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Part I—Current Year Credit
You may claim the regular credit (Section A) or elect the alternative incremental credit (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.
Members of Controlled Groups or Businesses Under Common Control
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 than S corporations, personal holding companies, and service organizations) may be eligible for a “basic research” credit
if payments in cash to a qualified university or scientific research organization (under a written contract) exceed a base
period amount (based on
their general university giving and certain other maintenance-of-effort levels for the 3 preceding years). Enter your payments
on this line. See
section 41(e) for details.
Enter the qualified organization base period amount as defined in section 41(e). The amount on line 2 (not to exceed the amount
on line 1),
although not eligible for the basic research credit, can be treated as contract research expenses on line 7 subject to the
65% (or 75%) limitation.
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.
Include 65% of any amount you paid or incurred for qualified research performed on your behalf. Prepaid contract research
expenses are considered
paid in the year the research is actually done. Also include 65% of that portion of the line 1 basic research payments that
does not exceed the line 2
base amount.
However, use 75% in place of 65% for payments made to a qualified research consortium. A qualified research consortium is
a tax-exempt organization
described in section 501(c)(3) or 501(c)(6) that is organized and operated primarily to conduct scientific research and is
not a private foundation.
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:
The fixed-base percentage for a start-up company is figured as follows.
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For the first 5 tax years beginning after 1993 for which you have qualified research expenses, the percentage is 3%.
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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.
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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.
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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.
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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.
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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.
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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 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.
The fixed-base percentage for all companies (existing and start-up) must be rounded to the nearest 1/100th of 1% (i.e., 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.
If short tax years are involved, see Regulations section 1.41–3(b).
Note:
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).
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, 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.
Section B—Alternative Incremental Credit
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.
Section C—Current Year Credit
Pass-through entities should report the amount on line 41 as follows.
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 take on Form 1041. On Schedule K-1, show the credit allocated to each beneficiary.
S corporations and partnerships.
Attach Form 6765 to your tax return, and on Schedule K-1 show the credit allocated to each shareholder or partner.
Electing large partnerships
include this credit in “ general credits.”
The credit allowed for the current year may be limited based on your tax liability. Use Part II to figure the allowable credit
unless you must file
Form 3800, General Business Credit.
Who must file Form 3800.
You must file Form 3800 if you have:
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A research credit from a passive activity,
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More than one credit included in the general business credit (other than a credit from Form 8844 or 8884), or
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A carryback or carryforward of any of those credits.
See the instructions for Form 3800 for a list of credits included in the general business credit.
See section 38(c)(4) for special rules that apply to married couples filing separate returns, controlled corporate groups,
regulated investment
companies, real estate investment trusts, and estates and trusts.
Although you may not owe alternative minimum tax (AMT), you generally must still compute the tentative minimum tax (TMT) to
figure your credit. For
a small corporation exempt from the AMT under section 55(e), enter zero. Otherwise, complete and attach the appropriate AMT
form or schedule.
For an individual, estate, or trust, the credits on line 16 or 39 and line 40 are limited to the amount of tax attributable
to your taxable income
from the sole proprietorship or your interest in the partnership, S corporation, estate, or trust (pass-through entity) generating
the credit. Figure
the research credit limitation separately for each business enterprise by using the following formula:
| (Line 46 - Line 48) x |
Taxable income attributable to the sole proprietorship or your interest in the pass-through entity |
Taxable income for the year (Form 1040,
line 41, or Form 1041, line 22)
|
The result figured above is limited to the excess of line 46 over line 48. If in the current tax year you had no taxable income
attributable to a
particular business interest, you cannot claim any research credit this year for that business.
If you cannot use part or all of the research credit because of the tax liability limit or the taxable income limit above
(line 52 is less than
line 41), carry the unused credit back 1 year then forward up to 20 years. See the instructions for Form 3800.
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