Forms 8986 where the five items of information are included with the Form 6765 attached to the BBA Partnership’s AAR.[3]

Partners of BBA partnerships are provided with the following guidance in the draft instructions:

BBA Partnerships cannot file amended returns; they must instead file AARs. A BBA AAR is a statutorily provided type of amended filing used to change partnership-related items for any partnership taxable year. If you are a partner of a BBA and filing a return that includes a section 41 credit for increasing research activities from the BBA Partnership's AAR, you may, but are not required to, include the five items of information with your return to which your Form 8978 is attached if the BBA Partnership has provided the information with its AAR.[4]

[1] Instructions for Form 6765 (Rev. January 2023) Credit for Increasing Research Activities, Draft as of January 12, 2023, January 12, 2023, https://www.irs.gov/pub/irs-dft/i6765--dft.pdf (retrieved January 14, 2023)

[2] Instructions for Form 6765 (Rev. January 2023) Credit for Increasing Research Activities, Draft as of January 12, 2023, January 12, 2023

[3] Instructions for Form 6765 (Rev. January 2023) Credit for Increasing Research Activities, Draft as of January 12, 2023, January 12, 2023

[4] Instructions for Form 6765 (Rev. January 2023) Credit for Increasing Research Activities, Draft as of January 12, 2023, January 12, 2023