California R&D Tax Credit Case Study

The R&D tax credit is one of the most valuable credits leveraged by companies. The R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. The R&D tax credit can provide a significant reduction to current and future tax liabilities and a source of cash.

Benefits

  • 15% of qualified expenses that exceed a base amount
  • Dollar-for-dollar reduction in your federal and state income tax liability
  • Carried forward indefinitely, but cannot be carried back

Qualifications

More companies in California can now qualify for the R&D tax credit. Companies are able to qualify R&D activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released. If you are engaged in any research activities, looking into a potential R&D tax credit may be a great benefit. In addition, look back studies can recognize unclaimed credits for the last 4 open tax years.

Case Study

A San Francisco Company develops software used by its clients. It had never before claimed the R&D credit for the development activities of its software programmers. This project involved a four-year study with a three-year look back.

The Company qualified for the federal R&D Tax Credit of $330,000 and an additional $247,500 in California state R&D Tax Credit. 

FEDERAL
CALIFORNIA
Year
Total QREs
Credit
Total QREs
Credit
2021
$1,300,000
$130,000
$1,300,000
$97,500
2020
$900,000
90,000
$900,000
$67,500
2019
$650,000
65,000
$650,000
$48,750
2018
$450,000
45,000
$450,000
$33,750
Total $3,300,000 $330,000 $3,300,000 $247,500