(Sacramento, CA) – Assemblymember James C. Ramos (D - Highland) and Senator Anthony J. Portantino (D - La Canada Flintridge) bill to replace the minimum franchise tax with one that will benefit California’s small businesses has cleared the legislature and will be heading to the Governor’s desk to be considered for law.
“As a small business owner in the Inland Empire, I know the financial challenges many business owners face. 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,” said Assemblymember Ramos.
“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.
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. SB 349 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
SB 349 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 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.
The Governor has until October 13 to sign or veto SB 349. If he takes no action before the deadline, the bill automatically becomes law.
For Immediate Release
Friday, September 13, 2019
Contact: Brendan Wiles (909) 476-5023
Follow Assemblymember Ramos on social media: Facebook @AsmJamesRamos / Twitter @AsmJamesRamos / Instagram @asmjamesramos
Assemblymember James Ramos proudly represents the 40th Assembly district which includes Highland, Loma Linda, Mentone, Rancho Cucamonga, Redlands, and San Bernardino.
Assemblymember James Ramos secured $16 million in state funding for the 40th Assembly District in the 2019-2020 State Budget. Click here to read more.