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New Bill Proposes Restaurant Tax Credit

AB 259 creates the Protecting Our Restaurants Tax Credit

By Chris Micheli, March 4, 2021 6:50 am

Assemblywoman Laurie Davies (R-Laguna Niguel) introduced Assembly Bill 259 to enact a tax credit for restaurants. The bill would add and repeal Section 23632 of the Revenue and Taxation Code. As a tax levy, the bill would take effect upon the bill being approved.

Section One of the bill would name the bill the Protecting Our Restaurants Tax Credit. Section Two of the bill would make two legislative findings and declarations that restaurants have faced a significant financial burden as a result of local ordinances closing businesses due to the pandemic. In addition, financial assistance must be provided to reduce the number of restaurants that must permanently closed.

Section Three of the bill would add Section 23632 to the Revenue and Taxation Code, to provide a tax credit between January 1, 2020 through December 31, 2021. The credit would be 50% of the annual fee paid or incurred by an owner or operator of the qualified taxpayer for an alcohol license during the taxable year.

The bill would define the terms “alcohol license” and “qualified taxpayer,” which is an establishment that has received an alcohol license. In addition, the credit would be in lieu of any other deduction that the qualified taxpayer may claim with respect to the costs paid or incurred by a taxpayer for an alcohol license or permit fee.

Section Four of the bill would make legislative findings and declarations to comply with Revenue and Taxation Code Section 41. It would provide specific objectives for this new tax credit in an effort to relieve part of the significant financial burden that restaurants have faced as a result of local ordinances closing businesses due to the COVID-19 pandemic. The Legislative Analyst would be required to conduct a study to review the effectiveness of the credit.

The bill is likely to be heard later this month.

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