2022-28: Tax refunds and other tax relief contained in California budget deal


The Governor and legislative leaders have reached a 2022–23 budget agreement that contains tax refunds to combat inflation and other major tax relief. These agreements are contained in various budget trailer bills that will be voted on by the California General Assembly shortly. Here are some highlights of these provisions.

AB 192/SB 192 authorizes approximately $9.5 billion in tax refunds, ranging from $400 to $1,050 for married filing joint and $200 to $700 for all other taxpayers depending on their California AGI, and whether they claim any dependent credits. To download a table specifying who qualifies for what amounts, go to:

www.caltax.com/files/2022/cataxrefunds.pdf

To qualify, the taxpayer must:

  • Be a California resident on the date the payment is issued, and for at least six months during the 2020 calendar year;
  • Have filed their 2020 tax return by October 15, 2021; and
  • Not be claimed as a dependent on another taxpayer’s 2020 California tax return.

AB 194/SB 194 contain the following key provisions:

  • Extend the partial conformity to the federal treatment of Paycheck Protection Program loan forgiveness to apply to PPP loans approved after March 2021 (AB 80’s 25% gross receipts reduction threshold would still apply to deduct expenses paid with these forgiven loans);
  • Enact first-time penalty abatement beginning on or after January 1, 2022. Unlike the federal first-time tax abatement, penalty abatement would only be available once rather than once every four years;
  • Enact a partial sales and use tax exemption for diesel fuel for the period October 1, 2022, through October 1, 2023;
  • Allow the 2020 and 2021 Main Street Small Business Tax Credits to be claimed on an amended tax return; and
  • Extend the California Competes Tax Credit by five years, through the 2027–28 fiscal year.

In addition, AB 195/SB 195 would:

  • Repeal the cannabis cultivation tax;
  • Revise the cannabis excise tax so it is collected at the point of retail sale; and
  • Allow qualified cannabis businesses to claim a credit of up to 25% of their qualified expenditures (employment compensation, safety-related equipment, training and services, and workforce development and safety training) up to $250,000 maximum.

Noticeably absent is any clean-up legislation relating to the passthrough entity elective tax.

The full text of the bills is available at the California Legislative Information website:

https://go.spidell.com/e/837113/faces-home-xhtml/3g9qx8/824216359?h=V9IAb1ZQNcyO50NrwhiZ4mXvrVm7FVBTggFpSxW_tTw


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