(Sacramento, CA) – Assemblymember James C. Ramos (D - Highland) and Senator Anthony J. Portantino (D - La Canada Flintridge) have introduced a bill to replace the minimum franchise tax with one that will benefit California’s small businesses. This bill could lower a corporation’s franchise tax by $200 to $600 annually.
Under current law, California corporations pay either the minimum franchise tax (MFT) $800 to the Franchise Tax Board, or the measured franchise tax of 8.84 percent of apportioned net income, whichever is greater than $800. In this “one size fits all” structure, a newly formed corporation would pay the same MFT as a large established corporation. The bill proposed by Assemblymember Ramos and Senator Portantino would even the playing field by creating a fee structure based on a corporation’s annual gross receipts as follows:
- $200 for a corporation with less than $2.5 million in gross receipts
- $400 for a corporation with more than $2.5 million but less than $7.5 million
- $600 for a corporation with more than $7.5 million but less than $15 million
- $800 for a corporation with more than $15 million
This bill aims to create an equitable tax structure which fosters growth of small businesses and encourages entrepreneurship. California leads the nation with 3.9 million small businesses employing roughly half of the state’s workforce. Of all the small businesses in California, 1.6 million are minority owned. Small businesses also generate 43 percent of California’s $152.1 billion in international exports, which helps to diversify and strengthen the state’s economy.
“Small businesses in California continue to play an important part of our economic health. It is critical that we search for ways to help them. It is my hope that SB 349 will reduce the minimum franchise tax and help owners improve their business models to achieve financial success. I am very happy to join the California Small Business Association in this effort,” commented Senator Portantino.
“Small businesses shouldn’t be subject to the same taxes that large businesses pay. Reforming the minimum franchise tax will encourage more small businesses to incorporate in California. This good business practice has often been hampered by the cost of entry,” said California Small Business Association President Betty Jo Toccoli.
“As a small business owner in the Inland Empire, I know the financial challenges many business owners face,” said Assemblymember Ramos. “Small businesses are crucial to the state and local economy. Moving away from a ‘one size fits all’ approach to the franchise tax is a smart and simple way to modernize our laws and ensure that small businesses remain competitive. Reducing the financial burden required to operate a small business will continue to make California a great place to live and do business.”
Assemblymember James C. Ramos (D- Highland) and Senator Anthony Portantino (D- La Canada Flintridge) introduce SB 349, a bill to provide tax relief for small businesses.
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Assemblymember James Ramos proudly represents the 40th Assembly district which includes Highland, Loma Linda, Mentone, Rancho Cucamonga, Redlands, and San Bernardino.