California’s Governor Signs 3 Tax-Related Bills

Tax relief comes to California in the form of 2022-2023 budget bills. On July 5^th, 2022, Governor Gavin Newsom signed into law California Assembly Bills “AB” 192, 194, and 195.

Tax relief comes to California in the form of 2022-2023 budget bills. On July 5^th, 2022, Governor Gavin Newsom signed into law California Assembly Bills “AB” 192, 194, and 195.

AB 192 provides monetary relief by authorizing up to $700 in tax refunds for qualifying taxpayers with California AGI of up to $250,000 ($500,000 Head of Household) and up to $1,050 for Married Filing Jointly taxpayers with California AGI of up to $500,000. These payments are scheduled to come out at the end of October, at the earliest.  Taxpayers must meet the following conditions to qualify:

• Must have filed their 2020 individual tax returns by October 15^th, 2021;
• Must be a California resident;
• Must have been a California resident for 6 months or more between January 1^st, 2020 and December 31^st, 2020;
• Cannot be claimed as a dependent of another taxpayer.

AB 194 provides a multitude of tax-related provisions, but small businesses can expect:

• Extends California’s partial conformity to the federal treatment of Paycheck Protection Program (PPP) loan forgiveness to apply to PPP loans approved after March 2021. This form of forgiveness was previously taxable under California law.Taxpayers who already filed 2021 tax returns and included the PPP loan forgiveness as taxable COD income should file amended returns;
• Enacts a first-time late-filing penalty abatement program for individual taxpayers for tax years beginning on or after January 1, 2022. Only individuals who have filed all returns and paid or entered into an installment agreement for all outstanding tax liabilities (other than the late-filing penalty) qualify for the first-time penalty abatement. Unlike the federal first-time abatement program, California penalty abatement would only be available once in a lifetime rather than once every four years;
• Enacts a partial sale and use tax exemption for diesel fuel for the period October 1, 2022, through October 1, 2023;
• Allows the 2020 and 2021 Main Street Small Business Tax Credit to be claimed on an amended tax return; and
• Extends the California Competes Tax Credit by five years through the 2027–28 fiscal year. The credit is offered to incentivize businesses that want to come to California, and stay and grow in California.

AB 195 focuses on the Cannabis industry introducing new regulations and controls to this budding industry. Beginning January 1^st 2023, this bill suspends the cannabis cultivation tax and requires the cannabis excise tax to be collected at the point of sale rather than from the distributor. It also introduces a new credit for years beginning on or after January 1^st, 2023 – January 1^st, 2028 which is based on 25% of qualified expenditures incurred by a qualified cannabis business but is subject to limitations.

ATS knows that the complexity of tax law can be hard to understand if not a trained professional. Should you have any questions regarding the above assembly bills, please contact our office. We are happy to provide clarity.

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