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California Employee Tax Credits

If you have a business in California with employees, please read on...

California just passed AB150, a continuation of last year's "Main Street Hiring Credit." It's a $1k/employee credit for hiring new employees during the pandemic.

Applications will be submitted through the website of CDTFA (Sales Tax Authority) starting on November 1. It's first come first serve, so once $70M of credits are approved, the program stops. So important to be first in line and ready to go .

Credit amount

The amount of the credit is equal to $1,000 for each net increase in qualified employees, less any tentative credit amount allocated under last year’s credit. The net increase is measured by comparing the taxpayer’s average number of monthly full-time equivalent (FTE) employees for the second quarter of 2020, with the lesser of either of the average number of FTE employees for:

  • The 12-month period beginning on July 1, 2020, and ending on June 30, 2021; or

  • The three-month period beginning on April 1, 2021, and ending on June 30, 2021.

All employees of related businesses are treated as employed by a single small business employer. For purposes of this credit, a monthly FTE emplyee is calculated as follows:

  • For hourly employees: The total number of hours worked per month, not to exceed 167 hours per month per employee, divided by 167; and

  • For salaried employees: The total number of weeks worked per month divided by 4.33, multiplied by the fraction of full-time employment that the qualified employee works (e.g., 50% for a half-time employee).

Like last year’s credit, the credit may be claimed against a taxpayer’s personal income tax or corporation franchise and income taxes, or at the election of the taxpayer, against state and local sales and use taxes.

If you have questions, please let me know.

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