State program
California Research and Development Credit
A long-standing, permanent state credit that closely tracks IRC Section 41 but uses California-only expenses and a fixed base percentage.
Program overview
California operates one of the largest state research credit programs in the country. The credit applies to qualified research expenses incurred in California and uses a modified version of the federal rules, including a fixed-base percentage capped at 16% and a special rule for basic research payments to California universities. The credit is non-refundable but carries forward indefinitely, which makes it valuable to companies expecting future California tax liability. Temporary annual credit utilization caps have applied in some years, so timing analysis matters.
Eligibility
Corporations and individuals conducting qualified research within California. Expenses incurred outside California do not count, even for California-headquartered taxpayers.
Benefits
Reduces California franchise or income tax dollar for dollar, with an unlimited carryforward for unused amounts.
Find out what your research actually qualifies for
A scoping conversation takes thirty minutes and costs nothing. You leave with a view on eligibility, likely credit range and the documentation you would need.