The California Research Credit reduces income or franchise taxes. You receive 15% of the excess of current year research expenditures over a computed base amount. You may carry over any unused amount to future years until none remains. In addition, combined reporting group members may assign credit to an affiliated corporation that is a member of the same group.


Per California Revenue and Taxation Code §§ 17052.12 and 23609, in order for an activity or project to qualify for the research credit, the taxpayer must show that it meets all of the requirements in Internal Revenue Code § 41(d). In order to claim the research credit, the research activity must satisfy a four-part test:

  • The research must have qualified as a business deduction

  • The research must be undertaken to discover information that is technological in nature

  • The taxpayer must intend to use the information to develop a new or improved business component.

  • The taxpayer must pursue a process of experimentation during substantially all of the research


Fill out form FTB 3523 to claim the credit (link below)