Like the remainder of our nation, many small companies in San Diego County have struggled to pay payments, hold their staff employed, and supply for his or her clients in the course of the COVID-19 pandemic. Due to the government-mandated shutdown, Congress created the Paycheck Protection Program final 12 months to supply forgivable loans to companies.
PPP gives a direct incentive for small companies to maintain their staff on payroll. These loans can be utilized to pay wages, advantages, hire, utilities, employee safety prices associated to COVID-19, and extra.
I supported the PPP and urged our federal representatives to extend funding when the preliminary cash shortly ran out as a consequence of excessive demand. The PPP saved many roles and helped blunt a number of the financial destruction that the COVID-19 shutdown induced.
A report issued by Yelp discovered that the financial disaster brought on by COVID-19 has induced greater than 19,000 companies to completely shut in California. If it had not been for the bipartisan CARES Act handed in 2020, or the Consolidated Appropriations Act handed late final 12 months that allowed for the PPP loans, many extra companies and jobs would have been misplaced.
Whereas the federal authorities has determined that the PPP funds and associated bills could be exempt from federal taxes, present California legislation continues to deal with them as taxable revenue. With out a legislative repair, small companies must pay taxes on federal help that was meant to assist them.
That’s the reason I assist Senate Bill 265 by Senator Andreas Borgeas that will make COVID-19 state and federal grants or loans absolutely tax deductible. SB 265 was launched in January, however as a consequence of Congress’ enactment of one other COVID-19 “stimulus” invoice, the prospect of performing shortly was thrown into query. It’s because the newest federal stimulus invoice comprises a provision that forestalls states from slicing taxes, which may have prohibited the state tax deductibility of PPP loans.
Fortunately, with the Might 17 tax submitting deadline quick approaching, the Treasury Division has lastly clarified that states like California could make PPP mortgage bills tax deductible.
The proverbial ball is now again within the court docket of the Legislature and Gov. Gavin Newsom. They’ll shortly cross SB 265 in the event that they select to take action and I’m dedicated to doing the whole lot I can to place the invoice up for a vote. I’ve little doubt that if it had been voted on in the present day, SB 265 would obtain sturdy bipartisan assist.
Sadly, there are discussions in Sacramento to make COVID-19 reduction solely partially tax deductible. The Governor and legislative Democrats beforehand agreed to a $150,000 cap on deductibility that will severely restrict any help to California’s small companies.
With California supposedly having fun with a price range “surplus,” it is unnecessary to penalize small companies for accepting federal help — particularly for the reason that feds have made such help absolutely tax deductible.
With legislative Republicans and small companies sounding the alarm on the flawed cap proposal and supporting Senator Borgeas’ SB 265, there may be motion in the direction of a extra favorable proposal coming from legislative Democrats and the Governor. Allow us to hope that’s the case, or higher but, allow us to hope they assist SB 265.
I’ll proceed to do what I can to assist San Diego County’s small companies. For instance, I led a bipartisan effort final December asking the Governor to reclassify restaurants as essential businesses and undertake the business’s protocols that will permit them to function safely.
Working with my colleagues, we authored bipartisan laws to offer greater than $2 billion in state grants to small companies and nonprofits affected by COVID-19, which the Governor signed into legislation. This effort started final December once I co-authored Senate Invoice 74, the Keep California Working Act, which in the end led to legislative leaders agreeing to incorporate a lot of the act in a price range invoice.
Small companies are the spine of our economic system. As an alternative of sticking them with a pricey tax invoice, the Legislature and Governor ought to approve SB 265 now.
Sen. Patricia Bates, a Republican, represents the thirty sixth Senate District within the California Legislature, overlaying northern San Diego and southern Orange counties.