Gov. Gavin Newsom signed Assembly Bill (AB) 80 last week, which is expected to help small businesses recover from the pandemic with a $6.2 billion tax cut over the next six years.
“Small business owners are not only huddling with their accountants because it's tax season,” said John Kabateck, California state director for the National Federation of Independent Business (NFIB). “They're trying to figure out their very financial futures and whether they can even keep their doors open so this couldn't come at a better or more appropriate time as they're trying to figure out what to do with their futures and the futures of the people who work for them.”
Introduced by Assemblymember Autumn Burke (D-Inglewood), AB 80 forgives Paycheck Protection Program (PPP) loans that businesses received from the federal government during the COVID-19 shutdown and provides for the money not to be counted as taxable income.
“This is not a rebate check or money back in their pockets but it's clearly a credit that is an offset that will help them,” Kabateck told the Southern California Record. “It helps ensure that many small businesses that have been creeping their way towards recovery do not find themselves set back miles and miles because of a surprise tax bill or because of a lack of loan forgiveness.”
The State Assembly unanimously approved AB 80 with a 75-0 vote and the State Senate with a 37-0 vote but there are no provisions in the bill for businesses that did not receive PPP loans.
“We're hopeful that the mere fact that a lot of these small businesses that are having their loans forgiven are able to keep their doors open, employees working and money coming through the door means that other small businesses out there, whether they received a loan or not but work well in business to business transactions, are going to be able to thrive and grow again due to that ripple effect,” Kabateck said.
The $6.2 billion tax cut is expected to benefit owners of beauty salons, restaurants, dental offices, and other mom and pop businesses, according to a press release
“Now we are hoping the governor and legislators will do the right thing by bringing clarity and parity to state and local tax relief,” Kabateck said. “We’re looking at SALT reforms that would lift that $10,000 cap in terms of deductibility for small business owners.”
Former President Trump signed a tax plan in 2017 called the Tax Cuts and Jobs Act, which included a limit on State and Local Tax (SALT), which allows residents who live in high-tax states, such as California, to deduct SALT payments from their federal income tax returns according to media reports.
“We're sensing millions of smiles and sighs of relief on Main Street because of this great AB 80 action and what would be a perfect capper is SALT reform because it would help so many small businesses and pastors that are still uncertain about their future,” Kabateck added.