By Arun Dubey (Manager, GHJ) and Frances Ellington (Principal, GHJ)
The state of California offers several programs to restaurants, those in the food supply chain and other small food and beverage companies. In addition, the U.S. Department of Agriculture (“USDA”) announced a grant program to support the agricultural producers and businesses in this industry with pandemic assistance funds. Qualifying food and beverage companies may take the advantage of these programs.
FEDERAL GRANT INITIATIVE
The USDA announced additional financial aid to agricultural producers and businesses. The USDA allocated $700 million in order to provide grants to qualified food and beverage companies including seafood or meat processors, distributors for Personal Protective Equipment (PPE) and other worker-protection measures associated with pandemic response. The program will be implemented beginning in August. See the details here.
The state of California offers loan to food and beverage companies and other eligible California businesses. These programs are as follows:
- Disaster Relief Loan Guarantee: The Disaster Relief Loan Guarantee Program allows access to capital for small businesses that do not qualify for federal disaster funds, including food and beverage companies. This program allows a maximum loan of $1.25 million and a maximum guarantee of $1 million.
- Eligibility: Businesses located in California employees between one and 750 people that have been negatively affected by COVID-19, as well as eligible nonprofit organizations, may qualify. Learn more about the program here.
- California Rebuilding Fund: This program provides loans of up to $100,000 or 100 percent of a business’ average monthly revenues for three months prior to the COVID-19 pandemic, whichever amount is lower.
- Eligibility: The restaurant and other
food and beverage companies that employ 50 or less full-time equivalent employees and had gross revenues of less than $2.5 million or below in 2019 are eligible. Businesses also must have suffered a direct economic hardship as a result of COVID-19 that materially affected operations to be eligible. The eligible businesses may apply for the funding here.
TAX CREDIT PROGRAM
The state of California offers below tax credit in order to assist businesses including food and beverage companies.
- New Employment Tax Credit: This credit is available to food and beverage companies that hire new qualified employees on or after Jan. 1, 2014, through 2025. To generate an allowable credit, the qualified taxpayer must have a net increase in its total number of full-time employees working in the state, when compared to its base year both based on annual full-time equivalents. To claim a generated credit on a tax return, the qualified taxpayer must have a tax liability to offset. Otherwise, the credit is carried forward for potential use for up to five taxable years subsequent to the year the credit was generated.
- Eligibility: To obtain a credit, a qualified taxpayer must 1) Hire a qualified full-time employee on or after Jan. 1, 2014; 2) Pay qualified wages; 3) Receive a Tentative Credit Reservation from the Franchise Tax Board for that qualified fulltime employee; 4) Hires an individual that is a qualified full-time employee that works at least an average of 35 hours per week. An unemployed worker for the six months immediately preceding employment can also be a qualified employee. The credit is based on 35 percent of qualified wages or wages between 150 percent and 350 percent of minimum wage. Learn more about the program here.
- Payroll Tax Credit: California Gov. Gavin Newsom signed a SB 95 to provide two supplemental weeks of COVID-19 sick leave for workers through Sept. 30, 2021. Employers (such as food and beverage companies, etc.) with 26 or more workers are eligible. This offers $511 per day to aid small businesses, nonprofit organizations and other employers via a payroll tax credit, up to $5,110 total, by utilizing federal funding from the Families First Coronavirus Response Act (P.L. 116-127).This is in effect retroactively beginning Jan. 1, 2021 through Sept. 30, 2021.
OTHER FINANCIAL ASSISTANCE
The other financial assistance for California food and beverage companies are:
- Sales and Use Tax Relief: California currently provides a 12-month, interest-free payment plan for up to $50,000 of sales and use tax liability. Companies with less than $5 million in taxable annual sales may qualify. This relief only applies to Sales and Use Tax on returns with original due dates between Dec. 15, 2020 and April 30, 2021. A business that previously took advantage of the 12-month, interest-free payment plan that must be paid in full by July 31, 2021 may also apply. Payment plans must be paid in full by April 30, 2022 to qualify for zero interest. Apply for relief here.
- License Fee Exemptions for Restaurants and Bars: California provides two years of fee relief for restaurants and bars licensed through the state’s Department of Alcoholic Beverage Control (“ABC”), as well as barbering and cosmetology businesses licensed through the Department of Consumer Affairs. Restaurants and Bars may apply for license fee waivers here.
- Commercial Eviction Moratorium: California has suspended any state law that would prevent local governments from protecting commercial tenants from eviction due to a COVID-19 hardship. Commercial tenants should contact their local government to see if they are covered by a local eviction moratorium. This suspension id valid through Sept 30, 2021.
The restaurants and businesses in food industry should review their eligibility in order to take the benefit of the loan and other tax credits offered by the state. Should you need assistance in understanding the eligibility criteria or need assistance in understanding the various programs, reach out to GHJ’s tax advisors.
Check out GHJ’s tax alert on California state budget for 2021-2022 for latest update on other Tax Credit and Grant programs pertinent to food and beverage companies.