A bipartisan group of 25 California Legislators led by Assemblymember Evan Low (D-Campbell) is urging Assembly Budget leadership to immediately end a tax increase enacted on California employers last year and restore the net operating loss (NOL) deduction and business incentive tax credits as part of this year’s budget.
In a February 26, 2021 letter to Assembly Budget Chair Phil Ting, Vice Chair Vince Fong (R-Bakersfield) and Chair of Subcommittee 4 Wendy Carrillo (D-Los Angeles), the group of Assemblymembers and Senators calls on budget leaders to reverse course on measures taken during a period of pandemic-induced budget uncertainty last year. With California now sitting on a budget surplus of $22 billion in reserves and $15.6 billion in the state’s Rainy-Day fund, the group argues that last year’s emergency tax increase is no longer warranted.
“Businesses should be allowed to immediately utilize NOLs and earned tax credits to offset any harm they have suffered as a result of the pandemic and to encourage employers who are considering leaving to stay,” the Legislators state in the letter.
The group further underscores the fact that it is businesses who need help now – not the state.
“Some of California’s most storied companies are either leaving the state, choosing to expand elsewhere, or encouraging employees to relocate to lower-cost states. Sunsetting the NOL suspension and cap on business incentive tax credits would send a strong, positive message that our state’s employers are important to our government,” the Legislators say.
The group argues that the business incentive tax credit cap is particularly troubling considering many of California’s employers are actively engaged in researching and developing COVID-19 vaccines and anti-viral therapies – activity the state should encourage.
In addition, the legislators point out in the letter that the NOL suspension is causing even greater financial strain for employers who have suffered staggering losses over the past year and have no way to offset their revenue declines. “Struggling businesses need help now – not in several years when the 202 budget’s carryback provisions take effect,” they say.
The letter was signed by Assemblymembers Marc Berman, Steven Choi, Jim Cooper, Jordan Cunningham, Tom Daly, Laurie Davies, Jim Frazier, Adam Gray, Tom Lackey, Evan Low, Brian Maienschein, Devon Mathis, Chad Mayes, Patrick O’Donnell, Jim Patterson, Cottie Petrie-Norris, Bill Quirk, Robert Rivas, Rudy Salas, Suzette Valladares, Carlos Villapudua, and Senators Patricia Bates, Andreas Borgeas, Jim Nielsen and Scott Wilk.
A copy of the letter may be found here.
CalChamber Leads Coalition in Support
This morning, the California Chamber of Commerce and 75 allied groups sent a letter to Governor Gavin Newsom and Legislative leadership urging action to help small businesses who continue to struggle as a result of the pandemic.
High on their list of requests is passage of Assemblymember Low’s proposal to reinstate limited tax credits and net operating losses. In their letter, the CalChamber-led coalition underscores the fact that the suspension is no longer necessary and lifting it would help struggling businesses immediately.