Governor Newsom Signs Law Clarifying PPP Loan Deductions for CA Taxes

Yesterday, California Governor Gavin Newsom signed AB 80 into law, more than three months after it was first passed in the Assembly. This bill gives businesses who have received PPP loan assistance the power to deduct expenses on their taxes. AB 80 also includes deductibility for all Emergency Injury Disaster Loan (EIDL) forgivable loans due to the Consolidated Appropriations Act. To be eligible, businesses must have received at least a 25% reduction in gross receipts since 2019 and cannot be a publicly-traded company.

AB 80 went through several months of negotiations between Democrats and Republicans until lawmakers decided to add selected provisions from a similar bill, SB 265. The two parties compromised on the 25% reduction in gross receipts minimum and the non-publicly traded company eligibility requirements, which makes this bill bipartisan. Many lawmakers are relieved and in favor of the outcome, as well as numerous small business owners who have been frustrated and waiting for solutions. AB 80 will allow small businesses to get back on their feet as the economy recovers.

Policymakers have embraced the spirit of SB 265 and made COVID-19 relief tax-free for small businesses. Many believe that AB 80 is a huge improvement over the $150,000 deductibility cap that legislative leaders agreed upon two months ago, which would have harmed many job creators. Many believe that there is still a lot more work that needs to be done to include those who have been left out of the AB 80 since many who applied for and received pandemic relief funds need every dollar to stay open.

Talley’s professionals have spent hundreds of hours reviewing the law, regulations and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.