January 23, 2022

Volume XII, Number 23

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January 21, 2022

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January 20, 2022

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

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.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 120
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About this Author

Hepworth, Associate, Sheppard Mullin
Associate

Justin Hepworth is an associate in the Tax and Estate Planning Practice Group in the firm's Orange County office.

Justin's practice focuses on tax transactional and controversy matters. He assists clients with multistate income, franchise, sales, and transfer tax issues. He advises on audit defense, voluntary disclosure agreements, unclaimed property planning, and other controversy and compliance matters. He has extensive experience handling nexus issues, sales tax exemption issues, state research and development credits, unitary business...

714-424-8293
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