Beginning on Monday November 1, California Businesses that meet certain qualifying criteria can claim their portion of the $70 million allocated via AB150 to reward companies with up to $1,000 per qualifying increase in payroll headcount. The Main Street Small Business Tax Credit II enables companies that have not benefited from other tax credits to help blunt the impact of pandemic-related business slowdowns and assist in continuing to build back from the downturn. Please see below for highlights of the program:
What is the 2021 Main Street Small Business Tax Credit II?
The 2021 Main Street Small Business Tax Credit II is set to provide further financial relief to qualified small business employers. The credit will allow those who qualify to offset their income tax or sales and use tax when filing.
Credit reservations for qualified small business owners will be available from November 1, 2021 through November 30, 2021. Allocations of this credit will be made on a first-come, first-served basis.
Who Qualifies for the Credit?
According to the California Department of Tax and Fee Administration, this credit applies to California small businesses who meet the following requirements:
- Employed 500 or fewer employees as of December 31, 2020.
- Experienced a decrease of 20 percent or more in gross receipts reported to Franchise Tax Board (FTB) for income taxes and will be determined by comparing:
- For calendar year income tax filers:
Compare January 1, 2020, through December 31, 2020, to January 1, 2019, through December 31, 2019.
- For fiscal year income tax filers:
- Compare gross receipts for fiscal year 2019-2020 to fiscal year 2018-2019.
or
- Compare average of gross receipts for fiscal year 2019-2020 and fiscal year 2020-2021 to gross receipts from fiscal year 2018-2019.
- For a taxpayer that started business in 2019:
- Compare gross receipts for the period January 1, 2020, through February 28, 2020, multiplied by 1.5 to the gross receipts for the period April 1, 2020, and ending on June 30, 2020.
Calculating the Tax Credit
The credit amount for a qualified business is equal to $1,000 for each net increase in qualified employees, measured by the monthly average full-time employee equivalents.
How to Claim the Credit?
File your income tax return timely, ensure you include your Main Street Small Business Tax Credit form that includes the information from your credit reservation from the CDFTA website during the month of November 2021.
If you think your company might meet the qualifying requirements of this program, please feel free to contact us for assistance interpreting or understanding the applicability. Also, please see the CDTFA Frequently Asked Questions website which provides great detail on this program.
