California's Partial PPP Conformity BillPartial PPP Conformity Bill: On April 29, 2021, Governor Newsom signed into law Assembly Bill No. 80 (“AB 80”). Providing partial conformity to the Federal tax treatment for deducting expenses. These are paid with Paycheck Protection Program (“PPP”) loans, EIDL advance, and targeted grants. Below are some of the key highlights of the bill’s provisions:
- For taxable years beginning on or after January 1, 2019, California will exclude from taxable income forgiven PPP loans, EIDL advance, and targeted grants
- Expenses (paid with PPP proceeds) are deductible only if the business had a 25% gross receipt reduction in 2020 in comparison to 2019 (similar to the 2nd round of PPP application requirements)
- The 25% gross receipts reduction test can be applied by comparing calendar quarters for tax years 2019 to 2020. Can also be for the entire calendar year, if the business operated all of 2019
- Funds received from EIDL advance are not subject to the 25% gross receipts reduction test
- What will be the procedure for taxpayers who have already filed returns?
- How can a taxpayer attest that there is a 25% reduction in gross receipts on a specific quarter?
- What documentation or disclosures are required to be filed with the tax return related to this?
- Is there an additional tax form that taxpayers need to file related to this matter?