A lot of people lost their jobs in 2020 when businesses were forced to shut down or had to furlough their employees due to COVID. To help Californians get back to work, California’s governor signed a new tax bill to give tax breaks to small businesses that increased hiring during the second half of 2020.

Senate Bill 1447 was enacted on September 9, 2020, to offer new credit called Small Business Hiring Tax Credit to qualified California small business employers who can use it to offset state income tax or sales and use taxes. To qualify for the credit, the businesses have to meet the following criteria:

  • Have less than 100 employees. A company with 50% common ownership is considered as a single employer;
  • Suffer from 50% or more decline in revenue during 4/1/2020 – 6/30/2020 as compared to the same months in 2019; and
  • Have a net increase in the number of employees during 7/1/2020 – 11/30/2020 as compared to 4/1/2020 – 6/30/2020.

The credit is $1,000 for each net increase in qualified employees and the total amount of credits received cannot exceed $100,000 for each qualified California small business employer.

California has reserved $100 million to fund this Small Business Hiring Tax Credit program. Qualified employers must apply for a credit reservation with the California Department of Tax and Fee Administration (CDTFA). CDTFA will start taking reservation applications through its website on December 1, 2020, at 8:00 a.m., until January 15, 2021. The CDTFA will notify each applicant via email, within 30 days of receiving an application, whether a tentative credit reservation has been allocated to them and the amount of the tentative credit reservation. For information that will be required to complete the application, please check out the CDTFA website.

The credit reservations will be allocated to qualified small business employers on a first-come, first-served basis. If you think you qualify, contact us today and start gathering information for the application right away.


About the Author

So Sum Lee CPA - Los Angeles CPA
So Sum Lee, CPA, Principal
Tax, Real Estate, Technology, Hospitality
So Sum Lee, CPA is a Tax Principal at KROST. So Sum has over 18 years of experience in public accounting and has a wide range of experience in Taxation, as well as servicing high-net-worth clients. So Sum’s area of expertise includes industries such as wholesale, Real Estate investments, and Restaurants. » Full Bio

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