New Credit Program: California Small Business Hiring Tax Credit
Senate Bill 1447, which provides for the establishment of a Small Business Hiring Tax Credit, was passed on September 9, 2020. The credit is designed to provide relief for qualified small businesses in California due to economic disruptions in 2020 that have led to job losses.
The credit is available to a qualifying employer that has a net increase in qualified employees from July to November 2020, compared to April to June 2020. The amount of the credit is $1,000 per net increase in qualifying employees, with a maximum credit of $100,000 per qualified small business. The credit may be utilized against California corporate or personal income tax or against qualified sales and use taxes and is available for taxable years beginning on or after January 1, 2020.
A qualifying employer is one that:
- Has 100 or fewer total employees on December 31, 2019;
- Has experienced a 50 percent decrease in gross receipts from April to June 2020 compared to gross receipts from April to June 2019;
- Is not required to be included in a combined return; and
- Has an increase in qualifying California employees in 2020.
How to Claim the Credit
The credit must be claimed on the originally filed 2020 California corporate income tax return or applicable sales tax return. Unused credits may be carried forward for five years. Eligible employers are required to apply to the California Department of Tax and Fee Administration for a tentative credit reservation beginning December 1, 2020, through January 15, 2021, once application forms are made available. The credits are first-come, first-served until exhausted at $100 million.