Budget Time A Deeper Dive Into the $300 Billion Package.

• Author: Fox, Jason
• Position: CapitolBeat

In mid-June the Governor and the Legislature passed a framework of a state budget to meet constitutional deadlines. However, the substance of much of the budget package came later in July when a series of budget trailer bills was passed on a largely partisan vote. In the end, the package outlined a record $300 billion state budget that addresses a broad list of policy priorities.

A key piece of the budget package is $9.5 billion in inflation relief via the Middle Class Tax Refund implemented by the FTB as outlined by AB 192. Nearly 23 million taxpayers will receive a refund payment based on their adjusted gross income and whether they have a dependent. Payments may be as much as $ 1,050 for joint filers with a dependent with an income of $150,000 or less and will decrease for higher income earners. The FTB expects to begin payments by October of this year. Qualifications and estimated payment amounts can be found at ftb.ca.gov/middle-class-tax-refund.

Additional tax related provisions are included in AB 194, the tax policy budget trailer bill. Major components include:

* Extension of California state tax rules for Paycheck Protection Program (PPP) loans issued after March 2021 as part of the PPP Extension Act, the last round of the federal relief program. Prior to AB 194, California had only provided state tax relief for PPP loans issued before March 2021.

* Beginning after Jan. 1, 2022, a one-time penalty abatement for failure-to-file or failure-to-pay timely for individual taxpayers that have not previously been granted abatement, have filed all required returns, and have paid or is in a current arrangement to pay all outstanding tax liabilities.

* A partial tax exemption for diesel fuel for the period Oct.l, 2022, through Oct. 1,2023.

* Expands the Main Street Small Business Tax Credit by allowing it to be claimed on an amended return for 2020 and 2021 and extends the credit until Dec. 1, 2026.

* Expands eligibility for the Homelessness Hiring Tax Credit.

* Extends the California Competes Tax Credit by five years, through the 2027-28 fiscal year.

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