New Requirements for Refunds on Research Credit Claims

On October 15, 2021, the Internal Revenue Service (IRS) released its Chief Counsel Memorandum, which outlines new requirements for claiming a tax credit refund for the Research & Development (R&D) Tax Credit. Specifically, when claiming a refund for the R&D Tax Credit, taxpayers are required to provide the information below with their tax return:

• Identify all business components to which the research credit claim relates for the respective tax year;

• For each business component, identify all research activities performed and name the individuals who performed each research activity, as well as the information each individual sought to discover; and

• Provide the total qualified employee wage expenses, supply expenses and contract research expenses for the claim year. This can be done by using Federal Form 6765, which is the Federal R&D Tax Credit form.

• Further, the taxpayer is required to provide a declaration signed under penalties of perjury verifying that the facts provided are accurate. The facts must be provided via a written statement rather than a production of documents.

This new requirement takes effect on January 10, 2022. Given the requirements set out by the IRS are generally vague and the general complexities of claiming the R&D tax credit, it is important to speak to an experienced tax advisor.