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California R&D Tax Credits

R&D Tax Credits

Connect with us to find out how R&D Tax Credits can boost your organization’s performance.

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This post was last updated on April 23rd, 2023 by Casey Barka.

California R&D Tax Credits R&D Tax Credit

Find out if you qualify for R&D tax credits in California R&D Tax Credits and recharge your business.

15
%
of qualified expenses that exceed a base amount
24
%
of basic research payments
%
years
Total tax credit can be carried forward

California R&D Tax Credits R&D Tax Credit Eligibility Summary:

Is the R&D Tax Credit Available?:
Yes
No
Eligible Entities:
C-Corporations, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Data Required to Compute Credit:
Due with California Tax Return
What Information is needed?:
Gross Receipts for Prior 4 Years

California R&D Tax Credits R&D Tax Credit Guidelines:

  • Taxpayers may elect the alternative incremental credit in which taxpayers are assigned a smaller three-tiered fixed-base percentage and a reduced three-tiered credit rate (1.49%, 1.98%, and 2.48%).
  • California offers an additional 1/3 of the credits to be applied to the 1.5% S-Corp entity tax.
  • Several states impose a dollar limit on the amount of expenses that can qualify for the research tax credit. Some states limit the amount of their research tax credits that taxpayers can claim in any one tax year. The California research tax credit does not have a dollar limitation.
  • California conforms to the federal IRC on a fixed-date basis, conforming to the code in effect on 1/1/2015; therefore, it does not conform with TCJA, which was enacted on 12/22/2017.

California R&D Tax Credits R&D Tax Credit Case Study

A Nebaraska-based manufacturing company recovered $304K from the R&D tax credits.

$

268000

Amount earned in Arizona state tax credits

50

%

Amount of wages qualifed for a Arizona based manufacturer

$

668000

Total R&D tax credit earned

Key California R&D Tax Credits R&D Tax Rules Changes

2019' - 22
22' and after
2019' - 22
22' and after

Resources

There are many other considerations and exemptions, including what documentation the IRS requires for the R&D tax credits. Stay updated to navigate the new tax laws with confidence.

California R&D Tax Credits

Connect with us to find out how R&D Tax Credits can boost your organization’s performance.

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With just a little info, our Strike Experts can help you start your R&D tax credit journey.

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California R&D Tax Credits

Find out if you qualify for R&D tax credits in California and recharge your business.

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.

Learn more about California's R&D Tax Credit law or see if improving products and processes will help you pass the 4-part test.

R&D Tax Credit Available:

Yes

Eligible Entities:

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.

California R&D tax credit calculation:

  • 15% of the excess of California qualified research expenses for the taxable year over the base period research expenses.
  • 24% of basic research expenses for qualified university-based research for the taxable year.

Specific Items to Note:

  • Taxpayers may elect the alternative incremental credit in which taxpayers are assigned a smaller three-tiered fixed-base percentage and a reduced three-tiered credit rate (1.49%, 1.98%, and 2.48%).
  • California offers an additional 1/3 of the credits to be applied to the 1.5% S-Corp entity tax.
  • Several states impose a dollar limit on the amount of expenses that can qualify for the research tax credit. Some states limit the amount of their research tax credits that taxpayers can claim in any one tax year. The California research tax credit does not have a dollar limitation.

Ready to calculate your R&D tax credits?

To get an estimate of the potential value of your unclaimed R&D Tax Credits, try out our credit calculator.

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