CALIFORNIA, USA — The COVID-19 pandemic has hit small businesses significantly this year, presenting challenges to the businesses, employees and owners. According to an August Small Business Majority survey, data found that 44% of small businesses are at risk of shutting down.
To assist those businesses, Gov. Gavin Newsom announced Monday the state will offer temporary tax relief and $500 million in aid to small businesses impacted by COVID-19 restrictions. The governor's office says the total tax relief, if fully utilized, is estimated to have billions in impact.
As many businesses are struggling to stay afloat after months of restrictions and lower sales because of the COVID-19 pandemic, which in recent weeks has surged to record levels. Newsom says the tax relief and grants are designed to provide aid until the Legislature can meet in the new year and work with him to provide more relief.
“California’s small businesses embody the best of the California Dream and we can’t let this pandemic take that away,” said Governor 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.”
According to a press release from the governor's office, California is home to 4.1 million small businesses, representing 99.8% of all businesses in the state and employing more than 7 million workers in California, or 48.5% of the state’s total workforce.
Data released through the Census Current Population Survey found that minority-owned businesses are disproportionately impacted by the coronavirus pandemic. The number of active businesses owned by African-Americans dropped by 41%, Latinx by 32%, Asians by 25%, and immigrants by 36%.
So, what exactly are these tax relief programs?
1. Billions in Sales Tax Deferrals
According to Governor Newsom, businesses will receive an automatic 3-month extension for taxpaying owners with less than $1 million in sales tax. Interest-free payment agreements will be expanded to larger companies with up to $5 million in sales tax. These tax deferrals will also expand to industries heavily impacted by coronavirus, including bars, restaurants, hair salons and more.
2. Emergency Relief Package
In partnership with the Legislature, California will provide up to $500 million in COVID-19 relief funds. The state will provide $25,000 each in grants to small businesses, non-profits and cultural institutions in need. The program will act as a bridge until California officials can take further actions with the Legislature in January 2021.
3. CA Rebuilding Fund
The goal of the CA Rebuilding Fund is to provide $125 million of relief funds with public-private investment for small businesses. It will increase the state funding to $37.5 million total. Applications for the CA Rebuilding Fund opened last weekend, with 86 million already matched. 68% of those funds were matched with diverse owners, 46% with women owners and 50% owned by indigenous and people of color.
4. $100 Million Main Street Hiring Tax Credit
The Main Street Hiring Credit authorizes $100 million in hiring tax credit for qualified small businesses. The credit is equal to $1,000 per qualified employee, up to $100,000 for each small business employer. Applications for the Main Street Hiring Credit open Tuesday, December 1. A full list of existing state support for businesses can be found here.
5. Tax Relief to Encourage Entrepreneurialism
California will offer $100 million to waive franchise taxes for new businesses in the state and exclude PPP loans from state taxes.
6. $100 Million for Small Business Support
$50 million in COVID-19 Disaster Relief Loan guarantees began through an executive order previously this year, which the Legislature has now doubled to $100 million. $24.9 Million has already been approved. 83% of those awarded support were women, minority-owned, low to moderate-income businesses. 217 loans have been approved for the $50 million for small business programs, leveraging a total of $109 million.
Relief for small California businesses related to COVID-19
More people than ever seek medical attention due to the coronavirus as the number of active cases rises across California.