Updated Nov. 25, 2024: The IRS is extending the research credit claim transition period, which gives taxpayers 45 days to perfect a research credit claim for refund prior to IRS’s final determination on the claim, through Jan. 10, 2026. In October 2021, the IRS set forth the information that taxpayers will be required to include for a research credit claim and made modifications in June of 2024 to waive some requirements. For claims postmarked after June 18, 2024, the same requirements announced in June 2024 apply, and taxpayers are required to: Identify all the business components to which the Section 41 research credit claim relates for that year, Identify all research activities performed for each business component, and Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year. This may be done using Form 6765, Credit for Increasing Research Activities. Updated June 18, 2024: The IRS announced that effective for claims postmarked as of June 18, 2024, it is waiving the requirement that taxpayers provide the following two items of information with their refund claim involving the Research Credit: 1) The names of the individuals who performed each research activity and 2) The information each individual sought to discover. The IRS is making this change after significant experience with the Research Credit refund claims process. While IRS is waiving the requirement of providing these two items of information at the time a refund claim involving the Research Credit is filed with the IRS, this information may be requested if a refund claim involving the Research Credit is selected for examination. See FAQ 21. Updated Oct. 30, 2023: The IRS is extending for another year (through January 10, 2025) the transition period during which taxpayers are provided 45 days to perfect a research credit claim for refund prior to IRS's final determination on the claim. The IRS has also updated the FAQs to provide a best practice example of a claim submission. Updated Sept. 30, 2022: The IRS is extending for another year (through January 10, 2024) the transition period during which taxpayers are provided 45 days to perfect a research credit claim for refund prior to IRS’s final determination on the claim. Updated April 19, 2022: Taxpayers who file a claim for refund that includes an IRC Section 41 research credit must comply with the requirement to provide the five items of information when the claim for refund is based on an IRC Section 41 research credit from a pass-through entity. For more information on IRC Section 41 research credit claims for refund involving BBA partnerships and non-BBA pass-through entities such as a TEFRA partnership, S corporation, estate, trust, cooperative, or other non-TEFRA or non-BBA pass-through entities, and their partners, shareholders, beneficiaries, or member-patrons, please see the Research Credit Claims frequently asked questions. Updated Jan. 5, 2022: The timeframe for perfecting research credit claims has been modified to 45 days. For further information, see the Research Credit Claims frequently asked questions. IR-2021-203, Oct. 15, 2021 WASHINGTON — The IRS has set forth the information that taxpayers will be required to include for a research credit claim for refund to be considered valid. Existing Treasury Regulations require that for a refund claim to be valid, it must set forth sufficient facts to apprise IRS of the basis of the claim. The Chief Counsel memorandum PDF will be used to improve tax administration with clearer instructions for eligible taxpayers to claim the credit while reducing the number of disputes over such claims. Effective tax administration entails ensuring taxpayers understand what is required to support the claim for the research and experimentation (R&E) credit. Each year, the IRS receives thousands of R&E claims for credits in the hundreds of millions of dollars from corporations, businesses, and individual taxpayers. Claims for research credit under IRC Section 41 are currently examined in a substantial number of cases and consume significant resources for both the IRS and taxpayers. The Chief Counsel legal advice released today is the result of ongoing efforts to manage research credit issues and resources in the most effective and efficient manner. By requiring taxpayers to provide the information referenced below, the IRS will be better able to determine upfront if an R&E credit claim for refund should be paid immediately or whether further review is needed. Specifically, the opinion provides that for a Section 41 research credit claim for refund to be considered a valid claim, taxpayers are required to provide the following information at the time the refund claim is filed with the IRS: Identify all the business components to which the Section 41 research credit claim relates for that year. For each business component, identify all research activities performed and name the individuals who performed each research activity, as well as the information each individual sought to discover. Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year. This may be done using Form 6765, Credit for Increasing Research Activities PDF. The IRS will provide a grace period (until Jan. 10, 2022) before requiring the inclusion of this information with timely filed Section 41 research credit claims for refund. Upon the expiration of the grace period, there will be a one-year transition period during which taxpayers will have 30 days to perfect a research credit claim for refund prior to the IRS' final determination on the claim. Further details will be forthcoming; however, taxpayers may begin immediately providing this information. The IRS plans to continue engaging with stakeholders on research credit issues. Comments may be sent to irs.feedback.recredit.claims@irs.gov.
