California has multiple resources for small businesses impacted by Covid-19 including the following:
Extensions, Tax Relief, and Credits
Extended filing Deadline
The California Department of Tax and Fee Administration (CDTFA) is providing a three-month extension for individuals and businesses to file and pay their taxes and fees originally due between December 15, 2020 and April 31, 2021. Taxpayers reporting less than $1,000,000 in taxes and fees on a return originally due during this period are not required to seek an extension from CDTFA. Relief will be automatically provided. Additionally, interest and penalties will not accrue on return amounts due, provided payments are made and returns are filed within three months of the original due date. Click here for the sales and use tax and special taxes and fees return extension due date information.
Fourth quarter 2020 and first quarter 2021 returns, for all but the largest taxpayers, will be extended and are now due April 30, 2021 and August 2, 2021, respectively. For taxpayers required to make monthly prepayments against their fourth quarter tax and fee obligations, the October prepayment remains due on November 24, 2020. The November prepayment that is normally due on December 24, 2020, is now due on March 24, 2021.
Annual filers scheduled to file returns in January 2021 or April 2021, the filing deadlines will be extended and are now due April 30, 2021, and July 15, 2021, respectively.
Taxpayers with a liability of $1 million or more must request an extension if they are unable to file and pay by their due date. These requests are evaluated on a case-by-case basis and taxpayers will be notified if their extension has been approved or denied.
Effective December 15, 2020, for sales and use tax returns with original due dates between December 15, 2020 and April 30, 2021, small business taxpayers with less than $5 million in taxable annual sales, can take advantage of a 12-month, interest free, payment plan for up to $50,000 of sales and use tax liability. All payment plans must be paid in full by April 30, 2022, to qualify for zero interest. Businesses with $5 million or more in annual taxable sales in sectors particularly impacted by operational restrictions due to the pandemic may also apply for this 12-month interest free payment plan.
The California Earned Income Tax Credit and Young Child Tax Credit are now available to taxpayers who have an Individual Taxpayer Identification Number (ITIN). This was previously only available to taxpayers with Social Security Numbers. These tax credits can be claimed on 2020 individual tax returns.
Small Business Credits
The Small Business Hiring Tax Credit provides a $1,000 tax credit for each new employee hired by small businesses (up to $100,000 per business) that can be used to offset income taxes or sales and use taxes. The credit is allocated on a first-come, first-served basis. Within 30 days of receiving an application, CDTFA will notify each applicant via email if a tentative credit reservation has been allocated to them and the amount. For more information or to apply for this credit, click here to go to the CDTFA website.
$12.5 Million Increased Funding for the California Rebuilding Fund
The California Rebuilding Fund is a public-private partnership that aggregates funding from private, philanthropic, and public sector sources, to address the capital and advisory needs of California’s small businesses as they reopen and recover from the Covid-19 pandemic. When the fund launches, small businesses will be able to seek loan capital for a maximum loan amount of $100,000 or up to 100% of the business’ average monthly revenues for three months prior to the Covid-19 pandemic outbreak, whichever is less. Repayment terms are either offered under a 60-month repayment schedule or a 36-month repayment schedule.
To be eligible the business must meet the following criteria:
- Have 50 or fewer full-time equivalent employees prior to March 2020;
- Have gross revenues of less than $2.5 million in 2019;
- The business must have suffered a direct economic hardship as a result of Covid-19 which has materially impacted operations;
- The business must have returned to or sustained, for at least one-month, at least 30% of pre Covid-19 revenues relative to a similar period in 2019;
- The business must have demonstrated positive net income in 2019 (not including depreciation and amortization expenses);
- The business must have been in operation since at least June 30, 2019; and
- The main office or headquarters for the business must be in California.
- Firms engaged in activities that are prohibited by Federal law or applicable law in the jurisdiction where the business is located or conducted.
- Businesses engaged in speculative activities that develop profits from fluctuations in price rather than through the normal course of trade.
- Facilities primarily used for gambling or to facilitate gambling.
- Businesses or firms engaged primarily in lobbying activities.
- Passive real estate investment.
$50 Million in State Funding for the Small Business Disaster Relief Loan Guarantee Program and $50 Million for the Small Business Loan Guarantee Program
These are loan guarantee programs designed to assist small businesses that experience capital access barriers.
Eligible uses of the Small Business Loan Guarantee program financing include start-up costs, construction, inventory, working capital, business expansion, agriculture, lines of credit and more.
Credit qualifications are based on lender criteria.
Eligible applicants must have between 1-750 employees and be established as one of the following entity types:
- Sole Proprietor.
- Limited Liability Company
Small Business Debt Relief
7(a), 504 and Microloans
The SBA will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020. This relief is not available for Paycheck Protection (PPP) loans or Economic Injury Disaster loans.
Borrowers do not need to apply for this assistance, it will be provided automatically. The SBA has notified 7(a), 504 and Microloan Lenders that it will pay these borrower loan payments and lenders have been instructed to refrain from collecting loan payments from borrowers. If a borrower’s payment was collected after March 27, 2020, lenders were instructed to inform the borrower that they have the option of having the loan payment returned by the lender or applying the loan payment to further reduce the loan balance after SBA’s payment
Borrowers should contact their lender if they have any questions regarding this payment relief.
Disaster home and Business Loans
For current SBA Serviced Disaster (Home and business) Loans, if the disaster loan was in ‘regular servicing’ status on March 1, 2020, the SBA is providing automatic deferments through March 31, 2021. During the automatic deferral period, borrowers can expect the following:
- Interest will continue to accrue on the loan.
- 1201 Monthly payment notices will continue to be mailed out, which will reflect the loan is deferred and no payment is due.
- The deferment will NOT cancel any established Preauthorized Debit or recurring payments already in place for the loan.
- Borrowers preferring to continue making regular payments during the deferment period may continue remitting payments during the deferment period. SBA will apply those payments normally as if there was no deferment.
After this automatic deferment period, borrowers will be required to resume making regular principal and interest payments. Borrowers that cancelled recurring payments will need to reestablish the recurring payment.
For a complete list of resources, please click here to go to the California Covid-19 Response website.