California PPP Tax Conformity Update

California has yet to make a final determination on whether to conform state tax code to current federal tax rules related to the treatment of expenses associated with forgiven Paycheck Protection Program (PPP) loans.
 
Earlier this evening Gov. Newsom and legislative leaders released the following statement updating the status of PPP conformity and additional support for businesses and employees grappling with the impacts of the pandemic:
 
"With small businesses and their employees still suffering from the consequences of COVID-19, we continue to work on measures to provide them additional relief related to federal Paycheck Protection Program (PPP) loans, as was done last year under AB 1577.
 
"The legislation that would conform to the federal tax treatment of these grants will be delayed temporarily while we seek detailed guidance from the U.S. Treasury Department regarding provisions in the American Rescue Plan Act signed yesterday by President Biden.
 
"We remain committed to an equitable and broad-based recovery and acting expeditiously to provide additional relief to businesses in the state—especially those that have been hardest hit by COVID-19, such as bars, restaurants, barbers, nail and hair salons and performing arts venues, among others."

You can also find the statement on the governor's website.

AB 80 was introduced earlier this month as a legislative vehicle to partially conform and allow some PPP related deductions for state tax purposes. However, this bill has not been acted upon by the Legislature.
 
CalCPA has been urging immediate action on PPP conformity and continues to communicate to policy leaders that without action, California small businesses that received a PPP loan will face significant and unexpected tax consequences.

– March 12, 2021