NFIB California Main Street Minute

For the legislative and political week March 22-26

Welcome to the March 22 edition of the NFIB California Main Street Minute from the NFIB small-business advocacy team in Sacramento.

Well, maybe this report will take more than a minute. A lot of important stuff happened last week and will again this week.

So, now what? A provision slipped into the American Rescue Plan Act of 2021 is causing great consternation across the nation, including here in California. The provision prohibits states from using any of the federal money sent to them to offset tax cuts. Does that include cuts or tax-code adjustments planned long before the Recuse Plan was an idea in someone’s mind? The nation awaits U.S. Treasury Secretary Janet Yellen’s decision.

Brakes slammed on PPP conformity. According to NFIB California’s chief legislative advocate, Kevin Pedrotti, “A budget item that would provide relief to small businesses by expanding loan forgiveness to businesses that took PPP loans is AB 80 (Burke). AB 80 was to be acted on … but was unexpectedly stalled late Friday afternoon after an announcement by Governor Newsom, Senate President Pro Tempore Atkins and Assembly Speaker Rendon collectively pumped the brakes as they defer to the federal government. Their joint statement read: ‘The legislation that would conform to the federal tax treatment of these grants will be delayed temporarily while we seek detailed guidance from the U.S. Treasury Department regarding provisions in the American Rescue Plan Act signed yesterday by President Biden.’”

For an Associated Press story that ran in 151 media outlets across the nation, NFIB California State Director John Kabateck told the wire service that “Small business owners need that conformity and they need it as soon as possible. We can’t afford for the federal government or any leaders to dilly dally with this critical help that they need right now to get back on their feet.”

And what about the proposed reduction in the minimum franchise tax? Would that, too, be considered offsetting a tax cut by the feds? Assembly Member James Ramos (D-Rancho Cucamonga) asked NFIB California to be a sponsor of his Assembly Bill 632, which reduces the minimum franchise tax on businesses and eliminates it entirely for those with less than $15 million in net income. NFIB agreed. The bill was to have come up for a hearing today in the Assembly Revenue and Tax Committee. NFIB had sent this letter of support to the committee. Now, it too has been put on hold.

According to the Legislative Analyst’s Office, “Corporations doing business in California must pay a state corporation tax (CT) on their net income. Many corporations have no net income in California, but are still required to pay an annual minimum franchise tax of $800. Other types of noncorporate businesses are not subject to the CT, but many also are required to pay an annual minimum franchise tax of $800.The most common noncorporate businesses subject to the minimum franchise tax include limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs).”

A letter signed by 21 state attorneys general “urging the U.S. Department of Treasury to take immediate action to ensure the American Rescue Plan Act does not strip States of their core authority to implement basic state tax policy” was sent to Secretary Yellen last week.

But don’t look for California Attorney General Xavier Becerra’s signature on the letter. He was busy getting confirmed March 18, by one vote, as the next U.S. Health and Human Services secretary.

In other news …

Last Tuesday, a coalition of 42 business groups, including NFIB, delivered a co-signed letter to Gov. Gavin Newsom and the California State Legislature commending them for recognizing the need to address state and local tax (SALT) reform. “Comprehensive federal action on this issue is unlikely to provide any relief to Californians anytime soon; therefore, any meaningful action on SALT reform rests with the state,” said the letter.

What the coalition and others are seeking is some way around the so-called “SALT Cap,” put in place by the 2017 federal Tax Cuts and Jobs Act, which limited to $10,000 the amount of deductions a taxpayer could take on his federal taxes for the state and local taxes paid, which the coalition’s letter said, “hurts people and businesses across California.” The vehicle for addressing the SALT Cap is Senate Bill 104.

Act Now! SB 104 is scheduled to be heard in the Senate Budget Governance and Finance Committee this week, Thursday, March 25, but any letter expressing your support must be submitted by today, Monday, March 22. Click here for a sample letter that you can tailor to your liking. You can then submit it directly to the committee right here.

“Does labor ever lose a priority issue in the State Capitol?” asks Pedrotti rhetorically. “We can’t recall the last time, and we’ve been doing this for a while. And it happened again this week. Over the objections of more than 110 employer organizations expressing strong opposition to the Paid Leave bill, labor again prevailed with the passage of SB 95 (Skinner) which would mandate the addition of up to 80 hours of employer-paid COVID-19 sick leave. And it’s retroactive to January 1, 2021.

SB 95 applies to all employees who work for a public or private employer with more than 25 employees. “Lest we forget,” adds Pedrotti, “California already allows numerous other leave provisions. The employer community is especially worried about the retroactive provisions … Unless a business meticulously tracked the reasons for which an employee was out over the past few months (not required by current law), it will be almost impossible for an employer to question a request for retroactive payment. Additionally, employers are extremely concerned about the liability employers could face based on this retroactive mandate. It would likely take litigation to resolve the issue at a time when employers can least afford it. Score another for labor.

The governor signed Senate Bill 95 into law Friday. NFIB and its coalition partners opposing SB 95 can take some consolation in having succeeded in lobbying lawmakers to make it applicable to only businesses with more than 25 employees, but serious misgivings still remain, as explained in this letter.

You probably already know, but if not, this from the office of Assembly Member Autumn Burke, chair of Assembly Committee on Revenue and Taxation, “On Wednesday, March 17, 2021, the U.S. Treasury Department and the Internal Revenue Service (IRS) announced that the federal income tax filing due date for individuals will be automatically extended from April 15, 2021, to May 17, 2021. In response to the federal extension, California also extended the state’s tax filing and payment deadline for individuals to May 17, 2021. However, both the federal and state extensions do not apply to estimated tax payments due on April 15, 2021. The extension will provide taxpayers with additional time.”

On Tuesday, March 16, the U.S. Senate confirmed Isabel Guzman as administrator of the U.S. Small Business Administration. NFIB California had an excellent working relationship with Guzman when she headed California’s Office of the Small Business Advocate. In a news release, NFIB President and CEO Brad Close said, “NFIB congratulates Administrator Isabel Guzman on her confirmation as the next Administrator of the United States Small Business Administration. Administrator Guzman has a strong track record as an advocate for small businesses and we look forward to working with her to help small businesses navigate the SBA Economic Injury Disaster Loan and Paycheck Protection Programs.”

CORRECTION: Last week’s Main Street Minute meant to write “billion” not “trillion” in this corrected bullet. Apologies for the error
- The Rescue Plan Act was very generous to California, giving the Golden State $42.6 billion, the most of any state. Twenty-six billion dollars goes directly to the state, with the $16 billion balance going to cities, counties, and state capital projects.

Nationally

The big news of last week was U.S. House passage of a bill extending the authorization of PPP loans. In a news release praising the vote, Kevin Kuhlman, NFIB vice president of federal government relations, said, “NFIB is pleased the legislation will provide an additional two months to apply for a PPP loan and an additional 30 days for SBA to process pending applications, which will help ensure small business owners are not unfairly harmed by PPP processing delays. NFIB strongly supports the PPP Extension Act of 2021.”

Heads Up! On March 25, the next NFIB-member Federal Ballot will launch. In 1943, NFIB founder C. Wilson Harder established the first NFIB Federal Ballot with “one member, one vote” to lead NFIB’s policy positions. This year’s questions will cover:
- Small business paid leave mandate exemptions
- Health insurance flexibility
- Credit card processing options
- Federal contracting limitations
- Taxpayer-backed pandemic business interruption insurance