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On April 29, 2021 Governor Newsom signed California A.B. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program (PPP) loans. The $150,000 limitation in prior versions of A.B. 80 was removed, and replaced with a requirement that only non-publicly traded companies who reported losses of at least 25% in gross receipts during one quarter of 2020 can deduct such expenses. That 25% decrease in gross receipts was also a condition for receiving a PPP loan in the second round of loans made available in late 2020. Publicly traded companies cannot deduct any amount of expenses paid with funds from forgiven PPP loans.
A.B. 80 also provides that Economic Injury Disaster Loan (EIDL) advance grants received under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act of 2021 are not included in gross income.
The changes were made via amending to California Revenue and Taxation sections 17131.8 and 24308.6, and are generally applicable to taxable years beginning on or after January 1, 2019.
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