Form 6765's Section G: business-component reporting arrives on the original return

For decades, Form 6765 asked for the research credit's arithmetic but not its anatomy: totals by expense category, no detail about what the research actually was. The redesigned form — effective for tax years beginning in 2024 — changes that. New Sections E, F, and G collect, respectively, a set of yes/no and informational questions (officers' wages in QREs, acquisitions and dispositions, new expense categories, ASC/280C context), summary QRE totals, and — the consequential one — Section G: business-component detail on the original return.

Who must complete Section G

Section G was optional for all filers for tax year 2024 as a transition, and applies in earnest for tax years beginning in 2025. Two groups remain permanently exempt (reporting is optional for them):

• Qualified small businesses electing the payroll tax offset; and
• Taxpayers with total QREs of $1.5 million or less and gross receipts of $50 million or less for the credit year, determined at the controlled-group level.

Everyone else claiming the credit completes it. Note what the exemption is not: it is not an exemption from substantiation. An exempt taxpayer still bears the full burden of proving its credit on exam, component by component; Section G merely determines whether the detail travels with the return.

What must be reported

For each reported business component, Section G collects, in substance:

• identification of the component and its type (product, process, software, technique, formula, invention), including whether software is for internal use;
• the name or identifier and a description of the information sought to be discovered — a distilled statement of the technical uncertainty;
• per-component QREs by category: qualified wages (further split among direct research, direct supervision, and direct support), supplies, computer rental, and contract research.

The reporting convention caps the burden: components are listed in descending QRE order until 80% of total QREs are covered, up to a maximum of 50 components, with special aggregation conventions for items like controlled-group members. The IRS trimmed earlier drafts — which asked for more narrative per component — in response to comments, but the surviving dataset is still, functionally, the skeleton of an exam workpaper.

Preparation implications

Three practical consequences follow.

The study must be component-shaped. A claim built top-down — total engineering payroll times an estimated qualified percentage — cannot populate Section G honestly. Wage, supply, and contract dollars must be mapped to named components, which is the same discipline the four-part test and the shrink-back rule already assumed and many studies deferred until audit.

The return now makes assertions an exam can test. Section G descriptions of the "information sought to be discovered" are the taxpayer's own framing of uncertainty, signed under penalties of perjury. Descriptions that read as marketing ("developed innovative platform") invite scrutiny; descriptions that track the regulation (capability, method, appropriate design) set up the defense. Consistency with any later refund claim — which has its own specificity requirements — should be assumed to be checked.

Timelines move up. Component mapping, wage allocation, and uncertainty narratives now belong in the provision-and-compliance calendar, not the post-filing one. For calendar-year corporations, that means the Section G dataset should exist by the extended due date at the latest — and ideally be assembled from records kept during the year.

The wider substantiation context — what examiners challenge and what the case law demands — is covered in audit defense; the expense categories Section G asks you to split are defined in qualified research expenses.