The California Department of Tax and Fee Administration (CDTFA) began accepting applications today for a small business hiring credit against California state income taxes or sales and use taxes.
The credit (authorized by SB 1447) is available to certain California qualified small business employers that receive a tentative credit reservation.
Credit reservations will be allocated to qualified small business employers on a first-come, first served basis. The reservation system became available today at 8 a.m. and continues through January 15, 2021, according to the CDTFA.
The credit applies to California small businesses that meet the following qualifications:
- Employed 100 or fewer employees as of December 31, 2019; and
- Suffered a 50% decrease or more in income tax gross receipts (generally, all income less returns and allowances), when comparing second quarter 2020 to second quarter 2019.
Example: You had $250,000 in gross receipts for second quarter 2019 and $100,000 in gross receipts for second quarter 2020. The percent of decrease in gross receipts is 60%. ($250,000 – $100,000 = $150,000. $150,000 ÷ $250,000 = 0.6 x 100 = 60%)
Within 30 days of receiving an application, CDTFA will notify each applicant via email whether a tentative credit reservation has been allocated to them and the amount of the tentative credit reservation.
Funding for the Small Business Hiring Tax Credit program totals $100 million and is to be allocated to qualified California small business employers. Generally, these employers may receive a credit of $1,000 for each net increase in qualified employees from April 1, 2020 through June 30, 2020, compared to July 1, 2020 through November 30, 2020.
For more information on “net increase in qualified employees,” see the Frequently Asked Questions (FAQ) and the Calculation FAQs at https://www.cdtfa.ca.gov/taxes-and-fees/SB1447-tax-credit.htm.
Also available there is the list of information needed to complete the credit reservation application. The CDFTA warns that the system will not allow applicants to save the application if they exit the system before completing and submitting the application.
The total amount of credits received cannot exceed $100,000 for each qualified California small business employer.
To contact the CDTFA Customer Service Center, call 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.
For assistance with Franchise Tax Board (FTB) questions, including how to use the credit on personal or corporate income tax returns, visit the Small Business Hiring Credit webpage located on the FTB website.