Electronic tax

California offers restaurant tax breaks, but new charges too

Photo by Gavin Newsom of Shutterstock

In a concession to the California restaurant industry, Gov. Gavin Newsom said Monday his administration would exclude Paycheck Protection Program (PPP) loans and Restaurant Revitalization Fund (RRF) grants from income. taxable by operators.

The provision is part of a spending and income plan that calls for a number of other measures with implications for the restaurant industry, including a reduction in higher-than-state corporate tax rates. imposed at the start of the pandemic. The state believed at the time that it would probably generate a huge deficit if not for the then current fiscal year due to increased spending to combat the crisis and a drop in personal income tax. individuals. Instead, California ended up with a large surplus of funds.

Newsom is now asking for emergency tariffs to expire a year earlier than originally planned.

Separately, Newsom over the weekend released indications that it would ask the state legislature to reinstate some form of paid sick leave for workers who contract COVID-19. An emergency measure enacted by the governor in March 2021 required all employers of at least 26 people to grant up to 80 hours of paid leave to employees who contract the disease. Newson said some recovery is needed due to escalating infections from the omicron coronavirus.

Newsom’s proposed budget for fiscal year 2022-2023 aims to implement the exclusion of federal aid from taxable small business income at the time businesses file state taxes for the previous year. The governor’s office said the move would save restaurants and other small businesses an estimated $ 130 million on their taxes for 2021-2022, $ 144 million on their returns for 2022-2023 and more than $ 500 million. in total.

The proposals garnered praise from the state’s restaurant industry. “The California Restaurant Association commends Governor Newsom for his thoughtful budget approach, which will help thousands of small businesses – including restaurants – as they attempt to weather the fallout from the pandemic, ”the trade group said in a statement. “These proposals could tip the balance. , giving more restaurants a greater chance to stay open. “

The federal government has previously indicated that it will not consider canceled P3 loans and RRF grants as taxable income. Both forms of aid were aimed at helping restaurateurs survive the loss of business due to the closure of dining halls by state governments and social distancing efforts by jurisdictions at all levels.

“The CRA particularly appreciates the Governor’s proposal to align state law with federal rules that ensure restaurants receiving federal aid grants do not have to pay tax on those grants, helping restaurants that have counted on federal assistance to get through the pandemic, ”the restaurant association said in its press release.

There are more restaurants in California than in any other state. The country’s third largest state is also home to numerous restaurant chains, including Chipotle, The Cheesecake Factory, and BJ’s.

Update: This version of the story includes the addition of commentary from the California Restaurant Association.

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