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California Assembly Bill AB249

California 2021-2022 Regular Session

California Assembly Bill AB249 Compare Versions

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1-Amended IN Assembly January 03, 2022 CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 249Introduced by Assembly Member Choi(Coauthor: Assembly Member Seyarto)January 14, 2021An act to amend Sections 17052.12 and 23609 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 249, as amended, Choi. Income tax credits: research credit.The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) no later than July 31, 2023, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
1+CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 249Introduced by Assembly Member ChoiJanuary 14, 2021An act to amend Sections 17052.12 and 23609 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 249, as introduced, Choi. Income tax credits: research credit.The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
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3- Amended IN Assembly January 03, 2022 CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 249Introduced by Assembly Member Choi(Coauthor: Assembly Member Seyarto)January 14, 2021An act to amend Sections 17052.12 and 23609 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 249, as amended, Choi. Income tax credits: research credit.The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO
3+ CALIFORNIA LEGISLATURE 20212022 REGULAR SESSION Assembly Bill No. 249Introduced by Assembly Member ChoiJanuary 14, 2021An act to amend Sections 17052.12 and 23609 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.LEGISLATIVE COUNSEL'S DIGESTAB 249, as introduced, Choi. Income tax credits: research credit.The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO
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26-AB 249, as amended, Choi. Income tax credits: research credit.
26+AB 249, as introduced, Choi. Income tax credits: research credit.
2727
28-The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure.This bill would take effect immediately as a tax levy.
28+The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.This bill would, under both laws for each taxable year beginning on or after January 1, 2021, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, increase the amount of the credit for basic research payments to 30%.Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.The bill also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.
2929
3030 The Personal Income Tax Law and the Corporation Tax Law, in modified conformity to a credit allowed by federal income tax laws, allow a credit against taxes imposed by those laws for increasing research activities. In general, the amount of the credit under those laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined. Additionally, the Corporation Tax Law, in modified conformity to that credit allowed by federal income tax laws, allows a credit of 24% of the basic research payments, as defined.
3131
32-This bill would, under both laws for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, increase the amount of the credit for basic research payments to 30%.
32+This bill would, under both laws for each taxable year beginning on or after January 1, 2021, increase the amount of the credit to 20% of the excess of the qualified research expenses for the taxable year over the base amount. The bill would also, under the Corporation Tax Law for each taxable year beginning on or after January 1, 2021, increase the amount of the credit for basic research payments to 30%.
3333
3434 Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
3535
3636 The bill also would include additional information required for any bill authorizing a new tax expenditure.
3737
3838 This bill would take effect immediately as a tax levy.
3939
4040 ## Digest Key
4141
4242 ## Bill Text
4343
44-The people of the State of California do enact as follows:SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) no later than July 31, 2023, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
44+The people of the State of California do enact as follows:SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
4545
4646 The people of the State of California do enact as follows:
4747
4848 ## The people of the State of California do enact as follows:
4949
50-SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
50+SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
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5252 SECTION 1. Section 17052.12 of the Revenue and Taxation Code is amended to read:
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5454 ### SECTION 1.
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56-17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
56+17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
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58-17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
58+17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
5959
60-17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, 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) If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
60+17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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, and before January 1, 2021, 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 If 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 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) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).(g) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.(h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(i) 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.(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.(k) 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.(l) Section 41(f)(6), relating to energy research consortium, shall not apply.
6161
6262
6363
64-17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax, as defined by 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:
64+17052.12. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the net tax (as tax, as defined by Section 17039) 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:
6565
6666 (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.
6767
6868 (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.
6969
7070 (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.
7171
72-(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, the reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.
72+(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, the reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.
7373
7474 (c) Section 41(a)(2) of the Internal Revenue Code shall not apply.
7575
7676 (d) Qualified research shall include only research conducted in California.
7777
78-(e) If 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.
78+(e) In the case where the If 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.
7979
8080 (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 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.
8181
8282 (2) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 11 (commencing with Section 23001).
8383
8484 (g) (1) For each taxable year beginning on or after January 1, 2000:
8585
8686 (A) 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.
8787
8888 (B) 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.
8989
9090 (C) 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.
9191
9292 (2) 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. 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.
9393
9494 (3) Section 41(c)(7) 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 taxpayers 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.
9595
9696 (4) Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.
9797
9898 (h) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.
9999
100100 (i) Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:
101101
102102 (1) The last sentence shall not apply.
103103
104104 (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.
105105
106106 (j) Section 41(a)(3) of the Internal Revenue Code shall not apply.
107107
108108 (k) 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.
109109
110110 (l) Section 41(f)(6), relating to energy research consortium, shall not apply.
111111
112-SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
112+SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
113113
114114 SEC. 2. Section 23609 of the Revenue and Taxation Code is amended to read:
115115
116116 ### SEC. 2.
117117
118-23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
118+23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
119119
120-23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
120+23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
121121
122-23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(d) (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 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) Qualified research and basic research shall include only research conducted in California.(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery. (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year. (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(m) 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.(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
122+23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:(a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:(1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.(2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.(b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:(A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.(B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.(c)(d) (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 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) Qualified research and basic research shall include only research conducted in California.(d)(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:(1) Basic research conducted outside California.(2) Basic research in the social sciences, arts, or humanities.(3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.(e)(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:(A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.(B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.(2) For purposes of this subdivision:(A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.(B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.(f)In (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.(g)(h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).(h)(i) (1) For each taxable year beginning on or after January 1, 2000:(A) 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.(B) 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.(C) 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.(2) 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. 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.(3) Section 41(c)(7) 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 taxpayers 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.(4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.(i)(j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.(j)(k) 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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.(k) (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.(l)(m) 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)(n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
123123
124124
125125
126-23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:
126+23609. For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the tax (as tax, as defined by Section 23036) 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, except as follows:
127127
128128 (a) For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:
129129
130130 (1) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 8 percent.
131131
132132 (2) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 12 percent.
133133
134134 (b) (1) For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:
135135
136136 (A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 11 percent.
137137
138138 (B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.
139139
140140 (2) For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:
141141
142142 (A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 12 percent.
143143
144144 (B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.
145145
146-(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, 2022, and for each taxable year beginning on or after January 1, 2027, both of the following shall apply:
146+(3) For each taxable year beginning on or after January 1, 2000, and before January 1, 2021, both of the following shall apply:
147147
148148 (A) The reference to 20 percent in Section 41(a)(1) of the Internal Revenue Code is modified to read 15 percent.
149149
150150 (B) The reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 24 percent.
151151
152-(c) For each taxable year beginning on or after January 1, 2021, 2022, and before January 1, 2027, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.
152+(c) For each taxable year beginning on or after January 1, 2021, the reference to 20 percent in Section 41(a)(2) of the Internal Revenue Code is modified to read 30 percent.
153+
154+(c)
155+
156+
153157
154158 (d) (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 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.
155159
156160 (2) Qualified research and basic research shall include only research conducted in California.
157161
158-(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:
162+(d)
163+
164+
165+
166+(e) The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, shall be modified so that basic research, for purposes of this section, includes any basic or applied research research, including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:
159167
160168 (1) Basic research conducted outside California.
161169
162170 (2) Basic research in the social sciences, arts, or humanities.
163171
164172 (3) Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.
165173
166-(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, including oil and gas.
174+(4) Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including mineral, including oil and gas). gas.
167175
168-(f) (1) If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:
176+(e)
177+
178+
179+
180+(f) (1) In the case of If a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code shall be modified to include both of the following:
169181
170182 (A) A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code.
171183
172184 (B) A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, is not a private foundation, is designated a specialized laboratory cancer center, and has received Clinical Cancer Research Center status from the National Cancer Institute.
173185
174186 (2) For purposes of this subdivision:
175187
176188 (A) Biopharmaceutical research activities means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.
177189
178190 (B) Other biotechnology research and development activities means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.
179191
180- (g) If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.
192+(f)In
193+
194+
195+
196+ (g) If the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and succeeding years if necessary, until the credit has been exhausted.
197+
198+(g)
199+
200+
181201
182202 (h) For each taxable year beginning on or after January 1, 1998, the reference to Section 501(a) in Section 41(b)(3)(C) of the Internal Revenue Code, relating to contract research expenses, is modified to read this part or Part 10 (commencing with Section 17001).
203+
204+(h)
205+
206+
183207
184208 (i) (1) For each taxable year beginning on or after January 1, 2000:
185209
186210 (A) 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.
187211
188212 (B) 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.
189213
190214 (C) 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.
191215
192216 (2) 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. 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.
193217
194218 (3) Section 41(c)(7) 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 taxpayers 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.
195219
196220 (4) Section 41(c)(5) of the Internal Revenue Code, relating to election of the alternative simplified credit, shall not apply.
197221
222+(i)
223+
224+
225+
198226 (j) Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.
227+
228+(j)
229+
230+
199231
200232 (k) Section 41(g) of the Internal Revenue Code, relating to special rule for passthrough of credit, is modified by each of the following:
201233
202234 (1) The last sentence shall not apply.
203235
204236 (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 (f), except that the limitation of Section 41(g) of the Internal Revenue Code shall be taken into account in each subsequent taxable year.
205237
238+(k)
239+
240+
241+
206242 (l) Section 41(a)(3) of the Internal Revenue Code shall not apply.
243+
244+(l)
245+
246+
207247
208248 (m) 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.
209249
250+(m)
251+
252+
253+
210254 (n) Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.
211255
212-SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) no later than July 31, 2023, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
256+SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
213257
214-SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) no later than July 31, 2023, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
258+SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:(A) To encourage the activity of research in California.(B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:(A) The number of taxpayers claiming the credit.(B) The average credit amount on tax returns claiming the credit.(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
215259
216260 SEC. 3. (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17052.12 and 23609 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:
217261
218262 ### SEC. 3.
219263
220264 (1) The specific goals, purposes, and objectives of this bill are as follows:
221265
222266 (A) To encourage the activity of research in California.
223267
224268 (B) To incentivize more research into treatments, cures, and vaccines to address the global pandemic caused by COVID-19.
225269
226270 (2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:
227271
228272 (A) The number of taxpayers claiming the credit.
229273
230274 (B) The average credit amount on tax returns claiming the credit.
231275
232276 (C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
233277
234-(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) no later than July 31, 2023, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
278+(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
235279
236280 SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
237281
238282 SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
239283
240284 SEC. 4. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
241285
242286 ### SEC. 4.