Thought Leadership

California Offers Business Tax Deferral Program and Expands Penalty and Interest Relief

Client Updates

On November 30, 2020, Governor Newsom announced that California will provide temporary tax relief for eligible businesses impacted by COVID-19 restrictions. The relief program provides an automatic three-month sales 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 tax deferral program provides additional support to qualifying business during the pandemic. On September 9, 2020, the Main Street Hiring Tax Credit (S.B. 1447) authorized $100 million in hiring tax credit for qualified small businesses. The hiring tax credit is equal to $1,000 per qualified employee and up to $100,000 for each small business employer. Applications for the credit may be submitted from December 1, 2020 through January 15, 2021.

Previously, in April 2020, the Governor issued an Executive Order allowing 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. To date over 9,000 relief plans with almost $150 million in tax relief have taken advantage of this program.

Governor Newsom announced that he will direct the California Department of Tax and Fee Administration to extend the penalty and interest relief as follows:

  • Provide an automatic three-month extension for taxpayers filing less than $1 million in sales tax on the return and extend the availability of existing interest and penalty-free payment agreements to companies with up to $5 million in taxable sales;
  • Broaden opportunities for more businesses to enter interest-free payment arrangements; and
  • Expand interest-free payment options for larger businesses particularly affected by significant restrictions on operations based on COVID-19 transmissions.

For additional information regarding qualification for these programs, please contact any of the authors.

 

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