As the federal government has yet to provide additional financial stimulus support to main street businesses, Gov. Gavin Newsom announced that California is set to provide temporary tax relief for eligible businesses impacted by COVID-19 restrictions.
The temporary tax relief entails an automatic three-month income tax extension for taxpayers filing less than $1 million in sales tax, extends the availability of existing interest and penalty-free payment agreements to companies with up to $5 million in taxable sales and provides expanded interest-free payment options for larger businesses particularly affected by significant restrictions on operations based on COVID-19 transmissions.
“California’s small businesses embody the best of the ‘California dream’ and we can’t let this pandemic take that away,” Newsom said in a prepared statement. “We have to lead with health to reopen our economy safely and sustainably while doing all we can to keep our small businesses afloat. With this financial assistance and tax relief, California is stepping up where the federal government isn’t. By providing potentially billions in immediate relief and support, our small businesses can weather the next month as we continue partnering with the Legislature to secure additional funding and investments in small businesses in the new year.”
The governor is expected to direct the California Department of Tax and Fee Administration to do the following:
- Provide an automatic three-month extension for taxpayers filing less than $1 million in sales tax on the return and extend the availability of existing interest- and penalty-free payment agreements to companies with up to $5 million in taxable sales.
- Broaden opportunities for more businesses to enter into interest-free payment arrangements.
- Expand interest-free payment options for larger businesses particularly affected by significant restrictions on operations based on COVID-19 transmissions.
This announcement also builds on the state’s ongoing business support throughout the pandemic, including the Main Street Hiring Tax Credit, which authorizes $100 million in hiring tax credit for qualified small businesses and is set to open Tuesday. The credit is equal to $1,000 per qualified employee, up to $100,000 for each small business employer.
The governor also announced the creation of a $500 million COVID Relief Grant administered by the California Office of the Small Business Advocate for small businesses that have been impacted by COVID-19 and the health and safety restrictions. Funds are expected to be awarded to selected intermediaries with established networks of community development financial institutions to distribute relief through grants of up to $25,000 to underserved micro and small businesses, as well as nonprofits, throughout the state by early 2021.
In addition, the governor announced a $12.5 million increase in funding to the California Rebuilding Fund, which makes available $25 million to help impacted small businesses rebuild from the economic crisis and keep local economies strong.
This increase would allow the fund to be fully capitalized and help the third-party administrator of the fund raise $125 million to make more low-interest loans to small businesses with less access to loans from traditional banking institutions.
CalOSBA is set to establish the $500 million COVID Relief Grant program, and is expected to make it available to small businesses as soon as possible. For more information, visit business.ca.gov. Applications for the Main Street Hiring Tax Credit are scheduled to open Tuesday. For more information, visit cdtfa.ca.gov/taxes-and-fees/SB1447-tax-credit.htm.