Treasury Department Releases Important PPP Conformity Directive
The Department of the Treasury has released a long-awaited directive that will allow the California Legislature to move forward with their PPP conformity bill, AB 80
. This bill would allow taxpayers to deduct up to $150,000 in business expenses paid with forgiven PPP loans. While AB 80 has not yet been signed into law, this news means that California will likely be moving quickly to enact the legislation.
CSEA has been closely following AB 80 throughout this legislative session. California had been holding off on moving forward with AB 80 out of concern that that the state would miss out on federal relief funds due to the “offset provision” in the American Rescue Plan Act of 2021. This provision states that federal relief funds may not be used by states and territories to offset a reduction in net tax revenue resulting from certain changes in law.
However, according to IRS and the Treasury Department, income tax changes that conform a state or territory’s tax law with recent changes in federal income tax law, regardless of the particular method of conformity or their effect on net tax revenue, are permissible. You can read the full news release here
We will continue to keep our Members apprised of additional updates as they become available.