Kruze clients are twice as likely to get acquired as the average startup.  Find out why here

California R&D Tax Credit

California R&D

Is the California R&D Tax Credit Worth it for Startups? YES.  If your startup had R&D activities in California, you very well likely qualify for the California R&D Tax Credit.  Across the 500+ startups we worked with in 2020, all were eligible for the California Research and Development Tax Credit if they had qualifying research and development activities in California.

What is the California Research and Development Tax Credit?

The California R&D Tax Credit is designed to increase research and development activities within California.  If your startup has eligible research and development activities in California, you will qualify for the California Research and Development Tax Credit.  The California Research and Development Tax Credit is based on the Federal R&D Tax Credit.

Is My Startup Eligible for the California R&D Tax Credit?

If you secured the Federal R&D Tax Credit, and you had research and development activities within California, you very most likely qualify for the California Research and Development Tax Credit.

What Goes Into The California R&D Tax Credit as a Qualified Research Expense (QRE)?

  • Wages: but only for those people who engage in R&D activities within California.
  • Subcontractors: engaged in research and development within California
  • Supplies: direct supplies that were related to the R&D project and that weren’t classified as an asset, and were within California
  • Computer Leases/Rentals: within California, such as AWS

Where do I apply for the California R&D Tax Credit?

Apply for the California R&D Tax Credit on form FTB 3523, 6765, and 3800, which is a part of the 1120 C-Corporation Income Tax Return, due 4/15 every year and can be extended to 10/15 every year.

How Much Credit Will My Startup Receive from the California R&D Tax Credit?

Your startup will receive about ~7% of Qualifying R&D Expenses, which differs from the Federal Qualifying Research and Development Expenses rate of ~10%.

How Does the California R&D Tax Credit Differ From The Federal Payroll R&D Tax Credit?

Unlike the Federal Payroll R&D Tax Credit, the California Research and Development Tax Credit does NOT offer an instant gratification cash refund.  Your startup will only be able to use these credits once it becomes profitable within California.

When Can I Expect to Receive My Startup’s California R&D Tax Credit?

The California R&D Tax Credit will only apply to your taxes once your startup becomes profitable.  Hence, you will only receive the benefit in the future once your startup becomes profitable.

Since the California R&D Tax Credit does not offer cash back like the Federal R&D Payroll Tax Credit, is it still worth the time and effort to complete?

YES! While you do not receive the instant gratification of the Federal payroll tax credit, you can still accrue the state R&D tax credits for use in future profitable years.  Once the Federal Research and Development Tax Credit is complete, it only takes a marginal amount of work to complete the California R&D Tax Credit .  Your startup should still get the Research and Development Tax Credit because acquirers look favorably upon traditional tax credits and NOLs that they might be able to use. 

Who administers the California R&D Tax Credit?

The California Franchise Tax Board administers the California Research and Development Tax Credit.

Where Can I Find More Information on The California R&D Tax Credit?

If you are interested in more details about the California Research and Development Tax Credit Program, click here

READY TO CONNECT FOR A FREE CONSULTATION?

We are the experts at helping seed/VC-backed Delaware C-Corps with their accounting and finances!

Talk to an experienced accountant, not a generic sales person

 Kruze Consulting
Alex Janeck
 Kruze Consulting
Edith Silva
 Kruze Consulting
Randy Hall
Viz AI

$250M+ VC Funding Raised


"I had a great experience working with Kruze Consulting when we raised Series A. They know what VCs need to see, and how to present a startup’s books and finances. If you are going to raise venture capital, you need experts like Kruze."
Chris Mansi

Chris Mansi

CEO

Startup Venture Capital Assistance

With former venture capitalists on staff, our team is here to help you navigate the fundraising process and manage your board of directors

 Kruze Consulting
Scott Orn
COO | Former VC
 Kruze Consulting
Healy Jones
VP FP&A | Former VC
Pequity

Scale Remote Operations & Team


"Kruze has supported us above and beyond basic accounting needs by ensuring we have everything we need to expand and support our team wherever they may be located"
Zack Fisch

Zack Fisch

Head of Operations & Legal

Clients who have worked with Kruze have collectively raised over $15 billion in VC funding.

We set startups up for fundrising success, and know how to work with the top VCs.

 Kruze Consulting
Vanessa Kruze, CPA
Founder & CEO
Kruze Logo

Experienced team helping you

Our account management team is staffed by CPAs and accountants who have, on average, 11 years of experience.

 Kruze Consulting
Bill Hollowsky, CPA
VP of Accounting Services
 Kruze Consulting
Claudine Vantomme, CPA
Controller
 Kruze Consulting
Morgan Avery
SUT/R&D Sr. Tax Accountant
 Kruze Consulting
Beth Bassler
Controller, CPA
Protara Therapeutics

Grew from a 2-person startup to a NASDAQ listed public company.


"The Kruze team helped us grow from a 2-person startup to a NASDAQ listed public company in 2 years. We wouldn’t have gotten public without Kruze’s support. Anyone thinking of launching a startup should make Vanessa their first call!"
Jesse Shefferman

Jesse Shefferman

CEO

Kruze Logo

Get in Touch

Please help us connect with you

How can we reach you?

Our first response is typically via email, so please check your inbox.

Help us have a productive first consultation by providing some additional information.

What year was your startup incorporated?

What is your stage of funding?

(pick up from the list)

Approximately how much funding have you raised?

(please enter a dollar value such as 5000000)

Help us understand what you are looking for:

(Optional, click the ones you need)

Anything additional that you’d like to share?

Optional - if you’d like to share anything else to help us prepare for our consultation, please let us know. We are also happy to sign an NDA, just let us know.

  Talk to a leading startup CPA