California research

Overview

This credit is based on the federal research credit, with modifications. You may qualify for this credit if you engaged in qualified research activities in California.

Rate

The credit is equal to the sum of the following:

• 15% of qualified expenses that exceed a base amount
• 24% of basic research payments

Alternative simplified credit

As of January 1, 2025, California has conformed to the federal Alternative Simplified Credit (ASC) method under Internal Revenue Code (IRC) Section 41(c)(4), as modified by California law.

For California purposes the ASC is equal to 3% of qualified research expenses (QREs) that exceed 50% of the average QREs for the three preceding taxable years. If the taxpayer has no QREs in any one of the three preceding taxable years, the credit is equal to 1.3% of the current year QREs.

You may elect ASC on a timely filed original return. If you want to revoke this method in a later year, you must receive our consent before filing an original return. You cannot change your method on an amended return. For more information on procedures to obtain consent, refer to FTB Notice 2024-01.

Alternative incremental credit

The Alternative Incremental Credit is repealed and no longer available to California taxpayers for taxable years beginning before January 1, 2025.

Carryover

The carryover must be applied to the earliest taxable year possible and the unused credit may be carried over until it is exhausted.

How to claim

• File your income tax return
• Attach 2025 Research Credit (FTB 3523) (coming soon)
• Visit 2025 Instructions for Form FTB 3523 (coming soon) for more information
• Credit assignments