Form 6765 Section G: New R&D Credit Reporting Rules for 2026

Key Takeaways

• Section G of Form 6765, Business Component Information, is mandatory for most research credit filers for tax years beginning after December 31, 2025; organizations should confirm now whether they qualify for an exception.
• Section G requires qualified research expenses (QREs) to be itemized by business component.
• Filers must split wage QREs into three categories: direct research, direct supervision, and direct support.
• Filers list business components in descending order of QREs until they reach 80% of total QREs or 50 components, whichever comes first. They combine the rest into one aggregate line.
• Two exceptions apply: qualified small businesses that check the box on Form 6765 to claim a portion of their research credit as a payroll tax credit, and filers with controlled-group QREs of $1.5 million or less, average annual gross receipts of $50 million or less for the prior three tax years, and a research credit reported on an original return.

Organizations claiming the research credit under Section 41 should prepare for a notable increase in reporting detail starting with tax years beginning after December 31, 2025. The IRS's finalized instructions for Form 6765, Credit for Increasing Research Activities (Rev. December 2025, released in February 2026), make Section G, Business Component Information, mandatory for most filers. This section adds business-component-level detail to the high-level qualified research expense (QRE) totals organizations have historically reported.

What Does Form 6765 Section G Change?

Filers subject to Section G must itemize QREs by individual business component and break wage costs into three categories: direct research, direct supervision, and direct support. A business component is any product, process, computer software, technique, formula, or invention that is held for sale, lease, or license, or used by the taxpayer in a trade or business (Section 41(d)(2)(B)). A plant process, machinery, or technique for commercial production of a business component is treated as a separate business component. On the form, each business component's type is reported as Product, Process, or All Others (column 49(d)). If the business component is software, the filer also reports the software type (column 49(e)): internal use software, dual function software, non-internal use software, or excepted from internal use treatment.

Reporting at this level requires organizations to connect qualified wages, supplies, computer costs, and contract research expenses to specific components rather than relying only on company-wide totals. As a result, filers may need more detailed project records, time-tracking data, cost-center information, and documentation showing how each expense was allocated among business components.

Who Must Complete Form 6765 Section G?

Section G is required for tax years beginning after 2025 unless the filer qualifies for one of two exceptions:

• Qualified small business election. The filer is a qualified small business under Section 41(h)(3) and has checked the box on line 33a to claim a portion of its research credit as a payroll tax credit. A qualified small business is a corporation (including an S corporation) or partnership that has (1) gross receipts under $5 million for the tax year and (2) no gross receipts for any tax year before the five-tax-year period ending with that tax year. A person that is not a corporation or partnership can qualify by meeting the same two tests using the combined gross receipts of all of its trades or businesses. Tax-exempt organizations under Section 501 cannot qualify. A qualified small business that does not check the box is not exempt from Section G.
• Small-filer exception. The filer's controlled-group-level QREs on line 48 are $1.5 million or less, average annual gross receipts for the prior three tax years are $50 million or less, and the filer is reporting a research credit on an original return. For this test, gross receipts are determined under Section 448(c)(3), without regard to subparagraph (A) of that section. See Instructions for Form 6765 (Rev. December 2025), “Requirements To Complete Section G.”

What Must Section G Filers Report?

How Does the 80%/Top 50 Rule Work?

• Filers subject to Section G list business components in descending order by QRE amount.
• Reporting continues until the organization reaches 80% of total QREs or 50 components, whichever comes first.
• Any components beyond that threshold are not itemized; they are combined into a single “Aggregate Business Components” line.
• Organizations that are members of a controlled group and file separate returns apply the 80%/Top 50 test to their own QREs, not the group's combined total. Otherwise, the 80%/Top 50 business components are determined at the controlled group level.
• Filers that follow the IRS's ASC 730 Directive (available only to certain taxpayers; see the line 41 instructions) make a single “ASC 730 Directive” entry in Section G. That entry does not count toward the 50 components. If it is at least 80% of the total QREs reported on line 48, no additional components must be itemized; otherwise, additional components must be reported to meet the 80%/Top 50 requirement.

What Financial Details Must Each Component Include?

• Wages, split into three categories:
• Direct research: employees actually conducting the research (for example, a scientist running experiments).
• Direct supervision: first-line management of the research (not higher-level managers to whom supervisors report).
• Direct support: work that directly facilitates the research, such as cleaning lab equipment or compiling research data. General administrative services and other services that only indirectly benefit the research do not qualify. Examples of services that do not qualify: payroll personnel preparing scientists' paychecks, and officers supervising financial or personnel matters.
• Total wages (the sum of the three wage categories).
• Supplies used in the research.
• Computer rental or lease costs for off-premises computers that the organization does not operate or primarily use.
• Contract research expenses, subject to limits on the part of each payment that counts: 100% of amounts paid or incurred for qualified energy research performed by an eligible small business, university, or federal laboratory; 75% of amounts paid or incurred for qualified research performed by a qualified research consortium; and 65% of amounts paid or incurred for all other qualified research performed by another person (Section 41(b)(3)).

When Does Section G Become Mandatory?

Section G was optional for tax years beginning before 2026 and becomes mandatory for tax years beginning on or after January 1, 2026, for all filers except those covered by the exceptions above.

How to Prepare for Section G Reporting

Organizations should first confirm whether they qualify for one of the exceptions above. Those subject to Section G should begin preparing before year-end so tax, finance, payroll, and technical teams have time to identify data gaps and establish a consistent reporting process.

• Identify and inventory the products, processes, software, techniques, formulas, or inventions that may qualify as business components. Line 37 of Form 6765 asks for the total number of business components generating the QREs on line 48, not just the number listed in Section G.
• Review how qualified wages, supplies, computer costs, and contract research expenses are currently tracked and whether they can be tied to individual components.
• Determine whether wage costs can be separated among direct research, direct supervision, and direct support using available payroll, time-tracking, or project records.
• Coordinate tax, finance, payroll, and technical teams to establish ownership of the data and a consistent method for documenting allocations.
• Test whether current data can support the 80%/Top 50 calculation and identify any reporting gaps before return preparation begins.

A member of the EisnerAmper R&D credit tax team can help assess readiness and plan for the new Section G requirements before the 2026 return is due.