New credit to help small businesses October 2020 Tax News

The California Legislature passed and the governor signed a law creating a new small business hiring credit (SBHC) (SB 1447) for small businesses impacted by economic disturbances in 2020. You may have heard Governor Newsom refer to this as the “Main Street Hiring Credit”.

Taxpayers can use the credit against income taxes, or can make an irrevocable election to apply the credit against sales and use taxes. The credit is equal to $1,000 for each increase in qualified employees, as measured in monthly full-time employee equivalents. The total amount of credit for each employer cannot exceed $100,000.

Taxpayers must get a tentative credit reservation from the California Department of Tax and Fee Administration (CDTFA). When applying for the reservation, taxpayers must specify whether they make an irrevocable election to apply the credit to sales and use taxes instead of against income taxes.

To qualify for the credit, employers must:

  • Have 100 or fewer employees on December 31, 2019 (this includes all employees, including part-time employees).
  • Have 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 in the following period: December 1, 2020, through January 15, 2021.
  • Not be required or authorized to be included in a combined report.

Go to our small business hiring credit webpage for additional information regarding these and other requirements for the credit.

For information regarding the tentative credit reservation and information regarding claiming the credit against your sales and use taxes, go to CDTFA and search for sbhc.