Bill To Allow Some Businesses To Deduct PPP Loan Assistance Passes in Senate

A bill that would give eligible businesses that received Paycheck Protection Program (PPP) loan assistance the power to deduct expenses on their taxes passed in the Senate on Monday over three months after it was first passed in the Assembly.

Assembly Bill 80, authored by Assemblywoman Autumn Burke (D-Marina del Rey), would specifically give businesses that have received at least a 25% reduction in gross receipts since 2019 and must not be a publicly traded company. In addition to the state tax deductibility of 100% of allowable business expenses paid by using PPP loans, AB 80 will also include deductibility for all Emergency Injury Disaster Loan (EIDL) forgivable loans due to the recently passed Consolidated Appropriations Act.

The bill will allow businesses which take advantage of AB 80, to also conform to federal tax guidelines.

AB 80 had been under negotiations between Democrats and Republicans for several months over the inclusion of several provisions from the similar SB 265, a Senator Andreas Borgeas (R-Fresno) authored bill that would give full deductibility to all businesses that received PPP loans in favor of a $150,000 deductibility cap that had been touted by the Governor and other lawmakers sever months ago.

Lawmakers eventually decided to add some provisions from SB 265 into AB 80 and compromised on the 25% reduction in gross receipts minimum and non-publicly traded company eligibility requirements, making the bill fully bipartisan.

“Frustrated small businesses have been waiting months for a solution. I applaud Senator Borgeas for bringing this idea to the table and for the legislature for getting behind this bipartisan effort to help our struggling job creators,” stated Senator Scott Wilk (R-Santa Clarita) on Monday. “What we passed today provides a solution for many small businesses who are struggling to get back on their feet. As I’ve said in the past, a win for bipartisanship is a win for our small business community because good ideas shouldn’t have party lines.”

Other lawmakers approved of the passage of AB 80 on Monday as well.

A bipartisan bill

“I’m glad the Legislature today has embraced the spirit of Senator Andreas Borgeas’ Senate Bill 265 and made COVID-19 relief tax-free for many small businesses,” added Senator Patricia Bates (R-Laguna Niguel). “This is a huge improvement over the $150,000 deductibility cap that the Governor and legislative leaders agreed to two months ago that would have harmed many job creators. I joined small businesses in sounding the alarm over the cap proposal and our efforts have made a difference.

“With California supposedly enjoying a budget ‘surplus,’ it makes no sense to penalize small businesses for accepting federal assistance — especially since the feds have made such assistance fully tax deductible. With today’s vote, we will finally end the ridiculous scenario of punishing businesses for accepting federal COVID-19 relief.”

However, despite the compromise and the passage of AB 80 in the Senate on Monday, many Republican lawmakers emphasized the need to assist businesses not covered by the bill for full tax conformity, as well as to help out more businesses in the state.

“Businesses that have received assistance during the pandemic should not be penalized by the state,” said Senator Borgeas on Monday. “I appreciate legislative leaders including key provisions of SB 265 into the emergency budget bill to help struggling businesses. However, much work remains to include businesses left out of AB 80, and California needs full tax conformity to allow for full deductibility for all businesses. Those who applied for and received pandemic relief funds need every dollar to stay afloat.”

Business owners have been overwhelmingly in favor of the bill, as it would help many businesses hit especially hard by COVID-19.

“I don’t know what else to say except this bill will save a lot of us,” said LA business owner Geoffrey Plant to the Globe. “It may not seem like a lot to some people, but it really, really is.”

AB 80 is due to go back to the Assembly for passage again due to significant amendments and changes from when it was passed previously in January in the coming weeks.