California’s New employee retention credit: A Lifeline for Businesses
In response to the economic challenges brought on by the COVID-19 pandemic, California Governor Gavin Newsom has introduced a new program aimed at supporting struggling businesses. The California employee retention credit, also known as CERC, seeks to provide a lifeline to businesses by offering tax credits to help retain employees during these unprecedented times.
The CERC program was announced as part of California’s budget agreement for the 2021-2022 fiscal year and is available to businesses that have been significantly impacted by the pandemic. Eligible businesses include those in the industries most affected by COVID-19, such as restaurants, retailers, hospitality, and tourism.
The credit is designed to encourage businesses to retain their current workforce rather than resorting to layoffs or downsizing. By providing financial incentives, the program aims to alleviate the burden on businesses that are struggling to stay afloat and keep their employees on the payroll. This, in turn, helps promote economic stability and recovery in the state.
Under the CERC program, eligible employers can claim a tax credit against California state income or franchise tax equal to $1,000 per retained employee. To qualify for the credit, businesses must have experienced a revenue decline of at least 50% in any quarter of 2020 compared to the same quarter in 2019. Additionally, eligible businesses must have at least one full-time employee and cannot be engaged in certain restricted activities, such as real estate investment, lobbying, or gambling.
Applying for the CERC program is relatively straightforward. Eligible employers can apply by filing a tentative credit reservation with the California Department of tax and Fee Administration (CDTFA). Once approved, businesses can claim the credit on their annual state tax returns by entering the total number of retained employees on the appropriate line.
The CERC program is expected to benefit thousands of small and medium-sized businesses across California. By providing much-needed financial relief, it offers a glimmer of hope for businesses struggling to cover expenses and retain their talented workforce. The program aims to incentivize businesses to weather the storm and emerge stronger on the other side.
Moreover, the CERC program complements federal COVID-19 relief efforts, such as the employee retention credit (ERC) implemented by the Internal Revenue Service (IRS). By providing additional tax credits at the state level, California acknowledges the unique challenges faced by businesses within its borders and strives to support them in their recovery.
The California employee retention credit is undoubtedly a welcome development for businesses struggling to survive amidst the ongoing pandemic. Its focus on employee retention aligns with the broader goal of promoting economic stability and recovery in the state. By providing financial incentives to retain employees, the program offers a lifeline to businesses, giving them a fighting chance to bounce back from the unprecedented challenges brought on by COVID-19.
For businesses looking to take advantage of the CERC program, it is essential to review the eligibility requirements and submit the necessary applications promptly. The program’s benefits can help provide the necessary breathing room for businesses to navigate these uncertain times and emerge stronger on the other side.