Main Street Small Business Tax Credit II

The Main Street Small Business Tax Credit II will provide COVID-19 financial relief to qualified small business employers. Beginning November 1, 2021, and ending November 30, 2021, the California Department of Tax and Fee Administration (CDTFA) will be accepting applications through their online reservation system for qualified small business employers to reserve $1,000 per net increase in qualified employees, not to exceed $150,000. Taxpayers that qualified for Employee Retention Credit may also qualify for the Main Street Small Business Tax Credit.

Tentative credit reservation amounts will generally be reduced by credit amounts reserved or received under the first Main Street Small Business Tax Credit. The credits are reserved on a first-come, first-served basis, and the allocation limit for this credit will be approximately $116 million.

Qualified small businesses can use the credit against income taxes, or can make an irrevocable election to apply the credit against sales and use taxes.

The credit only applies to California small businesses that meet the following qualifications:

• Employed 500 or fewer employees as of December 31, 2020, and
• Experienced a decrease of 20 percent or more in income tax gross receipts by comparing gross receipts for 2020 to gross receipts for 2019.

The amount credit is $1,000 for each net increase in qualified employees, measured by monthly average full-time equivalent. Employers that had low headcounts from April 1, 2020 though June 30, 2020 and added employees during the 12 month period beginning July 1, 2020 and ending June 30, 2021 are good candidates for this program.

The following information is needed to assess the opportunity:

Both 2020 and 2019 gross receipts. Payroll information during the periods April 1, 2020 to June 30, 2021. Business name, type of entity, mailing address, phone number, email. Number of employees as of December 31, 2020.