New California small business hiring credit for 2020. Especially attractive for restaurants and retail industries

Small businesses are able to get a nonrefundable credit of $1,000 for each net full time equivalent employee addition. The total credit can range from $1,000-$100,000. The increase is measured by comparing the average number of full time employees in the second quarter of 2020 to the average number in the 5 month period 7/1/2020-11/30/2020.

An eligible small business is a business with fewer than 100 employees at 12/31/2019 that had a 50% decrease in gross receipts in the second quarter of 2020 compared to the second quarter of 2019.

Monthly full time equivalent for hourly paid qualified employees is calculated by taking the total number of hours worked per month for the small business, not to exceed 167 hours per month per qualified employee, divided by 167. For salaried qualified employees, monthly full time equivalent is calculated by taking the total number of weeks worked per month for the small business divided by 4.33.

Any business using the Competes Credit or Employment Credit is ineligible.

This credit needs to be reserved with California Department of Tax and Fee Administration (CDTFA) between 12/1/2020-1/15/2021. The maximum cumulative total allocation for all taxpayers is $100 million. The credit will be allocated on a first come first served basis.

The credit can be used against corporate franchise (income) tax or personal income tax credit or the small business can make an irrevocable election to apply the small business hiring credit against qualified sales and use tax.