Under a new administration in the upcoming year, U.S. small businesses will hopefully make even bigger strides. Potentially sweeping reforms, such as a tax code overhaul, are awaiting enactment. However, until the inaugural ball is over, businesses will remain in suspense over pending legislation. Small businesses may have reason to feel optimistic because of a seemingly pro-business environment. Undoubtedly, legislative changes will have a small business impact. In the meantime, California continues to enact legislative incentives to encourage general and small business growth.
Central Market Street & Tenderloin Area Payroll Expense Tax Exclusion
To encourage businesses to set up shop in the Central Market Street & Tenderloin Area, the City of San Francisco offers a payroll expense and tax exclusion. The properties eligible for the exclusion under the Enterprise Zone initiative are defined on the OEWD map . Under Section 906.3, businesses that occupy commercial space in the Area for business transactions can increase their payroll base for up to six years with no additional tax. However, they would still be responsible for paying the annual (base year) payroll tax. Small businesses that qualify for the exclusion would be able to hire for positions that demand higher salaries, or to add more employees. The tax exclusion remains in effect through May 20, 2019. Applications for the 2016 tax year are now being accepted.
California Competes Tax Credit (CCTR)
Businesses that want to relocate, grow or stay in California may be eligible for the California Competes Tax Credit. An extension of the California business tax code, CCTR allows a business, including small businesses, to recapture a portion of capital expenditures if projected company milestones are met. All companies must document expenses for their business projects. A small business that receives a credit agreement is not subject to a review, unless the state’s GO-Biz determines a review is necessary. GO-Biz defines a small business as “a trade or business with less than $2 million gross receipts.” It further states, “GO-Biz specifies if a credit agreement is [suitable] for a small business.” FTB Notice 2014-02 states, “Subdivision (d) of Sections 17059.2 and 23689 of the Revenue and Taxation Code require the FTB to review the books and records of all taxpayers awarded a CCC (aka CCTR) other than taxpayers that are small businesses.” Enacted for tax year 2014, CCTR is in effect until January 1, 2025.
California Home Made Food Act
Many blue chip companies now on prestigious stock exchanges were once home based. They started in the family kitchen, tool shed, garage or the basement. Some homeowners converted rooms into home offices. However, home based businesses have their own burdens: registration, qualifying for commercial use, income reporting, licensing, zoning restrictions, and state and jurisdiction regulations. California heavily regulates certain businesses, such as home based child care. In California, the home based small business got a history-making breakthrough in 2012 when the California Assembly signed into law the California Home Made Food Act, AB-1616. A delicious piece of legislation, AB-1616 allows home based chefs and bakers to sell baked goods and other freshly prepared food products without having to invest in commercial kitchen space, and the commercial home based kitchen is exempt from zoning laws and other regulatory restrictions. The ingredients in homemade treats, such as jams, jellies, teas, spices, roasted coffees and gourmet specialties, must be non-hazardous. That is, they should not contain meat, trans fat oils, or dairy. Ideally, these goodies should also be gluten-free, non-GMO, and unencumbered with salt and sugar. Naturally, chemical additives are a no-no! The bill opens new opportunity for the cottage food business. Home cooks are already working their way into the shared economy. The next Airbnb chapter may be a story of sharing kitchen space to prepare shared community meals.
This article was written by Linda Cameron for CBS Small Business Pulse.