Short answer. You can claim both. California's research credit and the federal Section 41 credit are separate filings on the same underlying research, so qualifying work can earn a federal credit and a California credit in the same year. California pays 15 percent under the regular method against the federal 20 percent, is nonrefundable, and carries forward indefinitely after SB 711, and the records that prove the federal claim are what California relies on too.
Key facts
| Claim both? | Yes, separate filings on the same research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| California rate | 15% regular / 3% ASC |
| California refundable? | No (indefinite carryforward after SB 711) |
| Forms | Form 6765 (federal) + FTB 3523 (California) |
Two credits, one body of research
The federal and California credits run in parallel on the same qualified research.
The federal Section 41 credit is claimed on Form 6765 with your federal return. California's research credit is claimed on FTB 3523 with your California return. They are separate credits with separate forms, and the same qualifying research can support both in the same tax year.
Neither credit cancels the other. California starts from the federal definition of qualified research expenses, then applies its own rate and base to the portion of that research performed in California, so the work you document for the federal claim is the starting point for the state one.
Federal Section 41 vs. California, factor by factor
The two credits share a definition of qualified research but differ on rate, refundability, and where the work must happen.
| Factor | Federal Section 41 | California |
|---|---|---|
| What it is | Credit for increasing research activities | California research credit |
| Credit rate | 20% regular / 14% ASC | 15% regular / 3% ASC |
| Base | QRE over a fixed-base or ASC base | California QRE over a base |
| Refundable | No - a QSB may offset up to $500,000 of payroll tax under Section 41(h) | No |
| Carryforward | 20 years, with a 1-year carryback | Indefinite, after SB 711 |
| Where research must occur | United States | California only |
| How you claim it | Form 6765 with the federal return | FTB 3523 with the California return |
| Claim alongside the other? | Yes, on the same underlying QRE | Yes, on the same underlying QRE |
| Documentation | Four-part test and QRE substantiation (Treas. Reg. 1.41-4) | Relies on the same federal QRE records |
Where California differs from federal
Three differences matter most when you claim both.
Rate. California's regular rate is 15 percent against the federal 20 percent, and its Alternative Simplified Credit is 3 percent against the federal 14 percent. The state credit is meaningful but smaller than the federal one on the same spend.
Refundability and carryforward. Neither credit is refundable for a typical company, but California unused credit carries forward indefinitely after SB 711, so a credit you cannot use this year is not lost. The federal credit carries forward 20 years, and a qualified small business can instead offset up to $500,000 of payroll tax under Section 41(h).
Location. The federal credit covers research in the United States; California's applies only to the share performed in California, so the two credits can rest on different slices of the same project.
One evidence base for both
The documentation that proves the federal claim is what California asks for too.
Because California starts from the federal definition of qualified research, the four-part test analysis and the wage, contractor, and supply records that substantiate your federal credit under Treas. Reg. 1.41-4 are the same records the Franchise Tax Board relies on. You build the evidence once and use it for both filings.
R&D Binder documents the federal Section 41 four-part test, the foundation both credits stand on, and treats the California credit as a state add-on built from the same evidence. Whether your facts qualify, and which credits to claim, is a determination for your CPA.
More on California's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- California FTB Form 3523 (Research Credit), 2025 instructions - California Franchise Tax Board
- 26 U.S.C. § 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
- IRS, About Form 6765 - Internal Revenue Service
- Treas. Reg. § 1.41-4 (recordkeeping and substantiation of qualified research) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the California state workpaper from one engagement, both built to survive an FTB or IRS exam.