California and the R&D Tax Credit – Swanson Reed

State Credit Name: California Research Credit

Expiration Date: Permanent

Who Can Apply? Corporations and flow-through entities. S-Corps can only claim up to 1/3 against entity level tax, the rest may be passed through to shareholders and owners.

Credit Carry Forward: Unlimited carry forward, but no carry back.

About the Credit: The California Research Credit rate is 15% and it adopts the federal definition of qualified research activities and qualified research expenses. It is limited to research activities conducted in California.

Notes: The credit is calculated by comparing the taxpayer’s QRE’s to their gross receipts. The California Research Credit defines gross receipts as receipts from the sale of real, tangible, or intangible property held for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser in California. The difference between the taxpayer’s gross receipts and qualified research expenses can significantly maximize the credit.

Click here to find out if you qualify for the federal research credit.

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