Filing guide, cited to official California sources
How to claim the California R&D credit
These steps, forms and dates are procedure taken from official California publications, listed under "Sources for this section" and verified on . The rate, base and carryforward figures on this page come from Ricerca's rules registry.
Step by step
- 1 Total qualified research expenses for research conducted in California, using the federal §41 definitions as California law modifies them.
- 2 Choose the method. The regular credit is 15% of qualified expenses above a base amount plus 24% of basic research payments. For tax years beginning on or after January 1, 2025, you can instead elect California's alternative simplified credit: 3% of qualified research expenses above 50% of the average for the three preceding tax years, or 1.3% of current-year expenses if any of those years had none.
- 3 Make any ASC election on a timely filed original return. It cannot be made or changed on an amended return, and revoking it later needs FTB consent. Taxpayers who used the repealed alternative incremental credit must choose the regular credit or the ASC on FTB 3523 for 2025; the old election does not carry over to either.
- 4 Complete FTB 3523 and attach it to the return. S corporations, estates, trusts, partnerships and LLCs compute the credit on FTB 3523, attach it to Form 100S, 541, 565 or 568, and report each owner's share on Schedule K-1.
- 5 Apply the $5,000,000 business credit limitation for tax years beginning in 2024 through 2026, and decide whether to elect refundability for any disallowed amount on FTB 3870, filed with an original, timely return.
- 6 Reduce research deductions by the current year's credit unless you elect the reduced credit, and carry unused credit over until it is exhausted, applying it to the earliest year possible.
Federal Form 6765, line by line Estimate the federal credit State R&D credits in 2026: rates and refundability
Key dates
- Alternative simplified credit
- Available for tax years beginning on or after January 1, 2025, by election on a timely filed original return. Source
- $5,000,000 business credit limitation
- Tax years beginning on or after January 1, 2024 and before January 1, 2027. The FTB 3870 refundability election is made with an original, timely filed return for the year of the limitation. Source
Which form to file
| Form | Who files it | Link |
|---|---|---|
| Form FTB 3523, Research CreditFTB 3523 | Corporations, individuals, and pass-through entities that compute or claim the credit; attached to the return | Official page |
| Form FTB 3870, Election for Refundable CreditFTB 3870 | Taxpayers electing refundability for credits disallowed by the $5,000,000 business credit limitation (tax years beginning 2024 through 2026) | Official page |
Who can claim it
- The research must be conducted in California.
- An S corporation claims only 1/3 of the credit against its 1.5% entity-level tax (3.5% for financial S corporations) and reports shareholders' shares on Schedule K-1 (100S).
- Members of a controlled group of corporations, and businesses under common control, are treated as a single taxpayer; each member's credit is its share of the group's qualified research expenses and basic research payments.
- An owner's pass-through research credit is limited to the tax attributable to the business interest that generated it, under the §41(g) rule; the excess carries over.
Program rules worth knowing
- For tax years beginning 2024 through 2026, the FTB 3870 election lets credits disallowed by the $5,000,000 limitation be received as a refundable amount instead, 20% a year over five years, starting in the third taxable year after the election.
- If you do not make that election, credit disallowed by the limitation carries over, with the carryover period extended by the number of years the credit was disallowed.
- California has not conformed to the federal changes requiring amortization of research and experimental expenditures for tax years beginning on or after January 1, 2022.
California R&D tax credit FAQ
Which form claims the California research credit?
Can I use the alternative simplified credit in California?
How does the $5 million credit limitation affect my research credit?
Sources for this section
The California filing guide and FAQ above are drawn from these official publications and were verified on . They are re-checked each year and whenever a listed deadline passes.
California R&D credit rules for TY2026
Each row is a field from the registry entry our engine applies. A blank field says so; it is never filled in.
Program flags on this entry
- Contract research in state
- Yes
- Wages in state
- Yes
- CA ASC available
- Yes
- Business credit cap $5M through 2026
- Yes
- Credit for TY2026
- Current credit Yes. Our rules registry carries a current California research credit for tax year 2026.
- Structure
- Incremental: the credit applies to qualified research expenses above a state base amount
- Credit rate
- 15% of qualified research expenses above the base amount
- Additional statutory component
- 24% of basic research payments Cal. Rev. & Tax Code §23609 adds 24% of basic research payments to the 15% on qualified research expenses above the base amount. It is a separate component on a different base, claimed in addition to the 15%, not instead of it. Ricerca does not credit ordinary qualified research expenses at 24%.
- Base method
- The base amount is the federal §41(c) computation with California qualified research expenses and California gross receipts substituted; the state statute adopts that formula and modifies it. The registry does not carry a written description of that formula for this state, so the study establishes it against the statute cited below. The registry carries a base percentage of 50%. That is the statutory minimum base amount (§41(c)(2) as incorporated by the California statute): a floor under the base, and therefore a ceiling on the credit, not the base itself. Where California gross-receipts and fixed-base-percentage history is not on record the engine applies that floor and blocks issuance until the real base is substantiated.
- Utilization cap
- $5,000,000 of credit may be used against tax in the year A usage limit, not a haircut: the excess is not forfeited, it carries forward. It never reduces the computed credit.
- Carryforward
- Indefinite
- Carryback
- None recorded
- Refundable?
- Not determined in our registry - we confirm it in the study The registry treats an unverified "nonrefundable" as unknown rather than asserting it.
- State form
- FTB 3523
- Statute
- Cal. Rev. & Tax Code §23609 (post-SB 711: IRC conformity 1/1/2025; AIRC repealed; CA ASC added; SB 167 $5M credit cap TY2024-26)
How the California credit is computed
The California credit is incremental: it applies to the qualified research expenses that exceed a state base amount, not to the whole year's spending. The registry carries a rate of 15%.
The base amount is the federal §41(c) computation with California qualified research expenses and California gross receipts substituted; the state statute adopts that formula and modifies it. The registry does not carry a written description of that formula for this state, so the study establishes it against the statute cited below. The registry carries a base percentage of 50%. That is the statutory minimum base amount (§41(c)(2) as incorporated by the California statute): a floor under the base, and therefore a ceiling on the credit, not the base itself. Where California gross-receipts and fixed-base-percentage history is not on record the engine applies that floor and blocks issuance until the real base is substantiated.
On limits, a $5,000,000 utilization cap limits what may be applied against tax in the year, with the excess carried forward rather than lost. Unused credit carries forward indefinitely. Refundability: not determined in our registry, so the study confirms it against the statute rather than asserting it here.
Ricerca computes the California figure from the same substantiated expenses as the federal §41 credit, under the registry entry for the year claimed. Where the registry is silent, the study says so and the point is resolved with your return preparer, not assumed.
Claiming it alongside the federal credit
The federal §41 credit comes first: it is computed from the qualified research expenses the study substantiates and filed on Form 6765 with the return. The California credit is then computed from that same base under the state's own rules.
State credits generally reach only research performed in the state, so the study records where each expense was incurred as it is built, not at filing time.
One base, two computations
- 1 Qualify the activities under the four-part test and total the year's QREs.
- 2 Compute the federal §41 credit and file it on Form 6765.
- 3 Apply the California entry above to the California share of that base, and file it on FTB 3523.
Registry sources
The citations the California registry entry carries, verbatim: what the study cites and a reviewer can check.
- Statute
- Cal. Rev. & Tax Code §23609 (post-SB 711: IRC conformity 1/1/2025; AIRC repealed; CA ASC added; SB 167 $5M credit cap TY2024-26)
- Form
- FTB 3523
Registry entry version 2025.1, exported from services/study-api/app/engines/rules_engine.py (STATE_RULES_2024 + STATE_RULES_REGIME_OVERRIDES via RulesEngine.get_state_rules) on September 10, 2026. The entry above governs TY2026; a study for an earlier year uses that year's entry.
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