Businesses that claim the Credit for Increasing Research Activities under Internal Revenue Code Section 41 are facing a new compliance requirement: Section G of Form 6765, “Business Component Information,\u201d. <\/p>\n\n\n\n
The requirement has been optional, however, it will become mandatory for tax years beginning after December 31, 2025<\/strong>.<\/p>\n\n\n\n Section G represents a major change to Form 6765’s reporting framework. Rather than reporting qualified research expenses (QREs) as high-level totals, taxpayers must now itemize QREs on a business-component basis. <\/p>\n\n\n\n For each qualifying business component, wage-related QREs must be broken out into three distinct categories: direct research, direct supervision, and direct support.<\/p>\n\n\n\n Taxpayers required to complete Section G must report business components that represent at least 80% of total QREs, subject to a cap of 50 business components. <\/p>\n\n\n\n For members of a controlled group filing separate returns, the 80% threshold applies to that member’s own QREs rather than the group’s combined total.<\/p>\n\n\n\n The IRS first mentioned Section G reporting requirements back in June 2024, initially targeting the 2025 tax year for mandatory compliance. <\/p>\n\n\n\n However, after extensive taxpayer feedback expressing concerns,<\/em> the IRS pushed the effective date back. <\/p>\n\n\n\n In October 2025, the IRS confirmed that Section G would remain optional for tax years beginning in 2024 and 2025, with a public comment period on the related instructions extended through March 31, 2026<\/strong>.<\/p>\n\n\n\n The IRS released finalized instructions for Form 6765 on February 5, 2026: Section G is optional for all filers for tax years beginning before 2026, and required for tax years beginning after 2025, meaning it applies starting with the 2026 tax year.<\/p>\n\n\n\n Not every filer will need to complete Section G. The finalized instructions carve out exceptions for certain smaller taxpayers, including:<\/p>\n\n\n\nWhat Section G Requires<\/strong><\/h2>\n\n\n\n
The Timeline to Requirement<\/strong><\/h2>\n\n\n\n
Who Is Exempt<\/strong><\/h2>\n\n\n\n
\n