For the legislative and political week May 17-21
Welcome to the May 17 edition of the NFIB California Main Street Minute from your NFIB small-business advocacy team in Sacramento.
Happy Tax Day
Yes, no one wants to celebrate such a day. But we hope two huge successes your NFIB team in Sacramento helped achieve this year make tax compliance a little more bearable and tax payments a little less onerous.
- One is the lobbying efforts to have Gov. Gavin Newsom include a SALT (State and Local Taxes) adjustment into his previous state budget proposal. It allows S Corporations, limited liability corporations, and partnerships to restructure their state income taxes in a way that reduces their federal income taxes.
- The second accomplishment is the passage of Assembly Bill 80, which conforms state law to federal law with respect to the tax treatment of Paycheck Protection Program (PPP) and loans.
Still on hold
We would love to have called the following bills achievements, all of them well on their way to passage aided by NFIB support. But they still await U.S. Treasury Sect. Janet Yellen’s green light that they do not clash with provisions of the American Rescue Plan Act, or they await a decision in one of four court cases NFIB is involved in. They are:
- Assembly Bill 62, which provides a tax credit for complying with Cal/OSHA’s COVID-19 regulations
- Assembly Bill 91, which would reduce the Minimum Franchise Tax fee from $800 to $400 and to $200 for microbusinesses
- Assembly Bill 632, another bill reducing the Minimum Franchise Tax fee based on gross revenues
- Assembly Bill 664, suspending the Minimum Franchise Tax Fee until the governor lifts the state of emergency
- Assembly Bill 259, a tax credit for alcohol licenses
- Assembly Bill 1146, which would enact the California Property Tax Small Business Rent Relief Act, authorizing a county to establish a local property small business rent forgiveness and tax relief program.
That’s billions with a ‘B’
The big news of last week will reverberate this week: Gov. Gavin Newsom’s revised budget forecast. The numbers astound and there’s no looking back in history for comparison because Friday’s announcement is unprecedented.
- The state finds itself with a $75 billion surplus thanks to the taxpayers of California. Add to that the $25 billion it will receive in federal stimulus money, and it makes for a nice, $100 billion down-payment on the governor’s proposed $267.8 billion in spending for the 2021-2022 fiscal year, which starts on July 1.
- Negotiations with the Legislature will alter some of the numbers before the final product is unveiled before or on June 15, the constitutional deadline for passing a state budget.
No steak knives for you
- Kevin Pedrotti, NFIB California’s chief legislative advocate, offered this first take on the governor’s revised budget.
- “As part of the California State Budget May revision released by Governor Newsom over the course of this week, he announced that households earning up to $75,000 a year would get $600 payments, with an additional $500 if they have children. This selective refund is made possible by a $75.7 billion budget surplus, the result of a surging stock market and tax structure that relies on top income earners who by and large did well during the year-long shutdown. Those that generated some of the $75 billion get zilch, not even some cheap steak knives.”
… And for small business?
- Reports The Sacramento Bee, “Newsom’s proposal would pour an additional $1.5 billion in COVID-19 relief grants for small businesses, building on a previous $2.5 billion allotment he and the Legislature approved earlier this year.
- “Businesses that earned less than $2.5 million in annual revenue based on their most recent tax return would eligible for up to $25,000. Businesses must be impacted by the COVID-19 in some ways to be eligible.”
- The above Bee report, as well as the Los Angeles Times, quote State Director John Kabateck on Newsom’s announcement of $1.5 billion in additional grant money for small businesses.
Day of reckoning looms
- As of May 13, California had borrowed $20.3 billion from the federal government to keep its Unemployment Fund solvent—money that will have to be paid back.
- The governor’s revised budget seems to indicate he’s aware of the problem, but the $1.1 billion he wants to throw at it would have us believe he’s not very much worried about it.
- According to the state’s Employment Development Department, “California employers fund regular Unemployment Insurance (UI) benefits through contributions to the state’s UI Trust Fund on behalf of each employee. They also pay separate FUTA taxes to the federal government to help pay for the administration of the UI program, UI loans to insolvent states, and federal extension benefits. Any additional employer FUTA contributions are used to help repay any outstanding federal UI loan the state may have.”
- The paltry amount the governor wants to commit to solving the problem has NFIB and other business associations extremely worried. The California Business Roundtable went so far as to say, “The UI Fund deficit is the biggest threat to all businesses in California and their ability to bring back workers to their jobs … California businesses already pay the highest unemployment fund tax rate, plus a 15 percent surcharge. Without a significant investment from the state to address the massive UI Fund debt, businesses will be on the hook to pay for debt that [they] didn’t create and cannot afford to pay back.”
Turning to something a little lighter …
State Director John Kabateck and his brother, Brian, a top consumer attorney, are the Tom and Dick Smothers for the Sacramento set, and they are back with another in a series of KabaTalk podcasts. Their most recent one had California State Treasurer Fiona Ma as the guest. Check out the lively and informative discussion the brothers had with her by clicking here.
Speaking of Tax Day.
- Let it never be forgotten that NFIB alone pounded the table and demanded small-business tax relief be included in the 2017 Tax Cuts and Jobs Act. The result of which secured the 20% Small Business Deduction (IRS form 1040, line 13), which expires in 2025.
- NFIB has produced a video of small-business owners talking about how important that deduction has been to them, which you can see here.
Please join us this Wednesday, May 19
- President Joe Biden proposed significant federal tax changes and labor mandates in his infrastructure agenda. On May 19, NFIB will host a webinar on the important small business changes in his plan. Click here to learn more and to register for the webinar.
Small business survival
- This week, NFIB will launch “Small Business Survival,” a campaign to protect small businesses from tax increases and labor mandates.
Save the date
- NFIB Virtual Fly-In is June 22-23
Next Main Street Minute, May 24.