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Dear Reader,

The California Legislature recently passed a law that allows for a hiring tax credit for small businesses (sometimes the “Taxpayer”) with an intent to help those businesses overcome the economic difficulties resulted from the pandemic. This credit is called the “Main Street Hiring Credit.”

For every taxable year beginning on or after January 1, 2020 and before January 1, 2021, the amount of credit allowed is equal to $1,000 for each net increase in the monthly average number of qualified employees with the maximum allowable credit of $100,000 per qualified employer.

The criteria for the employers to qualify for this credit is as follows:

  • The employer employs 100 or fewer employees on December 31, 2019 (including part-time employees).
  • The employer has a 50% decrease in gross receipts from April to June 2020, compared to the gross receipts in April to June 2019.
  • The employer applies for a tentative credit reservation from the California Department of Tax (“CDTFA”) for the period beginning on December 1, 2020, through January 15, 2021.
  • The employer is unauthorized to be included in a combined income tax report.

It is noteworthy that the Taxpayer can use the credit against payment of income taxes or can make an irrevocable election to apply the credit against sales and use taxes. Such credits are available on a first-come-first basis until $100 million allocation is exhausted.

For more information regarding how to claim this hiring tax credit and application details, please visit https://www.ftb.ca.gov/file/business/credits/small-business-hiring-credit.html

If you have any questions about the above mentioned, please contact Christopher L. Rasmussen, Managing Partner, Inventus Law, PC., at chris@inventuslaw.com or Aakshita Bansal, Corporate Associate, Inventus Law, PC., at aakshita@inventuslaw.com.

Disclaimer: This Memo is being provided for information purposes only and is drafted entirely on the basis of public resources. Information contained on or made available herein is not intended to and does not constitute legal advice, recommendations, mediation or counseling under any circumstance. This information and your use thereof do not create an attorney-client relationship. You should not act or rely on any information provided herein without seeking the advice of a competent attorney licensed to practice in your jurisdiction for your particular business.


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