Tax & AccountingAugust 26, 2021

State Tax Breaks for Businesses Hit Hard by Pandemic

By: CCH AnswerConnect Editorial

State Tax Breaks for Businesses Hit Hard by Pandemic

Since the start of the COVID-19 pandemic, many taxpayer-relief measures have been provided to businesses by both the federal government and the states. Some examples of the pandemic-related tax breaks are:

  • extended tax filing and payment due dates;
  • an exclusion from income for forgiven PPP loan amounts;
  • income tax exemptions for various relief benefits and grants;
  • a 5-year carryback for NOLs arising in 2018, 2019, and 2020, with no 80% of taxable income limitation until 2021; and
  • an increase in the business interest limitation.

Beyond those relief provisions, it is also worth noting that states and localities have enacted a number of special incentives aimed at helping the industries hardest hit by the pandemic, such as restaurants and entertainment venues.

Some of those special pandemic tax break programs are highlighted below.

New York Restaurant Return-to-Work Credit

New York enacted a restaurant return-to-work credit program, under which qualifying restaurants can receive a $5,000 tax credit for new hires, up to a maximum of $50,000.

The credit is available to small, independently-owned restaurants in New York City, or in areas that were designated as an Orange Zone or a Red Zone for at least 30 consecutive days by the State Department of Health during the COVID-19 emergency. Eligible restaurants will be required to demonstrate COVID-related losses and show proof of hiring at least one full-time worker at the restaurant.

The program also includes a fast-track option that will allow restaurants to claim the credit as an advance payment ahead of filing their 2021 tax returns.

New York City Musical and Theatrical Production Credit

New York also enacted the New York City musical and theatrical production credit. Under the two-year program, eligible companies can receive tax credits of 25% of qualified production expenditures. First-year applicants can receive up to $3 million per production, with second-year applications being eligible for up to $1.5 million.

The program will offset some of the costs associated with producing a show, including production costs for sets, costumes, wardrobes, makeup, technical support, salaries, sound, lighting, and staging.

California Small Business Hiring Credit

For qualified small business employers, California allows small business hiring credits, designed to provide some financial relief to small businesses for the economic disruptions resulting from COVID-19 that have led to unprecedented job losses. The credits are allowed for taxable years beginning on or after January 1, 2020, and before January 1, 2021, and also for taxable years beginning on or after January 1, 2021, and before January 1, 2022.

The tax year 2020 credit equals $1,000 for each net increase in qualified employees, limited to $100,000 per employer. The tax year 2021 credit equals $1,000 for each net increase in qualified employees, limited to $150,000 per employer, minus the amount of any credit allocated to the employer under the original small business hiring credit provisions.

Iowa High Quality Jobs Program

For purposes of the high quality jobs program, which provides tax credits and other benefits to qualifying businesses, Iowa enacted legislation to ignore an applicant’s reduction in operations if the reduction occurred after March 1, 2020, and was caused by COVID-19. The change is effective through June 30, 2022.

Louisiana One-Time Credit for Restaurants and Bars

Louisiana enacted a one-time refundable credit against income tax for restaurants and bars affected by the COVID-19 pandemic. The credit, which was applicable to income tax periods beginning January 1, 2020, through December 31, 2020, was equal to the amount of annual license or permit fees paid by owners of restaurants and bars attributable to any month when the holder’s operations were temporarily closed under certain proclamations declaring a statewide COVID-19 public health emergency.

Louisiana Quality Jobs Program

Louisiana enacted a law authorizing certain COVID-19 impacted businesses to participate in the quality jobs program, which provides rebates to qualifying firms.

Specifically, certain businesses classified as COVID-19 impacted industries that have no more than 50 employees nationwide can participate in the program, including:

  • retail trade;
  • restaurants and bars; and
  • accommodations.

Pennsylvania Entertainment Economic Enhancement Program

Pennsylvania amended the Entertainment Economic Enhancement Program to include a COVID-19 Emergency Assistance Program. Specifically, among other enacted changes, streaming performances are permitted under the PA Live Events Industry Covid-19 Emergency Assistance Program for fiscal years beginning on July 1, 2021, and ending June 30, 2023.

Colorado Deduction for Bars and Restaurants

Colorado enacted a law providing for a temporary deduction from state net taxable sales for qualifying retailers in the bar, restaurant, catering, and mobile food services industries. The resulting state sales tax is allowed to be retained by the business permanently to help with business disruptions due to the COVID-19 pandemic.

Virginia Exemption for Personal Protective Equipment

Virginia enacted a temporary sales tax exemption for personal protective equipment. The exemption is available to any business that has in place a COVID-19 safety protocol that complies with the Emergency Temporary Standard issued by the Virginia Department of Labor and Industry and that meets certain other requirements (such as complying with all applicable federal, state, and local laws, and being consistent with best practices for infection prevention and workplace hygiene).

San Francisco Relief for Restaurants and Entertainment Venues

To mitigate the economic harm inflicted by the COVID-19 emergency, San Francisco, California, enacted tax and fee relief for restaurants and entertainment venues. The relief includes waivers of certain license fees, business registration fees, and payroll expense taxes. The city also extended various payment and filing deadlines. 

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