3523: Research Credit (2025)
California · FTB · Used for tax years 2025
California Form 3523 calculates the research credit using the regular credit or alternative simplified credit method. It reports qualified research expenses, applicable basic research payments, pass-through research credits, credits claimed, and carryovers. Attach it to your Cali
Who files this form
Form FTB 3523 is used to compute the California research credit and credit carryover. The form includes entries for individuals, corporations, S corporations, estates, trusts, partnerships, and limited liability companies (LLCs).
Only corporations other than S corporations, personal holding companies, and service organizations complete the basic research payment lines, lines 1–4 or 18–21. Individuals, S corporations, estates, trusts, partnerships, and LLCs start on line 5 or line 22, depending on the credit method.
Part III is only for combined report filers.
What you'll need
Have the information requested by the form available, including:
- Your name as shown on your California tax return and applicable taxpayer identification numbers.
- Qualified research expenses, including wages, supplies, computer rental or lease costs, and contract research expenses.
- For the regular credit: the fixed-base percentage and average annual gross receipts.
- For the alternative simplified credit: total qualified research expenses for the prior three taxable years.
- Any pass-through research credits, passive activity credits, and prior-year credit carryover.
Additional forms or attachments may apply:
- If you do not elect the reduced credit under IRC Section 280C(c), the form directs you to the instructions for a schedule to attach.
- To elect to assign credits, complete Form FTB 3544, Part A.
- To elect refundable credits as described in Part III, complete Form FTB 3870.
How to file
Attach Form FTB 3523 to your California tax return.
The supplied form does not give a mailing address or e-filing directions.
Common mistakes
- Completing both credit methods. If you elect the alternative simplified credit, skip Section A and use Section B. Skip Section B if you completed Section A.
- Including assigned credits in the wrong entries. Do not include credits received through assignment on line 37. Do not include assigned credits claimed on Form FTB 3544, Part B, on line 39 or in Part III, column (f).
- Skipping the assignment election form. Part III warns that an assignment shown there is invalid unless you also complete Form FTB 3544, Part A.
- Including elected refundable credits in Part III carryover. If you elect to make credits disallowed due to the $5,000,000 limitation refundable, exclude the elected amount from column (h) and complete Form FTB 3870.
- Overlooking instructions for combined report filers. Read the instructions for Part III before completing Part II.
Questions people ask
What credit calculation methods appear on the form?
Section A calculates the regular credit. Section B calculates the alternative simplified credit. Complete the applicable section, not both.
What if I had no qualified research expenses in one of the prior three taxable years?
For the alternative simplified credit, skip lines 28 and 29 if you had no qualified research expenses in any one of those years. On line 30, multiply line 26 by 1.3%.
Where do I report a research credit passed through to me?
Line 32 reports pass-through research credits from S corporations, estates, trusts, partnerships, and LLCs.
How does the form calculate credit carryover?
Line 42 subtracts lines 39, 40, and 41 from line 38 to calculate credit carryover available for use or assignment in future years.