California Small Business Tax Update

Here is a brief update of current credits available to California Businesses. This synopsis was provided to me by John Langreck at Fox Consulting Group, a CPA firm that specializes in maximizes tax credits from small business

CCTC

The California Competes Tax Credit (CCTC) schedule has been announced for fiscal year 2024-2025 with $644,756,695 available during 3 application rounds:

· ?$215M – 7/22/24 to 8/12/24

· ?$215M – 1/6/25 to 1/27/25

· ?$214.7M (+ any remaining unallocated amounts) – 2/24/25 to 3/10/25

?This credit is administered by the Governor’s Office of Business and Economic Development (GO-Biz) and rewards businesses that hire employees and invest in real or personal property within California.

R&D Tax Credit and § 174

?The pending Tax Relief for American Families and Workers Act of 2024 includes a retroactive elimination of the capitalization requirement for domestic research and development (R&D) expenses under § 174.? Note that foreign R&D would continue to be amortized over fifteen years.? This legislation passed the House and is currently stalled in

the Senate.

?ERC

?The statute of limitations to file an Employee Retention Credit (ERC) claim for the 2021 tax year closes 4/15/25.? It is unclear what action Congress will take with ERC, but most analysts believe that the program will end before the statute expires.? The IRS will resume processing existing claims in late summer according to IR-2024-169.? The ERC can be upto $21K per qualified employee.? I have attached a revenue test spreadsheet to determine eligibility.

?Credit for Sick and Family Leave for Self-Employed Individuals?

?There is still time to claim the sick and family leave credits for self-employed taxpayers.? These credits can be up to $32,220

for business owners who missed work due to sick or family leave related to COVID in 2020 and 2021.? The clock is ticking on the statute of limitations so you should act now to assess eligibility.