For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, for the taxable year an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as follows:
(a)For each taxable year beginning before January 1, 1997, the reference to “20 percent” in Section 41(a)(1) of the Internal
Revenue Code is modified to read “8 percent.”
(b)
(1)For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”
(2)For each taxable year beginning on or after January 1, 1999, and before January 1, 2
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For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, for the taxable year an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as follows:
(a)
For each taxable year beginning before January 1, 1997, the reference to “20 percent” in Section 41(a)(1) of the Internal
Revenue Code is modified to read “8 percent.”
(b)
(1)
For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”
(2)
For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.”
(3)
For each taxable year beginning on or after January 1, 2000, the reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.”
(c)
Section 41(a)(2) of the Internal Revenue Code shall not apply.
(d)
“Qualified research” shall include only research conducted in California.
(e)
In the case where the credit allowed under this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit has been exhausted.
(f)
(1)
With respect to any expense paid or incurred after the operative date of Section 6378, Section 41(b)(1) of the Internal Revenue Code, relating to qualified research expenses, is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property
that is eligible for the exemption from sales or use tax provided by Section 6378.
(2)
For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in Section 41(b)(3)(C)(ii)(I) of the Internal Revenue Code, relating to qualified research consortium, is modified to read “this part or Part 11 (commencing with Section 23001).”
(g)
(1)
(A)
For each taxable year beginning on or after January 1, 2000, and before January 1, 2025, the election of alternative incremental credit under Section 41(c)(4) of the Internal Revenue Code, as applicable for state purposes, shall apply as that section was in effect on January 1, 2015, and as modified as follows:
(i)
The reference to “3 percent” in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.”
(ii)
The reference to “4 percent” in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.”
(iii)
The reference to “5 percent” in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight
hundredths of one percent.”
(B)
Section 41(c)(4)(B) shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 1998, and before January 1, 2025. That election shall apply to the taxable year for which made and all succeeding taxable years beginning before January 1, 2025, unless revoked with the consent of the Franchise Tax Board.
(2)
(A)
For taxable years beginning on or after January 1, 2025, Section 41(c)(4) of the Internal Revenue Code, relating to election of alternative simplified credit, shall apply, and is modified as follows:
(i)
The reference to “14
percent” in Section 41(c)(4)(A) of the Internal Revenue Code is modified to read “3 percent.”
(ii)
The reference to “6 percent” in Section 41(c)(4)(B)(ii) of the Internal Revenue Code is modified to read “1.3 percent.”
(B)
Section 41(c)(4)(C) of the Internal Revenue Code shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code may be made for any taxable year of the taxpayer beginning on or after January 1, 2025. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board.
(h)
Section 41(c)(6) of the Internal Revenue Code, relating to gross receipts, is modified to take into account
only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale.
(i)
Section 41(h) of the Internal Revenue Code, relating to
treatment of credit for qualified small businesses, shall not apply.
(j)
Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:
(1)
The last sentence shall not apply.
(2)
If the amount determined under Section 41(a) of the Internal Revenue Code for any taxable year exceeds the limitation of Section 41(g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (e); except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.
(k)
Section
41(a)(3) of the Internal Revenue Code shall not apply.
(l)
Section 41(b)(3)(D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and federal laboratories, shall not apply.
(m)
Section 41(f)(6), relating to energy research consortium, shall not apply.