Senator Suzette Valladares (R-Santa Clarita) announced the introduction of Senate Bill 816, the small business tax relief bill, which would exempt small businesses, with 25 or fewer employees and maximum gross receipts of $5 million, from paying the state’s $800 annual franchise tax.

SB 816 is aimed at reducing financial barriers for small businesses, encouraging new startups and stimulating economic growth in California.

“Small businesses have long been the backbone of California’s economy, driving innovation, job creation and contributing vibrancy to our local economies,” said Senator Valladares. “But California’s excessive taxes and fees make the dream of owning a small business out of reach for too many Californians.  We must do more to expand opportunity and encourage innovation, not deter it. This needed tax relief for small businesses will reduce a major financial hurdle and allow more Californians to pursue their entrepreneurial dreams.”

California currently requires every corporation that is incorporated, registered, or doing business in the state to pay an annual minimum franchise tax of $800, regardless of the size, income, or profitability of the business. This fixed financial obligation has become a significant burden, particularly for small businesses, which often operate on tight margins and limited resources. SB 816 seeks to change that by providing cost relief to small businesses.

“With its high taxes and fees, California is a difficult place to run a small business,” said Andres Kabrera, owner of Rio Latin Bistro in Lancaster, California. “Eliminating the franchise tax would give us the breathing room we need to invest, hire more employees and improve our services. Every dollar saved is a dollar reinvested into building a stronger, more sustainable business.”

This tax exemption bill would apply to taxable years beginning on or after January 1, 2025, and would provide immediate financial relief to the state’s smallest businesses, allowing valuable resources to be directed toward growth and innovation, rather than excessive tax payments.

“If passed, this bill will expand opportunity for millions of Californians who have a dream to start or expand a small business. We must do more to make the American Dream a reality for more Californians,” concluded Senator Valladares.