State R&D Tax Credits

California

Credit Name: FTB 3523: Research Credit

Expiration Date: Permanent

Does it apply to C corps and pass-through entities?: Yes; S-Corps may only claim up to 1/3 against entity level tax, the rest may be passed through to shareholders (2/3 to 100%).

Credit Carry forward: No Carry Back. Unlimited Carry Forward

Description: Non-refundable credit that mirrors the federal definition. Two methods available to calculate: 1) Regular method: Credit amount is 15% of the excess of California QRES over base period expenses. Basic Research is allowed a credit of 24%. 2) Alternative incremental credit: Credit is calculated using a smaller three tiered fixed base percentage and a reduced three-tiered credit rate (1.49 %, 1.98 %, and 2.48 %), similar to the old federal AIRC method.

Other Notes: Federal credit does not need to be claimed to get the California credit. Credit cannot offset AMT