New Tax Relief & Grants will Support Businesses Impacted by COVID-19
As businesses and taxpayers continue to feel the effects of the pandemic into the new year, additional relief programs and assistance are being offered at both the state and federal level.
Below is a brief update on some of the programs to be aware of, highlighting specific opportunities that businesses should review to determine if immediate action is needed. Please note that there may be short application windows in effect.
Small Business COVID-19 Relief Grant Program
The Small Business COVID-19 Relief Grant Program has $500 million in funding and provides grants ranging from $5,000 to $25,000 to eligible small businesses. The application period for this program is open now and ends at 11:59pm on January 13, 2021. Funds are available for eligible businesses, including sole proprietorships and nonprofits, with between $1,000 and $2.5 million in annual gross revenues based on their most recently filed tax return.
This grant program is neither first-come, first-served or on a rolling approval basis. Grants will be awarded based on the following prioritization:
- Geographic distributions based on COVID-19 health and safety restrictions.
- Industry sectors most impacted by the pandemic; and
- Underserved small business groups (e.g., veterans, low-income or rural communities, and women or minority owned businesses).
Note that there will be a second round of grant funding; however, the application window for this round has not yet been determined. If a business applies for the first round but does not receive funding, their application will be in consideration for the second round. Details about this grant program can be found at https://careliefgrant.com.
Main Street Small Business Tax Credit
Senate Bill 1447 allows $100 million for a small business hiring credit against California state income taxes or sales and use taxes to certain California qualified small business employers. To receive this credit, the business must submit a tentative credit reservation, which are allocated on a first-come, first-served basis. The reservation system is available now through January 15th (unless taxpayers reserved the $100M in available credit prior to that date).
In order to qualify for this credit, the business must have employed 100 or fewer employees as of December 31, 2019 and experienced at least a 50% decrease in gross receipts when comparing the second quarter of 2020 to the second quarter of 2019. The credit would equal $1,000 for each net increase in qualified employees from April 1, 2020 through June 30, 2020 compared to July 1, 2020 through November 30, 2020. Special rules apply for S-Corporations applying for the credit.
Additional information on this credit can be found on the CDFTA website here: https://www.cdtfa.ca.gov/taxes-and-fees/SB1447-tax-credit.htm.
The federal government has issued many relief programs over the past 9 months and more are on the horizon.
The Consolidated Appropriations Act
The Consolidated Appropriations Act (CAA) was signed into law at the end of 2020. This program was a massive tax, funding, and spending bill that contained a nearly $900 billion coronavirus aid package. Some of the measures in this Act include the following:
Paycheck Protection Program
Additional funding is now available for the PPP loan program administered through the SBA totaling $284 billion. The new deadline to apply for a PPP loan is March 31, 2021.
- Businesses that did not apply by the August 5, 2020 deadline now have additional time to apply for loans up to $10 million based on 2.5 times their average monthly payroll. Similar criteria apply for these loans (small business concern, 500 or fewer employees, and not an ineligible business).
- Certain businesses are eligible for a second-draw loan of up to $2 million per borrower. Small businesses are defined as those with no more than 300 employees and whose revenues dropped by 25% during 2020 (measured on a quarterly basis). The loan will be up to 2.5 times a business’ average monthly payroll costs or 3.5 times for certain accommodation and food service sector businesses.
- The SBA and Treasury issued guidance late Wednesday night for this reconstituted Paycheck Protection Program. With the three-month application window, we expect to get additional clarity and guidance on this program within the next few weeks.
Employee Retention Tax Credit
This credit has been extended and modified through the CAA. Of note, the availability for the credit was extended from December 31, 2020 to July 1, 2021, and employers are now eligible regardless of whether they received any PPP funding. The credit limitations of 50% of qualified wages to a $5,000 annual cap were also expanded to 70% of wages with a $28,000 annual cap.
Paid Sick and Family Leave Tax Credits
These credits, which were first enacted under the FFCRA, have now been extended through March 31, 2021 on a voluntary basis. This means that while employers are not required to provide the FFCRA leave between January 1, 2021 and March 31, 2021, if they do so, they will be eligible for the tax credits for wages paid with respect to the leave.
Temporary 100% Deduction for Business Meals
Historically, qualified business meal expenses have been limited to 50% for income tax deduction purposes. The CAA has temporarily expanded the deductibility for business meal expenses to 100% of the cost for food and beverages during 2021 and 2022, if the expenditure was incurred at a restaurant.
As the CAA was only recently signed into law, we are expecting more information to unfold in the coming weeks and months, clarifying the contents of the 5,000+ page Act.
Please reach out to your team at BPW with any questions at (805) 963-7811 on how the above state and federal relief programs may apply to your business.