Calculation changes on IRS Form 6765

In December 2017, the Tax Cuts and Jobs Act (TCJA) was passed and became effective on January 1, 2018 for tax year 2018. While the TCJA did not fundamentally change the underlying concept or rules of the R&D tax credit, there are minor changes to the end R&D tax calculations that your tax consultant should be aware of. Luckily, these calculations benefit the taxpayer given that the TCJA reduced the corporate tax rate to 21%.
We encourage our clients timely claiming their 2018 R&D tax credit to elect the reduced credit under 280c. Doing so avoids the hassle of adding back their R&D tax credit to taxable income. That said, the latest revision of IRS Form 6765 (Credit for Increasing Research Activities, or the R&D tax credit) was released in December 2018. The prior version, dated March 2018, had different calculations for those electing the reduced credit. We’ve summarized the changes below.
Section A – Regular Credit, Line 17 – Are you electing the reduced credit under section 280c?
  • OLD – March 2018 revision of Form 6765
    • Yes – multiply line 16 by 13% (.13)
  • NEW – December 2018 revision of Form 6765
    • Yes – multiply line 16 by 15.8% (.158)

Section B – Alternative Simplified Credit, Line 34 – Are you electing the reduced credit under section 280c?

  • OLD – March 2018 revision of Form 6765
    • Yes – multiply line 33 by 65% (.65)
  • NEW – December 2018 revision of Form 6765
    • Yes – multiply line 33 by 79% (.79)

Whether you claim the Regular Credit or the Alternative Simplified Credit, you will be getting a 21% bump in the R&D tax credit versus last year’s calculation!