Posted on Jul 9, 2021

Wilson Tax Law Group - Newport Beach Tax Attorney

FTB Provides Additional Tax Guidance PPP Loan Forgiveness - On June 2, 2021, the California Franchise Tax Board (FTB) issued much anticipated guidance concerning loan forgiveness related to the Paycheck Protection Program (PPP).    Originally, California enacted legislation to tax the PPP loan forgiveness by not allowing businesses to deduct  necessary and ordinary operating expenses (including payroll) paid using emergency PPP funds.  California based its legislation on an IRS ruling that held the same. The federal government subsequently enacted legislation reversing the IRS from taking this position based on certain income requirements.  Uncertainty arose whether California would reverse course and conform with the federal government.  California delayed doing so right away due to concerns it had related to jeopardizing billions of dollars in federal stimulus aid it had received.   The federal stimulus funds California received had strings attached.  To receive the stimulus funds California had to agree not to lower any any taxes.   Allowing businesses to deduct legitimate business expenses lowers the taxes it owes.   Of course this is the right result.  Moreover, legislation to not allow the deduction of legitimate business expenses increases taxes.   After many months of uncertainty, public unrest and debate, California worked it out and enacted legislation to conform with the IRS.   On April 29, 2021, AB 80 was enacted which allowed more income exclus
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