California Corporate Tax Rate 2026: What Startups Actually Pay

California's corporate tax rate is 8.84% of net income for C corporations other than banks and financial institutions. You pay the larger of that tax or the $800 minimum franchise tax, and the 8.84% rate applies only to income apportioned to California.

The Franchise Tax Board's current rate table:

The rate is flat. There are no brackets, so a corporation with $50,000 of California income and one with $50 million both pay 8.84%. Combined with the 21% federal rate, a profitable California C-Corp faces a stacked rate of roughly 28% before the state deduction offsets some of it at the federal level (California tax is deductible on Form 1120, but federal tax is not deductible in California).

California files on Form 100. It is due the 15th day of the 4th month after year end (April 15 for calendar-year companies), and the FTB grants an automatic extension to file until the 15th day of the 11th month. The extension is for filing only: tax is still due by the original date.

Every corporation that is incorporated in California, registered with the California Secretary of State, or doing business in California owes the $800 minimum franchise tax each year. It applies whether the company is active, inactive, profitable or losing money, and it is due with the first estimated payment, by the 15th day of the 4th month of the tax year.

The main exception helps new companies. A corporation that is newly incorporated in California or newly qualified with the Secretary of State is not subject to the minimum franchise tax in its first taxable year. It still owes 8.84% on any first-year net income. The minimum tax starts in the second taxable year. The exemption does not apply to a corporation that reorganizes solely to avoid the minimum tax, or to one doing business in California without qualifying.

There is also a narrow rule for very short years: no franchise tax is due for a tax year of 15 days or less if the corporation did no business in California during that period.

Each entity owes its own minimum. A parent C-Corp with two California-registered subsidiaries owes $2,400 a year in minimum tax before any income-based tax. LLCs are different: an LLC classified as a partnership pays the $800 annual LLC tax plus a separate fee, from $900 to $11,790, based on total California income (R&TC §17942).

A Delaware corporation owes California tax once it is doing business in California, even if it never registers there. The FTB treats you as doing business if you engage in any transaction for financial gain in California, are commercially domiciled there, or exceed any of the bright-line thresholds for California sales, property or payroll.

The thresholds are indexed each year. For 2025 they were:

• California sales above $757,070, or 25% of total sales
• California real and tangible property above $75,707, or 25% of total property
• California payroll above $75,707, or 25% of total payroll

When we checked the FTB page in October 2026 it had not yet posted the 2026 indexed amounts, so confirm the current figures before relying on them.

For most venture-backed teams, payroll is what triggers filing. A single California-based engineer earning more than the payroll threshold puts the company over the line, and a California headquarters makes it commercially domiciled in the state. A founder who lives in San Francisco and runs the company from home usually creates California filing obligations from day one.

California corporations pay estimated tax on Form 100-ES, in four installments, but the percentages differ from the federal schedule:

1. 30% of the year's estimated tax by the 15th day of the 4th month (April 15 for calendar-year companies), and not less than the $800 minimum if it applies
2. 40% by the 15th day of the 6th month (June 15)
3. Nothing for the third installment (September 15)
4. 30% by the 15th day of the 12th month (December 15)

That front-loading catches companies that turn profitable mid-year: 70% of the year's tax is due by June 15. Underpayments are figured on form FTB 5806. A pre-revenue C-Corp past its first year usually just pays the $800 with the April installment.

If the corporation is required to pay electronically, all estimates must go by EFT, EFW, Web Pay or credit card to avoid the EFT penalty.

California apportions business income using a single sales factor under R&TC §25128.7. Your California share is California sales divided by total sales. Payroll and property in the state don't count toward the factor, which helps a company with a big California engineering team and customers across the country.

Sales other than tangible goods are assigned by market under R&TC §25136, meaning to where the customer receives the benefit of the service. For SaaS, the starting point is where the customer uses the software, and billing address is a common proxy when better data is not available. For example, if 20% of a SaaS company's sales are assigned to California and it earns $2 million of business income, $400,000 is apportioned to California and the tax is $35,360.

Commonly owned companies in a unitary business file a combined report, which pools income and sales factors across the group. That becomes relevant once you add subsidiaries, including a foreign subsidiary.

For taxable years beginning on or after January 1, 2024 and before January 1, 2027, California has suspended the net operating loss deduction for corporations with taxable income of $1 million or more. Corporations below $1 million, or with only disaster loss carryovers, can still use their NOLs. You keep computing and carrying NOLs during the suspension, and the carryover period is extended by one to three years depending on when the loss arose.

For the same years, the total of all business credits, including carryovers, cannot reduce tax by more than $5 million (applied at the group level for combined reports). Credits disallowed by the cap can be carried over, or you can make an annual irrevocable election on form FTB 3870 to receive them later as refundable credits.

These rules come from SB 167 and SB 175 (2024). SB 175 allowed an early end for 2025 or 2026 if the state's finances permitted, but the 2025 Form 100 instructions still apply the suspension and cap through 2026. As of October 2026, plan on them for your 2026 return, and expect both to lapse for tax years beginning in 2027 unless the Legislature acts again.

For a typical loss-making startup the suspension changes little, since you have no income to offset. It matters in the first profitable year: a company with $3 million of California taxable income in 2026 cannot use its NOL bank that year.

California's research credit (R&TC §23609, claimed on form FTB 3523) is one of the few meaningful offsets for tech companies. The regular credit is 15% of qualified research expenses above a base amount, plus 24% of basic research payments to universities and similar organizations. Only research performed in California counts.

For taxable years beginning on or after January 1, 2025, California repealed its alternative incremental credit and adopted an alternative simplified credit: 3% of QREs above 50% of the average QREs for the three prior years, or 1.3% of current QREs if you had none in any of those years. Companies that had elected the old method must choose the regular credit or the new simplified credit on form FTB 3523.

The California credit is not refundable and does not expire, so unused amounts carry forward until you have California tax to absorb. Note that it cannot reduce tax below the $800 minimum. California also does not conform to the federal QSBS exclusion under §1202, and its conformity to federal depreciation and research expensing rules lags or differs, so state taxable income often differs from federal.

California Competes, a negotiated credit run by GO-Biz, is another option for companies making hiring commitments in the state, but awards are discretionary and competitive.

A few practical points from our work with California C-Corps:

• Budget $800 per entity from year two, paid with the April estimate
• Track California payroll against the doing-business threshold before the first California hire, not after
• Don't rely on NOLs to shelter a breakout 2026 year if taxable income passes $1 million
• Claim the California research credit even while you are losing money, so the carryforward is documented
• Re-check the rules each year; California conformity and budget measures change often

The figures in this guide were checked against FTB rate tables, the 2025 Form 100 instructions and the 2025 FTB 3523 instructions in October 2026. This is general information, not tax advice for your specific facts.