California’s governor signed Senate Bill 1447 establishing the Main Street Small Business Tax Credit. This bill provides financial relief to qualified small businesses for the economic disruptions in 2020 that have resulted in unprecedented job losses.
Taxpayers can use the credit against income taxes, or can make an irrevocable election to apply the credit against sales and use taxes.
To qualify for the credit, taxpayers (employers) must:
- Have 100 or fewer employees on December 31, 2019 (all employees, including part-time employees).
- Have experienced a 50% decrease in gross receipts from April to June, 2020, compared to the gross receipts in April to June 2019.
- Apply for a tentative credit reservation from CDTFA during the period of December 1, 2020 through January 15, 2021.
- Not be required or authorized to be included in a combined report.
For each taxable year beginning on or after January 1, 2020, and before January 1, 2021, the new law allows a qualified small business employer a small business hiring tax credit, subject to receiving a Tentative Credit Reservation through the California Department of Tax and Fee Administration (CDTFA).
The credits are allocated by CDTFA on a first-come, first-served basis until the credits are exhausted at $100 million.
All taxpayers (including those electing to use the credit to offset qualified sales and use taxes) must reduce any deduction otherwise allowed for qualified wages by the amount of the credit allowed.