California Governor Gavin Newsom signed the 2022-2023 state budget into law on Jun. 27, 2022. The budget offers tax relief from Assembly Bills 192 and 194, which were signed into law in addition to the budget and include the following provisions:
- Authorization of approximately $9.5 billion in tax refunds, ranging from $400 to $1,050 for married filing joint and $200 to $700 for all other taxpayers, depending on their California adjusted gross income (AGI) and whether they claim any dependent credits.
- The Franchise Tax Board, upon request by an individual taxpayer, may grant a one-time abatement of a failure-to-file or failure-to-pay timeliness penalty for taxable years beginning on and after Jan. 1, 2022, if the taxpayer has filed all required returns as of the date of the request for abatement and the taxpayer has paid (or is in a current arrangement to pay) all tax currently due.
- Extension of California’s partial conformity to the federal Paycheck Protection Program (PPP) loan forgiveness treatment. As a result, the expenses paid with PPP loans can be deducted for loans approved after March 2021 should the taxpayer meet 25 percent gross receipts reduction qualifications.
- Extension of the CalCompetes Tax Credit program from 2023-24 through 2027-28 at the current level of $180 million per year. In addition, the bill provides a one-time general fund of $120 million for the CalCompetes grant program.
- Diesel fuel exemption from the state tax rate of 3.9375 percent on and after Oct. 1, 2022, and before Oct. 1, 2023. As a result, this will provide tax relief and reduce cost pressures from rising diesel prices to the businesses who utilize the bulk of diesel fuel in the state.
The 2022-23 enacted budget includes the following adjustments which offer significant tax relief:
- Statutory changes that will allow taxpayers that did not claim the Main Street Small Business Tax Credit on their original return to claim the credit in the subsequent five tax years.
- A one-time $75 million general fund for the California Small Agricultural Business Drought Relief Grant Program to provide direct assistance to eligible agriculture-related businesses that have been affected by severe drought conditions.
- Waived filing fees for new businesses registering with the Secretary of State between July 1, 2022 and June 30, 2023.
- The Workers Fairness Tax Credit for union members, which offers an increased benefit for tax purposes in the form of a state tax credit of up to 33 percent of union dues paid. This tax credit will be effective with future legislative action.
Taxpayers seeking assistance in understanding whether they would benefit from the tax relief programs and refund opportunities listed above can reach out to GHJ’s tax advisors in order to review their current tax position.