Comprehensive Analysis of Pro Forma Federal Form 6765 within the New Hampshire Research and Development Tax Credit Framework

A Pro Forma Federal Form 6765 is a preliminary draft of the federal research credit claim used by New Hampshire businesses to secure state-level tax incentives when their official federal filing is pending. It acts as the substantive evidence for the June 30th state application deadline, allowing the Department of Revenue Administration to verify qualifying manufacturing wages before final IRS submission.1

The New Hampshire Research and Development (R&D) Tax Credit program represents a sophisticated intersection of state industrial policy and federal tax definitions. Established under RSA 77-A:5, XIII, the credit is designed to foster a robust manufacturing ecosystem by lowering the after-tax cost of technical labor. However, because New Hampshire requires tax credit applications to be submitted well before most corporations finalize their federal income tax returns—especially those utilizing the six-month filing extension—the “Pro Forma” version of Federal Form 6765 becomes the indispensable heart of the filing package. This document serves not merely as a placeholder, but as a sworn statement of qualified activities that must withstand the scrutiny of the New Hampshire Department of Revenue Administration (DRA) during the annual allocation of a strictly capped $7 million credit pool.2

The Statutory Architecture of the New Hampshire R&D Tax Credit

The legislative framework for the New Hampshire R&D credit is unique in its dual-tax application. Unlike many states where a credit applies only to corporate income tax, New Hampshire’s credit is integrated into both the Business Profits Tax (BPT) and the Business Enterprise Tax (BET). This integration requires a nuanced understanding of how a single set of qualifying expenditures, documented on a Pro Forma 6765, cascades through different tax liabilities.1

The Evolution of RSA 77-A:5, XIII and RSA 77-E:3-b

The credit was first enacted in 2007 through Senate Bill 134, which initially provided a $1 million annual aggregate pool for all qualifying taxpayers. The legislature’s commitment to this incentive is evidenced by its periodic expansions to meet rising demand from the high-tech and manufacturing sectors.

Table 1: Legislative Timeline and Funding Volatility

The primary statute, RSA 77-A:5, XIII, dictates that the credit is calculated as 10% of the excess of qualified manufacturing R&D expenditures over a specific base amount. The secondary statute, RSA 77-E:3-b, allows for any portion of the credit not utilized against the BPT to be applied against the BET.3 This “cascading” mechanism ensures that even startups or capital-intensive firms with low net income but high payroll (and thus high BET liability) can derive immediate value from their R&D investments.8

The Manufacturing Nexus Requirement

New Hampshire diverges from federal standards by imposing a strict “manufacturing” mandate. While Federal Form 6765 allows for research in various fields including software, life sciences, and services, New Hampshire’s credit is explicitly restricted to “qualified manufacturing research and development”.2 The DRA interprets this to mean that the activities must be tied to the creation or improvement of a tangible product or the manufacturing process itself. Consequently, the Pro Forma 6765 submitted to the state must often be a subset of the federal form, isolating only those projects that meet the state’s narrower manufacturing definition.2

The Functional Necessity of the Pro Forma Federal Form 6765

In the world of corporate tax, timing is often the greatest hurdle to compliance. The New Hampshire DRA requires all R&D credit applications (Form DP-165) to be postmarked by June 30th following the tax year in which the expenditures were made.1 For a calendar-year taxpayer, this deadline arrives just as they may be beginning the complex process of an R&D study for their federal return, which is typically not finalized until the October 15th extension deadline.

Bridging the Compliance Gap

The Pro Forma 6765 serves as the regulatory bridge. The DRA guidance explicitly states that if a taxpayer’s federal return is not yet due or if they are filing on an extension that conflicts with the June 30th state deadline, they must submit a “pro-forma or draft copy” of Form 6765.1 This draft must be “complete” in its data entry, particularly regarding the wage components. The DRA uses this data to aggregate the total statewide demand for the credit. If a taxpayer fails to provide this draft, the application is deemed incomplete, and the taxpayer is permanently barred from receiving an award for that fiscal year.1

The September 30th Notification Cycle

The reason for this rigid June 30th deadline—and the subsequent reliance on a Pro Forma document—is the state’s proration requirement. Because the $7 million pool is often oversubscribed, the DRA must collect all requests, verify their validity against the submitted Pro Forma forms, and then calculate a proration percentage.4 Applicants are notified by mail of their granted award amounts by September 30th.1 This timeline allows the taxpayer to receive their official award letter just in time to include it with their finalized federal and state tax returns in October.

Comparative Analysis: Federal IRC § 41 vs. New Hampshire Specifics

To accurately complete a Pro Forma 6765 for New Hampshire purposes, a taxpayer must master the federal “Four-Part Test” established under Internal Revenue Code Section 41, while simultaneously applying state-specific exclusions.

The Four-Part Test Integration

The Pro Forma 6765 must demonstrate that the wages claimed were for activities that meet four criteria:

1. Technological in Nature: The research must fundamentally rely on the principles of physical or biological sciences, engineering, or computer science.5
2. Permitted Purpose: The activity must be intended to develop a new or improved business component, such as a product or process.10
3. Elimination of Uncertainty: At the outset, there must be uncertainty regarding the capability, method, or appropriate design of the component.5
4. Process of Experimentation: The taxpayer must evaluate alternatives through a systematic process, such as modeling, simulation, or trial and error.10

The “Wages Only” Restriction

Perhaps the most significant difference documented on the Pro Forma 6765 for New Hampshire is the exclusion of non-wage expenses. While the federal credit allows for the inclusion of supplies, contract research (at 65% or 75%), and cloud computing costs, the New Hampshire credit is strictly limited to wages.2

Table 2: Qualified Research Expense (QRE) Comparison

When filling out the Pro Forma 6765, New Hampshire applicants must look specifically at Line 5 (Regular Credit) or Line 24 (Alternative Simplified Credit) to isolate the “wages” component that pertains to services rendered within the state.1

Local Revenue Office Guidance: Navigating Form DP-165

The New Hampshire Department of Revenue Administration provides specific instructions on how to translate the data from a Pro Forma Federal Form 6765 onto the state application, Form DP-165.

Step-by-Step Filing Protocol

According to DRA Technical Information Releases and form instructions, the application process follows a rigid logic designed to filter for manufacturing-specific activities.

1. Identification of Qualifying Wages: The taxpayer must first complete the Pro Forma Federal Form 6765 to determine their total federal qualifying wages.
2. The New Hampshire “Carve-Out”: From the federal total, the taxpayer must isolate wages paid for services rendered specifically within New Hampshire. This is a geographical requirement; a New Hampshire-based company cannot claim wages for a researcher working in a Massachusetts laboratory.1
3. Section A of DP-165: The taxpayer enters the amount of Qualified Manufacturing R&D expenditures as defined in RSA 77-A:5, XIII(b). This must align with the “wages only” reported on the Pro Forma 6765. For the 2025 version of Form 6765, this typically maps to Line 42 in Section F.9
4. Section B of DP-165: The taxpayer enters the portion of Section A wages that are attributable specifically to New Hampshire activities.9
5. Section C of DP-165: The credit is calculated by multiplying the New Hampshire manufacturing wages by 10%. This amount is then compared against the $50,000 per-taxpayer cap.2

Documentation and Signature Requirements

The DRA emphasizes that the DP-165 must be signed in ink by an authorized agent. If a paid preparer is used, their PTIN and contact information must be provided.9 The Pro Forma 6765 must be attached to the DP-165 at the time of mailing. Guidance from the DRA’s Frequently Asked Questions (FAQ) warns that “if the application is not complete, the applicant will be notified,” but in practice, missing the June 30th postmark with a complete form is often a non-curable error for that year’s allocation.1

Financial Modeling: Calculation Example and Proration Impact

Understanding the financial impact of the Pro Forma 6765 requires looking at how the $50,000 individual cap and the $7 million statewide cap interact.

Scenario: Precision Machining Corp (PMC)

PMC is a Manchester-based manufacturer of aerospace components. In 2024, they invested heavily in developing a new high-heat alloy.

• Total Federal R&D Wages (from Pro Forma 6765, Line 5): $800,000
• Wages for NH-based Employees: $600,000
• Base Amount (Historical Average): $400,000

PMC’s calculation on Form DP-165 would proceed as follows:

1. Identify Excess Wages: $600,000 (NH Wages) – $400,000 (Base) = $200,000.2
2. Calculate Tentative Credit: $200,000 × 10% = $20,000.2
3. Apply Individual Cap: Since $20,000 is less than the $50,000 cap, PMC requests $20,000.2

The Reality of Proration

However, because PMC is part of a statewide pool, their final award depends on the total demand from all New Hampshire manufacturers. Historically, demand has routinely exceeded the $7 million cap.4

Table 3: Hypothetical Proration Impact on PMC

As shown, the Pro Forma 6765 sets the maximum possible credit PMC can receive, but the final fiscal reality is determined by the collective innovation spending of the state’s business community.2

Advanced Regulatory Considerations for Unitary and Combined Filers

For larger enterprises operating as “unitary” businesses, the New Hampshire DRA provides specific guidance under Rev 306.06 and RSA 77-A:6. These rules are designed to prevent the fragmentation of business activities to multiply the $50,000 individual cap.5

Unitary Business Principles

A unitary business consists of more than one taxpayer (e.g., a parent and its subsidiaries) that are functionally integrated. For the purposes of the R&D tax credit, a unitary group is considered a “single taxpayer”.5 This means the group as a whole is subject to a single $50,000 cap, regardless of how many subsidiaries within the group are conducting R&D.

The application process for these groups involves:

• Consolidated Pro Forma: While each subsidiary might have its own internal R&D data, the group often submits a consolidated or “combined” federal-style data set to support the state claim.14
• Form DP-160 Schedule of Credits: When the credit is eventually claimed on the tax return, combined filers must include a separate schedule showing how the credit is allocated among the members of the group that are subject to the Business Profits Tax.15

The Water’s Edge Election

New Hampshire allows for “Water’s Edge” combined reporting, which limits the apportionment of income to the United States. This election has implications for how R&D activities conducted by foreign affiliates are treated. Since the NH credit is restricted to wages for services rendered in New Hampshire, the Pro Forma 6765 must be strictly audited to exclude any wages paid to employees of foreign subsidiaries, even if those subsidiaries are part of the unitary group.9

Accounting for the Credit: BET vs. BPT and the Carryforward

Once the DRA issues the award letter in September, the taxpayer must determine how to record and apply the credit. The credit is nonrefundable and cannot be sold, making it a “use-it-or-lose-it” proposition within a defined window.2

The Priority of Application

The DRA requires a specific sequence for credit utilization to ensure consistency across the tax base:

1. Business Profits Tax (BPT): The credit must first be used to offset the BPT liability for the taxable period during which the expenditures were made.1
2. Business Enterprise Tax (BET): If the BPT liability is reduced to zero, any remaining credit amount may then be used to offset the BET liability.1

This priority system is vital because the BET is generally considered a lower-rate tax on a broader base (compensation, interest, and dividends), while the BPT is a traditional income tax. By allowing the credit to hit both, New Hampshire ensures that capital-intensive manufacturers—who might have negative net income (and thus no BPT) but high payroll (and thus high BET)—still receive the benefit.5

The Five-Year Carryforward

If a business has a “down year” where its combined BPT and BET liabilities are less than the R&D credit award, the unused portion does not expire immediately. New Hampshire law allows for a five-year carryforward period.2 This allows businesses to “store” their R&D credits for future periods of profitability, providing a stabilizing effect on corporate cash flow.3

Technical Changes in the 2025 Federal Form 6765

The IRS has introduced significant structural changes to Form 6765 for the 2025 tax year, which directly impacts the “Pro Forma” filings required by New Hampshire.

Section F: Qualified Research Expenses Summary

The 2025 revision includes a new Section F, which centralizes the summary of QREs. Line 42 of this section specifically tracks “Wages for qualified services”.9 For New Hampshire taxpayers, this line has become the “anchor” for the state application. The DRA’s latest instructions for Form DP-165 point taxpayers directly to this federal line, simplifying the audit trail between the state and federal documents.9

Section G: Business Component Information

The IRS now requires more detailed information regarding specific business components (projects) in Section G. While the IRS has signaled a transition period where Section G reporting may be optional for some taxpayers through early 2027, the New Hampshire DRA still expects the Pro Forma 6765 to contain enough project-level detail to verify the “manufacturing” nexus of the wages.19

Section 280C Elections and Item A

The 2025 Form 6765 has moved the Section 280C “reduced credit” election to the top of the form as Item A.19 This election is crucial because it affects the taxpayer’s federal deduction for research expenses. While the New Hampshire R&D credit amount is not directly altered by this election, the consistency of this election on the Pro Forma 6765 vs. the final federal return is a primary check for DRA auditors.1

Statistical Insights and Economic Trends

The New Hampshire R&D tax credit is a victim of its own success. Statistics from the Department of Revenue Administration indicate that the program has become a cornerstone of the state’s economic development strategy, particularly in the “Tech Corridor” along Route 3 and I-93.

Participation Rates and Proration Trends

In recent years, the $7 million cap has been consistently breached, leading to a “tax on innovation” in the form of proration.

Table 4: Historical R&D Credit Utilization Statistics

The decline in the proration rate—from roughly 71% in 2020 to an estimated 56% in 2023—suggests that while the number of innovating firms in New Hampshire is growing, their individual awards are shrinking because the $7 million cap is a “hard” limit.4 This trend is the primary driver behind the 2025 legislative push to expand the program.

Geographic Concentration of Credits

Data from the Nashua and Manchester economic development offices show that firms in these cities are the primary beneficiaries of the credit.12 The “Silicon Mill” heritage of these areas, combined with a concentration of precision manufacturing, makes the R&D credit a critical tool for local retention. Nashua firms, for example, rely on the state credit to compete with neighboring Massachusetts, which offers a more complex but potentially larger R&D incentive.12

Legislative Outlook: The Impact of SB 276 in 2026

New Hampshire is currently debating Senate Bill 276 (SB 276), which would represent the most significant update to the R&D tax credit in a decade. If passed, this legislation would fundamentally alter the value proposition for manufacturers.7

Raising the Aggregate Cap

SB 276 proposes increasing the aggregate statewide cap from $7 million to $10 million.7 This 42% increase is specifically targeted at reversing the proration trend. A $10 million pool would likely restore the proration rate to over 80%, providing significantly more cash-flow certainty for mid-sized firms.7

Doubling the Individual Taxpayer Limit

The bill also seeks to increase the per-taxpayer cap from $50,000 to $100,000 per year.7 This change recognizes that for larger manufacturing plants—some of which employ hundreds of engineers—a $50,000 credit is often too small to influence major R&D location decisions. Doubling the cap signals a state-level commitment to larger-scale “anchor” manufacturers.7

Fiscal and Economic Implications

The fiscal note for SB 276 anticipates a maximum state revenue decrease of $3 million per year.7 However, supporters of the bill argue that the credit is “revenue-positive” in the long run, as it encourages the high-wage employment that drives the state’s Business Enterprise Tax and Interest and Dividends tax revenue (though the latter is being phased out).18

Audit Defense and Best Practices for Pro Forma Filers

Submitting a Pro Forma 6765 to the New Hampshire DRA is not a “set-and-forget” action. Because it is a draft document, it requires a higher level of record-keeping than a final tax return to ensure that the eventual final federal filing matches the state’s expectations.

Maintaining a Contemporaneous Documentation Trail

To survive a DRA audit, a business must maintain a “nexus” folder for each year an R&D claim is made. This folder should include:

• Project Specifics: A list of all R&D projects active during the year, including a narrative of the “uncertainty” encountered and the “experimentation” performed.10
• W-2 Allocations: A detailed breakdown of each qualifying employee’s time, showing the percentage of their salary devoted to R&D activities in New Hampshire.1
• The “Manufacturing” Test: Documentation explaining how each project relates specifically to manufacturing, as opposed to pure research or service-based activities.2
• Internal Communications: Emails, design specifications, and meeting minutes that corroborate the R&D timeline.10

The Danger of Inconsistency

One of the most common red flags for DRA auditors is a significant discrepancy between the Pro Forma 6765 submitted in June and the final Form 6765 filed with the IRS in October. If a taxpayer discovers an error in their Pro Forma calculation during the federal study process, they should proactively notify the DRA. If the final federal wage amount is lower than the Pro Forma amount, the state award may be adjusted downward; if it is higher, the taxpayer may be limited to the original Pro Forma amount due to the proration lockout.1

Conclusion: Strategic Integration of the R&D Credit

The Pro Forma Federal Form 6765 is the essential mechanism through which New Hampshire manufacturers navigate the complex timing requirements of state tax incentives. It represents a commitment by the taxpayer to the veracity of their innovation activities, providing the state with the data necessary to manage a high-demand, capped incentive program. For the business community, the credit offers a permanent, reliable reduction in the cost of technical talent, while for the state, it serves as a powerful signal of New Hampshire’s status as a hub for precision manufacturing.

As the program moves toward a potential expansion in 2026, the strategic importance of early, accurate R&D planning becomes even more pronounced. Businesses that master the art of the Pro Forma filing—ensuring they capture all qualifying New Hampshire manufacturing wages while adhering to strict federal definitions—will be best positioned to maximize their share of the state’s innovation pool. The 10% credit, though subject to proration and caps, remains one of the most effective tools in the New Hampshire tax code for supporting the high-tech workforce that defines the state’s modern economy.2

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