Reminder: Main Street Small Business Tax Credit II November 2021 Tax News

Main Street Small Business Tax Credit II – Get your reservation now!

The time to get your reservation for the 2021 Main Street Small Business Hiring Tax Credit II is starting! To claim the credit, taxpayers must obtain a tentative credit reservation between November 1, and November 30, 2021.

The California Department of Tax and Fee Administration (CDTFA) administers the reservations. You can apply for a reservation at 2021 Main Street Small Business Tax Credit II. The total amount of credit available is approximately $116 million and will be allocated on a first-come, first-served basis.

The credit can offset either sales and use tax, or income and franchise tax. Taxpayers must make this election as to which tax they will offset when applying for their reservation.

Eligible taxpayers must:

  • Have 500 or fewer employees on December 31, 2020, (all employees, including part-time employees, whose wages are subject to California withholding laws).
  • Have experienced a decrease of 20% or more in gross receipts:
    • Calendar year filers compare gross receipts for 2020 to gross receipts for 2019.
    • Fiscal year filers can either:
      • Compare gross receipts for fiscal year 2019-20 to the gross receipts  for fiscal year 2018-19, or
      • Compare the gross receipts average for fiscal year 2019-20 and fiscal year 2020-21 to the gross receipts for fiscal year 2018-19.
    • New businesses that commenced business after January 1, 2019, but on or before January 1, 2020, can determine by comparing gross receipts from:
      • January 1, 2020, through February 28, 2020, multiplied by 1.5 to gross receipts for the period of April 1, 2020, and ending on June 30, 2020.
  • Apply for a tentative credit reservation from CDTFA during the period of November 1, 2021, through November 30, 2021, and receive a tentative credit reservation.
  • Not be required or authorized to be included in a combined report.

The amount of credit is equal to $1,000 for each net increase in qualified employees, measured by the monthly average full-time employee equivalents.

Each employer may receive up to $150,000 in credit. The amount of credit you may receive for the 2021 taxable year is reduced by the Main Street Small Business Tax Credit you received for taxable year 2020. The amount of reduction is either:

  • Your 2020 credit allocated for application to Sales and Use Tax; or,
  • Your 2020 credit received for application against income taxes.

For more information and requirements related to the credit, visit CDTFA’s 2021 Main Street Small Business Tax Credit II, or our Main Street Small Business Tax Credit II webpage.