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Franchise Tax Board issues Legal Division Guidance on Federal Conformity and Research and Development Tax Credit

On Behalf of | Mar 21, 2012 | FTB |

The Franchise Tax Board (FTB) recently released Legal Division Guidance 2012‐03‐01. While FTB’s “Legal Division Guidance” is not considered “written advice”, the guidance often relates to recently-enacted legislation where there may be little available commentary or advice.

Legal Division Guidance 2012‐03‐01 includes frequently asked questions and responses drafted by the FTB’s Legal Division staff. In their latest release, the FTB addresses questions relating to federal conformity regarding “gross receipts” with respect to California service receipts.

Additionally, the FTB answers whether a taxpayer with California Qualified Research Expenses and zero ($0) California gross receipts under RTC sections 17052.12(g)(3) or section 23609(h)(3), can claim the regular incremental Research and Development credit? In short, Yes.

If the computed “base amount” is less than the “minimum base amount,” then for taxable years 2000 and later the credit is equal to 15% of qualified research expenses in excess of the “minimum base amount” [50% of QREs]. In cases where there are no gross receipts, as defined in RTC sections 17052.12(g)(3) or 23609(h)(3), for taxable years 2000 and later, the California credit would be equal to 7.5% of the qualified research expenses for the credit year, or the reduced credit under IRC § 280(c)(3).

To read FTB Legal Division Guidance 2012-03-01 in its entirety click here.


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