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New tax relief and grants will support California’s small businesses impacted by COVID-19

December 03, 2020 23875

Quick Summary:

Applications for the hiring tax credit, called the Main Street Small Business Tax Credit, opened Dec. 1, while the grant program will open in early 2021. Dental practices may be eligible for other state relief, including the three-month tax deferral and flexible-term loans of up to $100,000.

A new state tax credit plus $500 million in COVID-19 Relief Grants are among the new financial stimulus programs available to eligible small businesses in California that have been impacted by the coronavirus pandemic, Gov. Gavin Newsom announced Nov. 30.

Applications for the hiring tax credit, called the Main Street Small Business Tax Credit, opened Dec. 1, and the governor announced today that $20 million of the available $100 million has already tentatively been claimed. Eligible applicants are encouraged to apply as soon as possible.

The grant program will open in early 2021. Dental practices may be eligible for other new state relief, including the automatic three-month tax deferral and flexible-term loans of up to $100,000. 

Main Street Small Business Tax Credit

Dental practice owners may benefit the most from the Main Street Small Business Tax Credit. This hiring tax credit applies to businesses that (1) had 100 or fewer employees as of Dec. 31, 2019, and (2) suffered a 50% or greater decrease in income tax gross receipts when comparing second quarter 2020 to second quarter 2019.

Employers who satisfy those two conditions may receive a credit of $1,000 for each net increase in qualified employees between April 1, 2020, and June 30, 2020, compared to July 1, 2020, and Nov. 30, 2020. The calculation is based on the employer’s average monthly full-time-equivalent employee counts for the three-month period (April-June 2020) compared to the five-month period (July-November 2020).

For each net increase, the employer can claim a $1,000 credit toward state personal income or qualified sales or use taxes. 

California small businesses can apply online Dec. 1, 2020, through Jan. 15, 2021. The credit will be allocated on a first-come, first-served basis until the $100 million available is exhausted.

The California Department of Tax and Fee Administration provides FAQ on qualified wages and employees, how the credit is applied and more. Applicants may want to review the calculation FAQ with example (scroll down) that explains how to calculate FTE-qualified employees.

Three-month tax deferral

Taxpayers filing less than $1 million in sales tax on the return will receive an automatic three-month filing extension. The tax relief also extends the availability of existing interest and penalty-free payment agreements to businesses with up to $5 million in taxable sales. 

$500M in COVID-19 Relief Grants

Grants of up to $25,000 per businesses will soon be available for eligible underserved micro and small businesses in California that have been impacted by the pandemic and the related health and safety restrictions.

The funds will be awarded to selected intermediaries with established networks of community development financial institutions to distribute the grants throughout the state in 2021. 

Program details and eligibility requirements are still in development. Interested applicants can visit the website of the Governor’s Office of Business and Economic Development for updates or sign up to receive an email update once the grant program has launched.

California Rebuilding Fund

California businesses that employed 50 or fewer full-time equivalent employees and had gross revenues of less than $2.5 million in 2019 are eligible to apply for the California Rebuilding Loan. 

The loans ― up to $100,000 per qualifying business ― will need to be paid back over a three- to five-year term with a fixed annual interest rate that is currently 4.25%, according to the program overview. The loans are intended to support California businesses that are adapting or facing upfront or ongoing expenses to operate safely in the COVID-19 economy.

Small businesses that are matched with a participating community lender will work with that lender to complete the loan application and, if approved, will continue to work with that lender for the life of the loan. 

The fund will seek to distribute funds equitably across the state. Visit the California Rebuilding Fund website for loan terms, FAQ and pre-application.