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| of the taxpayers business. All of the activities conducted in the research must be part of the process of acquiring the new technology to improve the taxpayer’s business or business function. Furthermore, the research credit would normally not be allowed for certain activities such drug testing, or research in the arts or humanities. Additionally, federal tax law requires that any deductions for research expenses be reduced by the amount of the credit allowed. California conforms to federal tax law with the exception that any research expenses be reduced only by the part of the credit that pertains to the California credit. Also, California requires that the California tax bracket be used for calculating the elective research credit amount. Make the adjustment for the research expenses which were deducted on the federal tax return but which don’t apply to California on Schedule CA of Form 540 or Form 540NR, line 12, line 17, or line 18, column C. In addition, enter the California research expenses after any reduction adjustment for California on Schedule CA of Form 540 or Form 540NR, line 12, line 17, or line 18, column B. Remember adjustments must only be made to reflect the differences between California and federal. |
| Property for which a public utility provided an energy conservation subsidy on or after January 1, 1995, and before January 1, 1997 |
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Another big one on the list of improvements is energy conservation. You have an energy conservation project going on, there is probably a credit for that. You may be able claim certain credit on your federal tax return for residential energy conservation. There are credits from the Internal Revenue Service for property you buy with the purpose of conserving energy. You can get a credit of 10 percent of the cost of qualified energy-saving equipment you add to your main home. There is also another credit called the Energy Efficient Property Credit which is 30 percent of the cost of energy saving equipment installed on or in your home such solar panels for water heaters, and solar electric equipment. |
| You as the taxpayer can benefit further by taking energy saving measures in your home. For example, federal tax law allows you to excludes certain subsidy received directly or indirectly by a public utility for the purchase or installation of energy conservation equipment for your home, minus the adjusted basis of the property received. For California, however, there is nonconformity for amounts received after December 31, 1994 and before January 1, 1997. If the federal amounts and the California amounts are the same and the both federal and California coincide with the credit, then there would be not adjustment needed on Schedule CA of Form 540 or Form 540NR. On the other hand, if you have to make adjustments use Form FTB 3885A to figure the adjustment to enter on the California Schedule CA. |
| Employer wage expenses for Work Opportunity Credit |
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There are certain employee groups who need that extra push in order to gain employment. If you employee is part of a targeted group, you will be able to claim a credit for offering work opportunity for these employee groups. For federal tax law employers can claim the Work Opportunity Tax Credit (WOTC) for all targeted group employees listed. The employer can claim the WOTC if they targeted employees began work after December 31, 2013 and before January 1, 2015. The employer must obtain certification that the hired individual is a member of the targeted group before the employer can claim the WOTC. The employer can obtain such certification by filing Form 8850 with the employer’s state workforce agency within 28 days after the targeted worker begins work. The employer who claims the credit must reduce their wage expense by the amount of the credits. California does not conform to federal on this and has no similar credit. If the wage expenses were reduced due to the federal Work Opportunity Tax Credit, you need to add them back to the California wage deductions by entering the amount of the federal Work Opportunity Credit that reduced the federal wage deductions on California Schedule CA of Form 540 or Form 540NR, line 12, line 17, or line 18, column B. You don’t need to worry about the WOTC itself since |
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| Revised: 07/09/15 |
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