Signed by Governor Gavin Newsom

Vote Smart's Synopsis:

Vote to pass a bill that authorizes businesses and other organizations to deduct Paycheck Protection Program loans as expenses on their taxes.

Highlights:

• Specifies for taxable years beginning on and or after January 1, 2020, 2019, gross income does not include any covered loan amount forgiven according to the Coronavirus Aid, Relief, and Economic Security Act, according to the Paycheck Protection Program and Health Care Enhancement Act, or according to the Paycheck Protection Program Flexibility Act of 2020 (Sec. 2.a).

• Specifies the goal, purpose, and objective that the deductions, tax basis, and other attributes will achieve is to assist small businesses operating in the state that have been harmed economically by the COVID-19 pandemic (Sec. 3.a).

• Specifies detailed performance indicators for the Legislature to use in determining whether the deductions, tax basis, and other attributes meet the goal, purpose, and objective is the extent to which the businesses that received the Payroll Protection Program (PPP) loans and subsequently used the deductions, tax basis, and other attributes reflect the industries, regions, and businesses by type of ownership that were most substantially harmed by the COVID-19 pandemic, and whether any particular industries, regions, or businesses by type of ownership in the business community were not able to participate in the PPP loans and the deductions, tax basis, and other attributes (Sec. 3.b).

• Requires the Legislative Analyst’s Office to collaborate with the Franchise Tax Board, as well as reviewing other publicly available data, to analyze whether the PPP loans and the tax benefits of the deductions, tax basis, and other attributes were distributed evenly over industries, regions, and businesses by type of ownership harmed by the COVID-19 pandemic and report by January 1, 2024 (Sec. 3.c).

• Establishes the data collection requirements for determining whether the deductions, tax basis, and other attributes meet, or fail to meet, the specific goal, purpose, and objective are (Sec. 3.d):

• To assist the Legislature in determining whether the deductions, tax basis, and other attributes meet the specific goal, purpose, and objective and to carry out its duties the Legislative Analyst’s Office may request information from the Franchise Tax Board; and

• The Franchise Tax Board can provide any available data requested by the Legislative Analyst’s Office

• Alleges the deductions and other tax benefits authorized by the Revenue and Taxation Code serve the public purpose of securing the financial condition of businesses that were economically harmed by the COVID-19 pandemic and do not constitute a gift of public funds within the meaning of the California Constitution (Sec. 4).

Full Bill Text