California Clarifies R&D Tax Credit

The Franchise Tax Board issued guidance March 20 to clarify when a taxpayer can claim the research and development credit based on California's definition of gross receipts, which differs from the federal definition.

The informal guidance from the FTB Legal Division replaces guidance issued and then withdrawn in June and July 2011 related to the research and development tax credit and gross receipts.

The new guidance restates that California's definition of gross receipts does not conform to Internal Revenue Code Section 41(c)(6) with respect to service receipts. The California definition excludes “all gross receipts other than those that are ‘sales of property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business that is delivered and shipped to a purchaser within this state,’ ” FTB said in the guidance.