Update: PPP & State Tax Deductibility


PPP Tax Deductions

As you know, we have been fighting hard for the statewide restaurant community as it relates to how the state treats your Paycheck Protection Program (PPP) tax deductions.

With your help, we averted a vote to limit your deductions on your state tax return and have fought for weeks for restaurants to get full deductibility.

In fact, we were almost across the finish line with success, when suddenly the new federal relief legislation signed by President Biden created some confusion (at minimum.)


Confusion Over Language in Federal Relief Bill

That provision in the American Rescue Plan Act seems to suggest that states who take the federal relief money, may not enact state tax relief.

The CRA believes this provision was not intended to deflate the relief provided by the bipartisan Congressional deal on the Paycheck Protection Program. We are seeking clarification on this provision, through outreach to our federal representatives and additional pressure on state officials.

Governor Newsom, Senate Pro Tem Toni Atkins, and Assembly Speaker Anthony Rendon issued a press release, committing to seek clarification and providing relief. That release can be found here. We also submitted an urgent Request for Clarification on H.R. 1319 to Treasury Secretary Janet Yellen. That request can be found here.


Assembly Bill 80

As we’ve shared with you before, AB 80 is a bill that, as initially drafted, would provide at least partial conformity to the federal provision allowing PPP loan borrowers to deduct expenses paid with PPP forgiven loan amounts. The CRA has worked hard to push this bill in the direction of full conformity for restaurants. However, with the recent development at the federal level, the state is awaiting additional guidance from the U.S. Treasury Department to see how to proceed with AB 80. On Friday, the Governor’s Office announced that AB 80 is on hold for now.

We will keep you posted as soon as there are any further developments, we know how critical the substance of this issue is, as well as the need for timely solution as we approach the tax filing deadline.