If you haven’t claimed the California R&D tax credit on prior returns, you may be leaving significant value unclaimed—potentially millions—depending on your filing history. Due to 2025 rule changes, the right catch-up strategy depends on which tax years you’re addressing.

Here’s how to evaluate returns that haven’t yet claimed the R&D tax credit.

Open years: Generally a four-year window

In California, the statute of limitations (SOL) for claiming a refund or credit is generally four years from the original return due date or the date the return was filed, whichever is later.

• 2021–2024 returns: You may still be able to amend these returns to claim R&D tax credits, if they are within the SOL.

Limitation: The new Alternative Simplified Credit (ASC) method is unavailable for pre-2025 tax years; the Regular Method (15%) applies. Per the California Franchise Tax Board (FTB) Notice 2024-01, the AIC method cannot be claimed on an amended return.

The amended-return trap: Method elections are restricted

One of the most consequential California rules is that you cannot elect the ASC method on an amended return.

• Original 2025 return: If you are claiming the California R&D tax credit on your original 2025 return, you may elect either the Regular Method or the ASC.
• Amended prior-year returns: If you are claiming the California R&D tax credit for the first time on an amended 2022 or 2023 return, you must use the Regular Method.
• In practice, this rule can require reconstructing historical base-period and related data—often reaching back to the 1980s or 1990s—an administrative burden the ASC was designed to reduce.

How the $5 million utilization limit affects planning

If you amend a return for 2024, 2025, or 2026, you must still account for the $5 million utilization limit.

You may be able to generate greater than $5 million in R&D tax credits on an amended return, but you can use only $5 million of total business credits to offset tax liability in any single year while the cap is in effect. The cap is currently scheduled to end after 2026. Any excess generally carries forward and does not expire.

Heightened documentation expectations for amended R&D claims

The Internal Revenue Service (IRS) has increased the substantiation required to support an R&D tax credit claim on an amended return, including more detailed identification of business components and the individuals who performed or supervised the research. California’s FTB is following suit.

If you are claiming the credit retroactively for the first time, you must include:

• California Form 3523 (Instructions)
• An R&D tax credit study, at the business component level, with supporting workpapers.

Do not just enter a number. To survive a near-certain audit of a first-time retroactive claim, you need a contemporaneous technical record for each project substantiating that its activities and expenses pass the Four-Part Test.

Next steps: Build a year-by-year filing map

Start with a year-by-year plan. Identify which years are still open under California’s SOL, then confirm which credit method is available based on how you’re filing, original or amended. For retroactive, first-time claims, plan for Regular Method computations and audit-ready project documentation, including the California FTB 3523 and technical Four-Part Test substantiation. If credits could exceed $5 million, then model utilization and carryovers through the cap’s scheduled end after 2026.

Connect, Learn, and Maximize R&D Tax Credits

Let's build a strategic tax plan together. Schedule a complimentary R&D consultation with Randy Eickhoff, CPA, Acena Consulting's Founder & Head Coach.

Register for our free monthly webinar, next on Feb. 17, 2026: Cracking the (Tax) Code for R&D.

• This workshop provides one continuing education (CPE) credit for professionals maintaining their continuing education (CEs).
• Discover more about qualifying and documenting R&D activities to receive tax incentives.

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Edited by Laura Whittenburg, MSBME, Sr. Technical Writer at Acena Consulting. Photo courtesy of 401(K) 2013 on flickr.