California Governor Gavin Newsom’s proposed budget for FY 2020-21 projected a $7 billion surplus and record state spending, but his revised budget projects as much as a $54 billion deficit in light of COVID-19’s impact on the state’s economy and deep revenue reductions. Newsom’s May Revision Budget—the last official estimate of revenues and spending before the enactment of the actual budget for 2020–21 in June—includes tax proposals as a critical component of his plan to raise new revenues to help fill California’s budget hole.
It should be noted that the Governor’s post-COVID-19 budget does maintain a handful of tax relief proposals for individuals, small businesses and the film industry originally proposed in January, including:
- Exemption From Minimum Franchise Tax for limited liability companies and certain partnerships, projected to reduce revenues by $50 million in 2020–21 and $100 million in 2021–22
- Extension of Sales Tax Exemption for Diaper and Menstrual Products to July 1, 2023, projected to reduce revenues by $48 million annually
- Extension of Carryforward Period for Film Tax Credits from six to nine years; revenue reduction to be determined
The Legislature will review these tax proposals and is likely to modify them or make alternative proposals as it works to put together and pass a balanced budget by its June 15 constitutional deadline to send a budget to the Governor.
For more information: ManattManatt
May 29, 2020