A bill Governor Gavin Newsom signed into law in February has positive tax implications for businesses, while a second bill requires certain companies to provide workers with COVID-19 sick leave without giving the employers tax relief in return.
Senate Bill 113 restores the net operating loss, or NOL, deduction and removes the 2020 cap on business tax credits, including for research and development. Lifting of the restrictions comes a year early and affects taxable years starting on or after Jan. 1, 2022. The tax credits had been limited to $5 million per year, while the NOL deductions were suspended for businesses with income of at least $1 million. The governor’s office says the bill means a near-term benefit of $5.5 billion for businesses.
Meanwhile, Senate Bill 114 requires companies with more than 25 employees to provide up to 80 hours of COVID-19-related supplemental paid sick leave in 2022. The bill, which is retroactive to Jan. 1, provides no offsetting tax credits for the companies. It takes effect on Feb. 19 and expires on Sept. 30. The bill doesn’t require employees to exhaust other sick leave before tapping the provision.
If you have questions about either bill, please contact the experts at RJI CPAs at (949) 852-1600 or firstname.lastname@example.org.