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California law generally conforms to IRC §41, and the federal R&D tax credit calculation methodology, modified by California Revenue & Taxation Code (RTC) §17052.12 (Personal Income Tax) and RTC §23609 (Corporation Tax). The California R&D tax credit also reduces income or franchise tax liabilities.
Taxpayers qualify for the R&D tax credit if the taxpayer paid or incurred qualified research expenses while conducting qualified research in California. Taxpayers claim the California R&D Tax Credit on FTB Form 3523, for the year the Company paid or incurred qualified research and development expenses in California.
Under the regular method, the credit is equal to 15% of the excess of the qualified research expenses over the base amount, plus 24% of the basic research payments.
R&D Tax Credit Available:
C-Corporation, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Due with California Tax Return
Data Required to Compute Credit:
Claim Period Qualified R&D Expenses (QREs)
What Information is needed?
Gross Receipts for Prior 4 Years
R&D Credit Carryforward:
Unlike the Federal R&D Tax Credit, the California research tax credit cannot be carried back. However, unused credit can be carried forward indefinitely until utilized.