California New Jobs Credit for Small Businesses


Many employers have not taken this credit and may not be aware of it.

Are you one of those employers? If so, read on and contact a BPM advisor to find out more.

Beginning in 2009, the California Franchise Tax Board set up a New Jobs Credit, which allows small businesses to receive up to a $3,000 credit for each additional full-time employee they hire. The board allocated $400 million for this tax credit. However, as of July 31, 2013, less than half of the credit has been claimed.

Small businesses still have the opportunity to reap the benefits of the New Jobs Credit.

Below is detailed information, taken from the California Franchise Tax Board, about the credit and how to qualify:

About the Credit

  • A new tax credit of up to $3,000 for each additional full-time employee hired is available to small businesses with 20 or fewer employees beginning January 1, 2009. The credit is prorated on an annual full-time equivalent basis for employees employed less than a full year.
  • The credit is not subject to the 50% limitation for business credits.
  • The credit must be claimed on a timely filed original return received by the Franchise Tax Board on or before a cut-off date specified by the Franchise Tax Board.
  • Taxpayers claiming the credit on an original return received by the Franchise Tax Board after the cut-off date is met will be notified that the credit has been denied.
  • Taxpayers that have been denied the credit as a result of the cut-off date being reached will not be assessed an underpayment of estimated tax or underpayment of tax penalty to the extent the underpayment was created or increased by the disallowance of this credit.

How to Qualify

An employer will qualify for the credit if:

  • Each qualified full-time hourly employee is paid wages for not less than an average of 35 hours per week.
  • Each qualified full-time employee that is a salaried employee was paid compensation during the year for full-time employment.
  • On the last day of the preceding taxable year, they employed a total of 20 or fewer employees.
  • There is a net increase in qualified full-time employees compared to the preceding taxable year. For taxpayers who first commence doing business in California during the taxable year, the number of qualified full-time employees employed in the preceding year would generally be zero, unless certain special rules apply.