California Largely (But Not Fully) Conforms to Deductibility of Expenses Paid with Forgiven PPP Loans

Sheppard Mullin Richter & Hampton LLP
Contact

Sheppard Mullin Richter & Hampton LLP

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.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.