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10 Dec

December 2020: California Small Business Tax Credit Enrollment Now Open

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What happened?
Senate Bill 1447 was enacted on September 9, 2020, and allows a small business hiring credit against California state income taxes or sales and use taxes to certain California qualified small business employers that receive a tentative credit reservation.

What are the details?
Starting December 1, 2020, the California Department of Tax and Fee Administration (CDTFA) will begin accepting applications for tentative small business hiring credit reservation amounts through an online reservation system. The credit reservations will be allocated to qualified small business employers on a first-come, first-served basis. The reservation system will be available from December 1, 2020 at 8:00 a.m., through January 15, 2021. Please note, this credit only applies to California small businesses that meet the following qualifications:

  • Employed 100 or fewer employees as of December 31, 2019, and
  • Suffered a 50 percent decrease or more in income tax gross receipts (generally, all income less returns and allowances), when comparing second quarter 2020 to second quarter 2019.

Small businesses may receive up to $100,000 in tax credits. An employer can be eligible for up to $1,000 for each net increase in qualified employees. This is calculated by subtracting the average monthly fulltime equivalent qualified employees employed during the three-month period (April 1, 2020 through June 30, 2020) from the average monthly full-time equivalent qualified employees employed during the five-month period (July 1, 2020 through November 30, 2020).

The CDTFA website hosts all the information available about this tax credit and has the link to the web portal where small businesses may apply. It can be found here.

Note: This is separate from the $500 million small business stimulus package that Governor Newsom has mentioned recently. The Office of the Small Business Advocate is still working out the details. A communication will be sent out separately about that stimulus package once more is known.

What do employers need to do?
Employers should review the information on the website and contact their HR representatives if they have any questions.