Information provided by the State of California.
Gov. Gavin Newsom announced that California will provide temporary tax relief for eligible businesses impacted by COVID-19 restrictions. According to a recent release, the temporary tax relief entails an automatic three-month income tax extension for taxpayers filing less than $1 million in sales tax; extends the availability of existing interest and penalty-free payment agreements to companies with up to $5 million in taxable sales; and provides expanded interest-free payment options for larger businesses particularly affected by significant restrictions on operations based on COVID-19 transmissions. The total tax relief, if fully utilized, is estimated to have billions in impact. These efforts are informed by recommendations made by the Governor’s Task Force on Business and Jobs Recovery.
“California’s small businesses embody the best of the California Dream and we can’t let this pandemic take that away,” said Newsom. “We have to lead with health to reopen our economy safely and sustainably while doing all we can to keep our small businesses afloat. With this financial assistance and tax relief, California is stepping up where the federal government isn’t. By providing potentially billions in immediate relief and support, our small businesses can weather the next month as we continue partnering with the Legislature to secure additional funding and investments in small businesses in the new year.”
The release stated that the pandemic has presented a significant challenge to small businesses, employers and employees. An August Small Business Majority survey data found that 44% of small businesses are at risk of shutting down. Data released through the Census Current Population Survey found that minority-owned businesses are disproportionately impacted: the number of active businesses owned by African-Americans dropped by 41%, Latinx by 32%, Asians by 25%, and immigrants by 36%.
Tax Relief for Businesses Impacted by COVID-19
Through an Executive Order in April, Newsom allowed taxpayers to apply for penalty and interest relief for 90 days for any taxpayer reporting less than $1 million in sales on their tax return. Through Nov. 22, some 9,287 plans with almost $149 million in tax relief have taken advantage of this program.
According to the release, Newsom will direct the California Department of Tax and Fee Administration to do the following:
- Provide an automatic three-month extension for taxpayers filing less than $1 million in sales tax on the return and extend the availability existing interest and penalty free payment agreements to companies (with up to $5 million in taxable sales)
- Broaden opportunities for more businesses to enter into interest-free payment arrangements.
- Expand interest-free payment options for larger businesses particularly affected by significant restrictions on operations based on COVID-19 transmissions.
$500 Million for New COVID-19 Relief Grant for Small Business
Newsom announced the creation of a $500 million COVID-19 Relief Grant administered by the California Office of the Small Business Advocate (CalOSBA) at the Governor’s Office of Business and Economic Development for small businesses that have been impacted by COVID-19 and the health and safety restrictions. Funds would be awarded to selected intermediaries with established networks of Community Development Financial Institutions to distribute relief through grants of up to $25,000 to underserved micro and small businesses throughout the state by early 2021. Nonprofits would also be eligible for these grants. CalOSBA is establishing the program and will make it available to small businesses as soon as possible. For updates on availability, visit here.
Increase Funding for the California Rebuilding Fund by $12.5 million
Last week, Newsom announced the opening of the California Rebuilding Fund which makes available $25 million to help impacted small businesses rebuild from the economic crisis and keep local economies strong. This program is built to be a resource in the market for the next year as businesses pivot and recover.
An increase of $12.5 million would allow the fund to be fully capitalized. The additional funding will help the third party administrator of the fund raise $125 million to make more low-interest loans to small businesses with less access to loans from traditional banking institutions.