On September 9, 2020, SB 1447 was enacted, which expands California’s assistance programs for small businesses during the COVID-19 pandemic by establishing a new $100 million small businesses hiring tax credit program. The Small Business Hiring Tax Credit is good for qualified hires between July and November, and the credit can be applied over the next five years.
Small Business Hiring Tax Credit Eligibility
SB 1447 allows businesses with 100 or fewer employees to receive a tax credit of $1,000 per net new hire after July 1, 2020, compared to their workforce in the second quarter of 2020. This credit can be applied against personal and corporate income tax liabilities or sales and use tax liabilities for the 2020 tax year. Eligible small businesses must have experienced a 50% decline in gross receipts between 2020 and 2019 (second quarter). They must reserve tax credits beginning December 1, 2020, and before January 15, 2021, with the California Department of Tax & Fee Administration. Total credits to an individual business are capped at $100,000.
Small Business Hiring Tax Credit Application Requirements
If you are a California small business searching for additional COVID-19 relief and fit the criteria above, you may qualify for additional funding. The application for tentative credit reservations is available on December 1, 2020 at 8 am. Please be sure that you have the information listed below to complete your application:
- Valid email address
- Irrevocable election to apply the credit to:
- Personal and/or Corporate Income Tax, or
- Sales + Use Tax
- Type of entity (Individual, Corporation, Partnership, LLC, S Corporation, etc.)
- Entity identification number (SSN, FEIN, Corporation number, LLC number, etc.)
- Business entity name or owner name
- DBA (Doing Business As)
- Business mailing address
- Business phone number
- If you make an irrevocable election to apply the credit to sales and use taxes, provide all sales and use tax accounts (i.e., seller permit(s) and use tax account(s)) for the business entity named above
- EDD Employer Payroll Tax Account Number (State Employer ID Number (SEIN))
- Number of employees as of December 31, 2019
- Total gross receipts for the following periods:
- April 1, 2019 through June 30, 2019
- April 1, 2020 through June 30, 2020
- The average monthly full-time equivalent (FTE) qualified employees employed during the following period (please see the Calculation FAQs):
- April 1, 2020 through June 30, 2020 (3-month period)
- July 1, 2020 through November 30, 2020 (5-month period)
For more information on the Small Business Hiring Tax Credit, visit the California Department of Tax and Fee Administration website.
Aldrich is Here to Support You
As always, the entire Aldrich team is monitoring the COVID-19 relief funding opportunities and recommended guidance. We’ll continue to update our COVID-19 Resource Center diligently to keep you apprised of changes as they happen. If you have any questions about the Small Business Hiring Tax Credit or any other funding relief, please reach out to your Aldrich Advisor.
This article was written with the most current information as of November 17, 2020.
Meet the Author
Andrew Davidson, CPA
Aldrich CPAs + Advisors LLP
Andrew serves his clients by providing strategic, forward-looking, holistic tax strategy, structure, planning and compliance. He is a trusted advisor for closely-held business and individual clients. Andrew has in-depth experience serving clients in a range of industries including manufacturing, retail, wholesale, distribution, agribusiness, real estate, and professional services. Andrew describes himself as a “blue-collar CPA... Read more Andrew Davidson, CPA
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