Good news for Californians. California AB 80, passed in the Senate on April 26, 2021 and presented to the Governor for approval today, is scheduled to take effect immediately as an urgency statute. As stated in California’s Legislative Counsel Digest, “the bill would exclude, for taxable years beginning on or after January 1, 2019, from gross income any advance grant amount, as defined, issued pursuant to specified provisions of the CARES Act or the Consolidated Appropriations Act, 2021, and covered loan amounts forgiven pursuant to the Consolidated Appropriations Act, 2021.” In other words, California will conform to federal regulations relating to PPP loans. Up until now, California intended to tax the grant amounts as income and or disallow expenses paid with the grant money. But Californians can breathe a sigh of relief.
- This bill would adopt, except as provided, the provisions of the Consolidated Appropriations Act, 2021, prohibiting any reduction in tax deductions, denials of basis adjustments, and reductions in tax attributes based on the exclusion from gross income provided for any loan amount forgiven in modified conformity with the federal CARES Act and its subsequent amendments;
- Provide findings to comply with the additional information requirement for any bill authorizing a new tax expenditure;
- Make findings and declarations related to a gift of public funds.
AB 80 has temporarily delayed California state tax filings as many California businesses and their tax preparers seek clarity in order to properly advise their clients in the preparation of their tax returns. This regulatory change will help ensure businesses rebound stronger with tax relief provisions that continue to assist businesses hit hardest by the COVID-19 pandemic.