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R&D Tax Credit Filing Changes Would Hurt Small Manufacturers

Changes proposed by the IRS to a tax form used to claim the research and development tax credit would disproportionately harm manufacturers and threaten innovation, the NAM told the agency this week.

What’s going on: The IRS recently unveiled draft modifications to its Form 6765, Credit for Increasing Research Activities. The longstanding credit is intended to incentivize R&D spending.

  • The substantive revisions—which are anticipated to go into effect for the 2024 tax year—include new requirements for detailed, exhaustive information, including a “new Section F for reporting quantitative and qualitative information for each business component,” among other additions, according to the IRS.
  • The public comment period on the changes ended Tuesday.

Why it’s problematic: “The current Form 6765 only requires disclosure of total qualified research expenses by type, [which is] … consistent with the statutory mandate that the compliance burden for claiming the R&D credit should be minimal,” said NAM Vice President of Domestic Policy Charles Crain.

  • However, “these new requirements will greatly frustrate efforts for taxpayers to claim the R&D tax credit, particularly by small manufacturers, which will hurt innovation and the high-paying jobs supported by slightly more than $300 billion the sector spent on R&D in 2022.”

NAM in the news: Bloomberg Tax (subscription) covered the NAM’s comments to the agency.

What should be done: The IRS should withdraw its proposed changes to Form 6765, Crain told the agency—or at least make specific “modifications and clarifications” to them and delay their implementation date by at least a year.  

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