Smith outlines tax relief request for businesses transitioning under AB 5

Assemblywoman Christy Smith, District 38 speaks to the crowd after being sworn in at Oak Hills Elementary School in Valencia on Saturday. Dan Watson/The Signal
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Assemblywoman Christy Smith, D-Santa Clarita, is part of an effort by Assembly Democrats to call for tax relief in the state budget for small businesses looking to comply with Assembly Bill 5. 

Gov. Gavin Newsom’s 2020 budget already includes funding to support AB 5 enforcement efforts. Smith, who is working side by side with the bill’s author, Assemblywoman Lorena Gonzalez, D-San Diego, is taking extra steps to request additional funding to assist businesses currently in transition following AB 5’s implementation in January. 

The request for the 2020-21 state budget proposes a one-year tax exemption of $800 for transitioning limited liability companies to help small businesses transition and maintain existing business relationships. Currently, LLCs are required to pay the minimum franchise tax of $800 annually. The exemption would apply for businesses formed from September 2019 through December 2020. 

The request also seeks a $20 million budget allocation to assist small, community nonprofit arts groups in the process of transitioning and complying with AB 5. 

The law aims to reclassify more than 1 million working people in California who have been independent contractors, instead classifying them as employees.

Efforts to help businesses under AB 5 are Smith’s priority this year, she said in a recent news release. 

“Relief for independent contractors, impacted small businesses and nonprofits are essential as we implement AB 5 and address its challenges,” she said. “These steps will help California workers’ futures and mitigate the pressures businesses face. This is a priority for me this year, and I look forward to working with employers, workers and my colleagues on this issue. Members of the community affected by AB 5 are encouraged to share their stories with my office.”

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