Assembly Bill 80 (AB80) is now officially law in California, providing partial conformity to federal law allowing taxpayers to deduct expenses paid with Paycheck Protection Program (PPP) forgiven loan amounts as well as Economic Injury Disaster Loans (EIDL) targeted and advance grants.
Effective retroactively to post-2018 taxable years, California excludes both forgiven PPP loans and EIDL advance and targeted grants from taxable income and allows eligible taxpayers to deduct expenses paid with these amounts. However, only PPP loan recipients who meet the 25% gross receipt reduction eligibility test applied to second draw PPP loan applicants are eligible to claim deductions for amounts paid with their forgiven PPP debt. The 25% gross receipt threshold requirement does not apply to EIDL advance/targeted grant recipients for income exclusions or deductions.
The Franchise Tax Board is expected to issue additional guidance on how the new law will be applied.
Our team will continue to work with you to file your taxes before the federal and state deadlines. If you have any questions please do not hesitate to contact us at (818) 789 1179.