3523: Research Credit (2024)
California · FTB · Used for tax years 2024
California Form 3523 calculates the research credit using the regular or alternative incremental method. It reports qualified research expenses, available credits, the credit claimed, and credit carryovers, and is attached to your California tax return.
Who files this form
Form FTB 3523 is used to calculate and report the California research credit and its carryover. Attach it to your California tax return.
The form provides completion directions for individuals, corporations, S corporations, estates, trusts, partnerships, and limited liability companies (LLCs). Part III is only for combined report filers.
What you'll need
Have the information requested by the form ready:
- Your name as shown on your California tax return and applicable taxpayer or entity identification numbers.
- Amounts for wages for qualified services, supplies, computer rental or lease costs, and contract research expenses.
- Average annual gross receipts and, for the regular credit, your fixed-base percentage.
- Basic research payments and the base period amount, if you complete the corporation-only lines.
- Any pass-through research credits, passive activity credits, and prior-year credit carryovers.
Additional forms or schedules may apply:
- FTB 3544, Part A: Required to elect to assign credits.
- FTB 3870: Required to elect refundable credits.
- A supporting schedule: Lines 17a and 39a direct you to the instructions for a schedule to attach if you do not elect the reduced credit under IRC Section 280C(c). The supplied text does not include those instructions.
How to file
Attach the completed Form FTB 3523 to your California tax return.
The form says to read the instructions before completing it. No instructions were supplied here, and the form text does not provide a mailing address or e-file directions.
Common mistakes
- Completing both credit methods: If you elect the Alternative Incremental Credit, skip Section A and use Section B. Skip Section B if you completed Section A.
- Starting on the wrong line: Individuals, S corporations, estates, trusts, partnerships, and LLCs begin on line 5 in Section A or line 22 in Section B. Lines 1–4 and 18–21 are only for corporations other than S corporations, personal holding companies, and service organizations.
- Including assigned credits where they are excluded: Do not include credits received through assignment on line 45. Do not include assigned credits claimed on FTB 3544, Part B, on line 47 or in Part III, column (f).
- Leaving out the assignment election form: An assignment shown in Part III is invalid unless you also complete FTB 3544, Part A.
- Overstating Part III carryover: Do not include in column (h) credits disallowed by the $5,000,000 limitation that you elected to make refundable. The refundable-credit election requires FTB 3870.
Questions people ask
What credit calculation methods appear on the form?
Section A calculates the Regular Credit. Section B calculates the Alternative Incremental Credit. The form directs you to use one section, not both.
Where do I report research credits passed through to me?
Report pass-through research credits from S corporations, estates, trusts, partnerships, and LLCs on line 40.
How does the form calculate the reduced credit?
Lines 17b and 39b apply these percentages to the corresponding unreduced credit: 87.7% for individuals, estates, and trusts; 91.16% for corporations; and 98.5% for S corporations.
How is the carryover for future years calculated?
Line 50 subtracts the credit claimed on line 47, the credit assigned on line 48, and the amount elected as refundable in future years on line 49 from the total on line 46. Combined report filers are directed to read the Part III instructions before completing Part II.