Building a business component list is a key part of preparing Form 6765 Section G. This page explains how to build a business component list. It is educational and is not individualized advice. For the underlying framework, see our page on Form 6765.
Step 1: Identify All Business Components
The first step is to identify all business components for which qualified research expenses are being claimed. Each business component should be a product, process, software, technique, formula, or invention being developed or improved. For more, see our page on identifying business components.
Step 2: Organize by QREs
The next step is to organize the business components by the amount of qualified research expenses for each. This helps identify the largest components and determine which represent 80% of total QREs.
Step 3: Apply the 80%/Top-50 Rule
The instructions may require reporting business components representing 80% of total QREs, up to 50 components. This means identifying the largest components by QREs and reporting those that represent 80% of the total, up to 50. The specific requirements should be verified against the current instructions.
Section G Exceptions
Section G is optional for tax years beginning before 2026. For tax years beginning after 2025, Section G is required, with two exceptions: (1) qualified small businesses (QSBs) making the payroll tax credit election under Section 41(h) are exempt, and (2) taxpayers whose qualified research expenses are $1.5 million or less AND whose average annual gross receipts are $50 million or less, reporting on an original return, are also exempt. The small-taxpayer exception does not apply to amended returns. Because Section G rules are tax-year-sensitive, readers should verify the current applicable thresholds and conditions against the current Instructions for Form 6765.
Step 4: Prepare the List
Prepare the business component list with the information required by the current instructions. This may include the business component name or description, the research activities performed, and the qualified expenses for each component.
Hypothetical Example
Consider a manufacturer that has 30 business components with qualified research expenses. The company identifies all 30, organizes them by QREs, and determines that the top 15 represent 80% of total QREs. Under the 80%/top-50 rule, the company may report those 15 components for Section G, subject to the current instructions.
This example is illustrative only.
Key Takeaway
Building a business component list for Section G involves identifying all business components, organizing them by QREs, and prioritizing the largest components under the 80%/top-50 rule. Because Section G requirements are tax-year-sensitive, professional review is appropriate.