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Advisor and Practitioner Program: United States track

What a practitioner preparing US research credit claims must master: section 41 and its regulations, the four-part test applied to each business component, qualified research expenses, the regular and alternative simplified credit methods with the section 280C(c) election, Form 6765 including Section G, and the IRS examination process.

Advisor and Practitioner ProgramLast reviewed 2 October 2026
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Advisor and Practitioner Program

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This track is for accountants and advisors who prepare or review research credit claims for United States clients. The federal research credit under section 41 of the Internal Revenue Code has no registration and no advance notification: the claim is Form 6765, filed with the income tax return. Three features shape the engagement. The unit of analysis is the business component, not the company. Two methods and two elections exist, and the elections can only be made on a timely filed original return. And for tax years beginning after 2025, Section G of Form 6765 asks for information about each business component, with some exceptions.

How the United States rules change the program

ModuleWhat is different in the United StatesCountry page
Legislation and guidanceSection 41 of the Internal Revenue Code, Treasury Regulations 1.41-2 and 1.41-4, the Instructions for Form 6765 and the Research Credit Audit Techniques Guide. Administered by the Internal Revenue Service.United States guide
Eligibility analysisThe four-part test in section 41(d), applied to each business component. The test is conjunctive: failing any single part means the activity does not qualify.Four-part test
Advanced calculationsQREs are wages, supplies and 65% of contract research costs. Regular credit of 20% above a base amount, or alternative simplified credit of 14% above 50% of the three-year average. Reduced credit under section 280C(c): 15.8% and 11.06%.ASC vs regular method
Technical interviewsEstablish, per business component, the information sought to be discovered and that uncertainty about capability, method or appropriate design existed at the outset. Uncertainty is judged before the work starts, not after it succeeds.Documentation
Reports and narrativesSection G asks for each business component's name, type, the information sought to be discovered, and the QREs allocated to it. Refund claims must identify the business components, the activities and the QRE totals.Form 6765
Disputes and auditsIRS examination. Examiners are directed to test contemporaneous documentation, the basis of wage allocations and the consistency between technical narratives and financial records.Reviews and audits
Ethics, integrity and fee arrangementsThe accuracy-related penalty is 20 percent of the underpayment attributable to negligence, disregard of rules or a substantial understatement; none is imposed where the taxpayer shows reasonable cause and good faith. Whether contingent fees are permitted depends on the professional body the advisor belongs to; see knowyourfees.org.Why claim integrity matters

Forms and deadlines

Form or stepDeadline or ruleCountry page
Registration or notificationNone. No pre-registration.Deadlines
Form 6765With the income tax return. Calendar-year C corporation returns are due on the 15th day of the fourth month after year end, partnership and S corporation returns on the 15th day of the third month, each with a six-month extension available.Form 6765
Form 3800The research credit is a component of the general business credit, subject to the section 38 limitation; unused credit is carried back one year and forward twenty years.How to claim
Section 280C(c) electionOn a timely filed original return including extensions; irrevocable for that year.Section 174
Payroll tax election and Form 8974Up to US$500,000 a year against payroll tax, elected on a timely filed original return including extensions; cannot be made on an amended return.Payroll tax offset
Refund claimWithin three years from the time the return was filed or two years from the time the tax was paid, whichever is later.Deadlines
AssessmentThree years after the return is filed under section 6501(a).Reviews and audits

Key rules to know

Business component first. The requirements are applied first at the level of the discrete business component and then, if not met, to the most significant subset of elements of the component, successively. Substantially all means 80 percent or more of the research activities, measured on a cost or other consistently applied reasonable basis, constitute elements of a process of experimentation.

Contracts cut both ways. A contract research expense requires an agreement entered into prior to the performance of the research under which the taxpayer bears the expense even if the research is not successful, and it qualifies only to the extent the research is conducted within the United States. On the client's own customer contracts, research is funded if payment is not contingent on the success of the research, or if the taxpayer does not retain substantial rights in the research; see the funded research exclusion.

Section 174 moves with the credit. For tax years beginning after December 31, 2024, domestic research or experimental expenditures are deductible when paid or incurred under section 174A, while foreign research expenditures continue to be amortised over 15 years under section 174. Section 280C(c) reduces that deduction by the amount of the credit unless the reduced credit election is made, so the section 174 schedule and the QREs must reconcile.

Worked example

Illustrative example. Calder Sensors Inc, a hypothetical C corporation with a calendar tax year, has two business components that pass the four-part test in 2026. Qualified wages are US$600,000, supplies US$70,000, and US$200,000 was paid to a US contractor under a pre-existing agreement with payment not contingent on success, entering at 65% as US$130,000. Total QREs are US$800,000. QREs for the three preceding years were US$500,000, US$600,000 and US$700,000. Average annual gross receipts for the four preceding years are US$12,000,000, and the start-up fixed-base percentage of 3 percent applies.

StepAlternative simplified creditRegular credit
BaseAverage of prior three years US$600,000; 50% = US$300,0003% of US$12,000,000 = US$360,000; the base may not be less than 50% of current QREs, so base = US$400,000
ExcessUS$800,000 less US$300,000 = US$500,000US$800,000 less US$400,000 = US$400,000
Credit at full rate14% = US$70,00020% = US$80,000
Credit with section 280C(c) election11.06% = US$55,30015.8% = US$63,200

The regular credit wins because the 50% floor sets the base amount. The practitioner completes Section A, elects the reduced credit so the section 174A deduction is not reduced by US$80,000, and reports US$63,200 in Section C for Form 3800. With QREs at or below 1.5 million US dollars and gross receipts at or below 50 million US dollars, Section G is optional this year, but the workpapers are kept in Section G form because the same information is required in any refund claim and tested in any examination.

Self-check questions

Answer each question, then open it to compare.

A client wants to add the reduced credit election under section 280C(c) to a return filed last year. Can you do it by amended return?
No. The section 280C(c) reduced credit election must be made on a timely filed original return including extensions and is irrevocable for that year. The credit itself can be added by amended return within the refund limitation period, but without the election the research expense deduction is reduced by the amount of the credit.
Your client has QREs of US$900,000 this year and had no QREs in one of the three preceding years. What is the alternative simplified credit before any election?
If the taxpayer has no QREs in any one of the three preceding tax years, the alternative simplified credit is 6 percent of the current year QREs, so US$54,000. The 14 percent computation against half of the three-year average is not available.
For a tax year beginning after 2025, which business components must be listed individually in Section G of Form 6765?
Business components are reported in descending order of QREs until 80 percent of total QREs are reported, subject to a maximum of 50 components, with remaining components reported in aggregate. Section G is optional for qualified small businesses making the payroll tax election and for taxpayers with total QREs of 1.5 million US dollars or less and gross receipts of 50 million US dollars or less.
A client pays a contractor US$100,000 for qualified research performed in the United States under an agreement signed before the work began, with payment not contingent on success. How much enters QREs?
US$65,000. Contract research expenses are 65 percent of amounts paid to any person other than an employee for qualified research. The agreement must be entered into prior to the performance of the research, the research must be performed on behalf of the taxpayer, and the taxpayer must bear the expense even if the research is not successful.
The IRS proposes to disallow a credit carried forward from a year that is now outside the three-year assessment period. Is the originating year protected?
No. The IRS may examine the computation of a carryforward credit in the year it is used even if the originating year is closed, so the records of the originating year must be kept for as long as the carryforward lasts.

Official sources

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