Last Updated on 10/12/2026
By Jonathan Tucker | Principal, Research & Development Tax Credits
Key Takeaways
- The IRS finalized the redesigned Form 6765 for 2024 tax-year returns and forward, but Section G remained optional for all 2024 and 2025 filers.
- For tax years beginning on or after January 1, 2026, Section G is required unless the taxpayer qualifies for one of the stated exceptions, including certain qualified small businesses electing the payroll tax credit and certain taxpayers below the QRE and gross-receipts thresholds.
- Taxpayers required to complete Section G generally report business components representing at least 80% of total QREs, but no more than 50 individually reported components. Remaining components are reported in aggregate.
The IRS finalized the redesigned Form 6765, Credit for Increasing Research Activities, for 2024 tax-year returns. Section G was optional for all 2024 filers, and the IRS later extended that optional treatment through tax year 2025. For tax years beginning after December 31, 2025, Section G becomes required for most taxpayers claiming the R&D tax credit, subject to limited exceptions.
Businesses should use the current Form 6765 instructions when preparing a claim. The December 2024 instructions remain relevant to the form’s original rollout, but the December 2025 revision now controls the current Section G timeline and reporting requirements.
On June 12, 2024, the IRS announced a revised draft of Form 6765. Compared with the initial draft, the revised version reduced the amount of business-component information requested and introduced reporting relief for certain taxpayers. The IRS later released draft instructions in December 2024 and continued revising the Section G implementation timeline in response to stakeholder feedback.
KBKG Insight:
Section G changes how research-credit information is reported, but it does not replace the underlying eligibility and documentation requirements under Section 41. Even taxpayers that qualify for an exception from Section G must maintain records supporting their research activities and qualified research expenses. According to KBKG’s R&D Tax Credit experts, claims involving multiple business components, controlled groups, amended returns, or significant QREs benefit from a coordinated technical and financial review. The project descriptions, employee activities, and expense schedules should tell one consistent story before the figures are transferred to Form 6765. For smaller, straightforward claims, CPAs may use KBKG’s Dash.tax software to calculate and report the credit. Any stated dollar threshold for choosing software rather than a specialist should be identified as a KBKG recommendation, not an IRS requirement.
Background
Initial Draft and Public Comment
On September 15, 2023, the IRS released an initial draft of the redesigned Form 6765. The draft followed heightened IRS attention to research-credit substantiation, including FAA 20214101F, which established specific information requirements for certain refund claims involving the Section 41 credit.
Those refund-claim rules apply when a taxpayer seeks a refund or increases a research credit through an amended return or administrative adjustment request. The redesigned Form 6765 separately proposed expanded business-component reporting for original returns.
The IRS requested public comment on this initial draft Form 6765, which they appeared to have taken seriously and provided relief based on many stakeholder comments. The most significant changes are for small and medium businesses.
Section G Relief for Small and Medium Businesses
Section G remains optional for all filers for tax years beginning before 2026. For tax years beginning after 2025, Section G is required unless an exception applies.
The current instructions provide exceptions for:
- Qualified small businesses under Section 41(h)(3) that elect the payroll tax credit; and
- Taxpayers with total QREs of $1.5 million or less at the controlled-group level, and average annual gross receipts for the prior three tax years of $50 million or less.
KBKG’s R&D team recommends testing these thresholds at the controlled-group level and confirming whether the claim appears on an original or amended return before relying on an exception.
Reduced Requirements for Taxpayers Required to Complete Section G
Taxpayers required to complete Section G must list business components in descending order by QRE amount until they report at least 80% of total QREs or reach 50 business components. Any remaining components are reported as “Aggregate Business Components.”
Compared with the initial draft, the final reporting structure no longer asks taxpayers to state whether each component is new or improved, identify whether it is held for sale, lease, or license, or describe the information sought to be discovered. However, the current form still requires business-component identifiers, component types, software classifications when applicable, and QRE amounts by category.
Effective Dates and Timeline
Current Section G Timeline
- Tax Year 2024: Section G was optional for all filers.
- Tax Year 2025: Section G remains optional for all filers.
- Tax Year 2026 and later: Section G becomes required for most filers, subject to the qualified-small-business and QRE/gross-receipts exceptions.
- January 10, 2027: The current 45-day perfection transition period for certain research-credit refund claims ends.
Action Items
- Determine whether Section G will apply for the taxpayer’s 2026 tax year.
- Test the QRE threshold at the controlled-group level and calculate average annual gross receipts for the prior three tax years.
- Use consistent business-component names across technical records, expense schedules, and Form 6765.
- Map wages, supplies, computer time-sharing costs, and contract research expenses to the applicable business components.
- Separate original-return reporting requirements from the additional substantiation rules
- Consider completing Section G voluntarily (for your records) for tax year 2025 as a dry run for the 2026 requirement.
KBKG’s R&D Tax Credit team helps businesses and CPA firms define business components, connect QREs to the underlying research activities, and prepare documentation that aligns with the current Form 6765 instructions.
To get help with claiming the R&D tax credit, please reach out to a KBKG representative or visit KBKG.com for more information.
About the Author
Jonathan Tucker | Principal – Research & Development Tax Credits
Jonathan Tucker is based in Atlanta, GA, and has over 20 years of experience providing federal business tax advisory services, primarily in R&D tax credits, to clients in various industries including technology, manufacturing, transportation, healthcare, retail and consumer products, hospitality, media and entertainment, financial, and other professional services industries. Read More
Frequently Asked Questions
Is Section G Required for 2024 or 2025 Tax Returns?
No. Section G is optional for all filers for tax years beginning before 2026. Separate substantiation requirements can still apply to research-credit refund claims filed on amended returns.
What Are the QRE and Gross-Receipts Thresholds?
For tax years beginning after 2025, Section G is optional when total QREs are $1.5 million or less at the controlled-group level and average annual gross receipts for the prior three tax years are $50 million or less.
How Many Business Components Must Be Reported?
A taxpayer required to complete Section G generally reports components representing at least 80% of total QREs, but no more than 50 individually listed components. Remaining components are reported in aggregate.
When Does Section G Become Mandatory?
Section G becomes required for most filers for tax years beginning after December 31, 2025, subject to the available exceptions.