Section B of Form 6765 is where the alternative simplified credit (ASC) is computed. This page walks through the ASC calculation conceptually in the order the current form (12/2025 revision) requests inputs. It is educational and is not individualized tax advice, and it does not reproduce the form verbatim. For the ASC formula, see our page on the ASC method.
The Conceptual Flow on Section B
Section B of the current Form 6765 requests inputs in a sequence that follows the ASC formula:
General rule (taxpayer has QREs in all 3 of the preceding years):
ASC = 14% × (current-year QREs − 50% × average QREs for the 3 preceding years)
No-prior-QRE rule (taxpayer has no QREs in any one of the 3 preceding years):
ASC = 6% × current-year QREs
The conceptual flow on the form is:
- Current-year QREs. The total qualified research expenses for the credit year.
- Prior-year QREs. The QREs for each of the three preceding taxable years.
- Average. The sum of the three preceding years' QREs divided by 3.
- Comparison amount. 50% of the average.
- Excess. Current QREs minus the comparison amount.
- Tentative ASC. 14% of the excess (or 6% of current QREs if no prior QREs).
Current QRE Inputs
The form requests the total QREs for the credit year. This is the sum of qualified wages, 65% of qualifying contract research, and qualified supplies. For more on how QREs are assembled, see our page on how QREs feed the calculation.
Prior Three-Year Inputs
The form requests the QREs for each of the three taxable years preceding the credit year. These are entered individually and then summed and averaged. If any one of the three preceding years has zero QREs, the 6% special rule under Section 41(c)(4)(B) applies instead of the general 14% formula. For more on the prior three-year mechanics, see our page on prior three years of QREs.
The Average and Comparison Amount
The form computes the average of the three preceding years' QREs and then computes 50% of that average. This 50% figure is the "comparison amount" — the threshold that current QREs must exceed before the 14% rate applies.
The 14% Rate
The form applies the 14% rate to the excess of current QREs over the comparison amount. The result is the tentative ASC.
The Special No-Prior-QRE Rule
If the taxpayer has no QREs in any one of the three preceding taxable years, the form applies the 6% rate to current-year QREs instead of the general 14% formula. There is no comparison amount to compute in this case — the 6% rate is applied directly to current QREs. For more, see our page on no prior QREs.
A Conceptual Walkthrough With Illustrative Numbers
The following is a hypothetical illustration for educational purposes only. It does not represent any actual taxpayer and does not state a filing recommendation.
Suppose a company enters the following on Section B:
| Form input | Amount | |---|---| | Current-year QREs | $500,000 | | QREs — 3 years preceding (Year 1) | $300,000 | | QREs — 2 years preceding (Year 2) | $350,000 | | QREs — 1 year preceding (Year 3) | $400,000 |
Step 1: Compute the sum of prior 3-year QREs.
Sum = $300,000 + $350,000 + $400,000 = $1,050,000
Step 2: Compute the average.
Average = $1,050,000 / 3 = $350,000
Step 3: Compute the comparison amount (50% of average).
Comparison amount = 50% × $350,000 = $175,000
Step 4: Compute the excess.
Excess = $500,000 − $175,000 = $325,000
Step 5: Apply the 14% rate.
Tentative ASC = 14% × $325,000 = $45,500
The tentative ASC of $45,500 flows to Section C (Current Year Credit) and then to Form 3800.
No-Prior-QRE Example
If the same company had no QREs in any one of the three preceding years, the form would apply the 6% rule:
Tentative ASC = 6% × $500,000 = $30,000
Downstream Reporting
The tentative ASC computed in Section B flows to Section C, which determines the current-year credit after any elections. The current-year credit then flows to Form 3800, General Business Credit, where the Section 38 limitation is applied. For more, see our pages on Form 6765 sections explained and carryforward and carryback.
Important Note on Form Changes
The specific line numbers and labels on Section B can change from year to year. The description above is a conceptual walkthrough based on the 12/2025 revision, reviewed August 2026. Taxpayers should always use the current form and instructions. The current Instructions for Form 6765 on IRS.gov are the authoritative reference.
Documentation Needed
Each input on Section B must be supportable: current QREs (payroll, contractor, and supply records) and prior three-year QREs (prior-year workpapers and records). For more, see our page on R&D tax credit documentation.
Questions for Your Tax Professional
- Do I have supportable prior-year QRE records for all three preceding years?
- Does the 6% special rule (no QREs in any one of the 3 preceding years) apply to me?
- How does my Section B result compare to the regular credit in Section A?
- What records support each input on Section B?
- How does my ASC flow to Section C and Form 3800?
Key Takeaway
Section B of Form 6765 computes the ASC by requesting current QREs, prior three-year QREs, the average, and the comparison amount (50% of the average). The 14% rate applies to the excess of current QREs over the comparison amount, or the 6% rate applies if there are no QREs in any one of the 3 preceding years. The tentative credit flows to Section C and then to Form 3800. The specific lines can change, so the current form and instructions are authoritative. For the formula, see our page on the ASC method.