California's R&D credit changed under SB 711.

Rate	15% (regular method) or 3% (ASC)
Refundable	No (nonrefundable)
Carryforward	Indefinite (after SB 711)
Form	FTB 3523
Statute	Cal. Rev. & Tax. Code 17052.12 and 23609

Four things, all effective for taxable years beginning on or after January 1, 2025.

• Alternative Incremental Method (AIM) is gone. The AIM tiered rates (1.49 percent to 2.48 percent) are no longer available. Companies that previously elected AIM cannot continue using it.
• Alternative Simplified Credit (ASC) is in. California adopted a federal-style ASC method at a state rate of 3 percent of qualified research expenses exceeding 50 percent of the average California QRE for the three preceding taxable years. The federal ASC is 14 percent; California's version uses 3 percent.
• Conformity moved up. California's IRC Section 41 conformity date now follows current federal law for tax years beginning on or after January 1, 2025. Prior conformity dates lagged by several years.
• Carryforward is now indefinite. SB 711 removed prior carryforward restrictions; unused California R&D credits carry forward without expiration.

If you previously elected AIM and do nothing on your 2025 return, you do not default to another method. You must affirmatively elect either the Regular credit or the ASC on a timely-filed original 2025 return, or you forfeit the credit for that year. Method changes after the original return require FTB consent.

Two computation methods, taxpayer's election.

• Regular credit (15 percent). Computed against California QREs in excess of a base period calculation, similar in structure to federal §41 but applied at California's 15 percent rate. This method generally produces a larger credit for companies with relatively flat or modestly growing California QREs.
• Alternative Simplified Credit (3 percent). Computed against California QREs that exceed 50 percent of the average California QRE for the three preceding taxable years. Simpler base period math; lower rate. Generally favors companies with rapidly growing California QREs or companies that lack the historical records the Regular credit base period requires.

Qualified research expenses must be incurred for research conducted in California. Wages count only for time the employee was performing qualified research while physically located in California. Contract research expenses count for contractors performing work in California. Supplies count for supplies consumed in California.

Statutory citations: Revenue & Taxation Code Section 17052.12 (personal income tax) and Section 23609 (corporation tax). The form is FTB 3523, Research Credit, filed with the California return.

The California credit is non-refundable. Excess credit carries forward indefinitely after SB 711.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder is what supports your federal Form 6765 and, starting tax year 2026, the mandatory Form 6765 Section G appendix. The same documentation foundation supports California, since the California QRE definition tracks federal §41 with the in-state performance modifier.

The California state credit workpaper is a $995 add-on to the standard binder engagement. It produces:

• A California-attributable QRE breakdown (employee, contractor, and supplies expenses tied to research conducted in California, using the same business-component partition as the federal binder).
• Form FTB 3523 input values for both the Regular credit and the ASC method, so you can compare and elect.
• Filing notes for your CPA: which form lines, statutory references, and any election language required on the original return.

We do not file Form FTB 3523 or sign the California return. That stays with your CPA, the same way federal Form 6765 does. R&D Binder produces the workpaper; your CPA files.

A worked example. A San Francisco SaaS company with 14 engineers, $3.2M in qualifying wages (federal QRE pool), and 12 engineers physically located in California.

• Federal Section 41 credit. Computed on the full $3.2M federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, QRE workpaper, and Form 6765 Section G appendix.
• California credit. Computed on the California-attributable portion of QREs. Roughly $2.74M ($3.2M times 12/14 engineer location ratio, with actual allocation refined by per-employee work-location records). The CPA elects Regular (15 percent of the incremental base) or ASC (3 percent of QRE exceeding 50 percent of the three-year average). R&D Binder produces both computations in the state workpaper so the CPA can elect the larger credit.
• Total engagement cost. SaaS Standard tier ($4,995, 6 to 25 FTE) plus California state workpaper add-on ($995). Total $5,990.

For a high-growth company with sharply rising California QREs, ASC often produces the larger credit despite its lower rate, because the Regular credit base period is dragged up by prior years. For a stable-headcount company, Regular usually wins. The state workpaper presents both so the election is informed.

The California Franchise Tax Board examines R&D credit claims under substantially the same substantiation expectations as the IRS under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, QRE allocation by employee, contractor, and supplies. The FTB additionally scrutinizes the California in-state performance documentation, since out-of-state QREs do not qualify.

The binder R&D Binder produces is built to that standard from the federal side, and the California workpaper carries employee location attribution and contractor performance location into the same business-component structure.

Our standard scope ends at delivering the binder and the state workpaper. Audit-defense engagement for an FTB examination is a separate scope at $250 per hour, scoped per-incident. We do not represent before the FTB; that stays with your CPA or your California tax controversy attorney.

• California Revenue & Taxation Code Section 17052.12 (personal income tax research credit).
• California Revenue & Taxation Code Section 23609 (corporation tax research credit).
• Senate Bill 711 (signed October 1, 2025) - repealed the Alternative Incremental Method, added the Alternative Simplified Credit at 3 percent, moved IRC §41 conformity, and made carryforward indefinite for tax years beginning on or after January 1, 2025.
• California Franchise Tax Board Form FTB 3523 (Research Credit) 2025 instructions.
• Sensiba alert summary of SB 711 changes.
• BDO insight on California IRC conformity and research credit rules.
• IRS Form 6765 (federal Credit for Increasing Research Activities) - California's QRE definition tracks federal §41 with the in-state performance modifier.

This page is general informational content, not tax advice for any specific taxpayer. The California research credit is administered by the California Franchise Tax Board. Form line references and rate citations reflect SB 711 as enacted and FTB published guidance as of May 2026. Confirm current rules and election deadlines with your CPA or the FTB before filing.

• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Indiana R&D credit
• Idaho R&D credit
• Illinois R&D credit
• Massachusetts R&D credit