This week the Legislature passed, and the Governor signed a $300 billion state budget that includes a number of targeted tax benefits for businesses, plus one-time increases in other areas.
The budget also included a $17 billion inflation relief package that includes tax refunds to Californians on a sliding scale based on income. It takes a small step toward returning the state’s unemployment insurance fund to solvency, committing $250 million toward the $17.7 billion the state owes the federal government.
Targeted Tax Benefits
As proposed by the Governor in his May budget revision, the adopted budget includes targeted tax benefits for businesses, such as:
• Extending the CalCompetes tax credit program for five years at $180 million per year, and extending the CalCompetes grant program for another year at $120 million.
• Fully conforming California law to the extended federal Paycheck Protection Program (PPP), which prevents these federal grants from being subject to state taxation.
• Another $500 million for a grant program administered by the Small Business Advocate to provide additional relief to small businesses most affected by the pandemic, focusing on the top 10 industries hardest hit by the pandemic.
The adopted budget continues to add to the state’s reserve to provide a cushion against future downturns in the economy. It also includes funding to help stabilize state energy supplies over the summer if renewable energy is insufficient to meet the demand for power.
Tax relief programs in the adopted budget include:
• A temporary reduction to the diesel sales tax.
• Funding for rental assistance and payments for outstanding utility bills built up during the pandemic.
• Hazard pay for working through the COVID-19 pandemic to doctors, nurses and other frontline health care workers, as well as on-site employees in supportive services for health care facilities.