On Friday, the Governor’s office announced that AB 80 has been put on hold. AB 80, as initially drafted, would provide at least partial conformity to the federal provision allowing Paycheck Protection Program (PPP) loan borrowers to deduct expenses paid with PPP forgiven loan amounts.
The state is awaiting additional guidance from the U.S. Treasury Department to see if AB 80 can be enacted.
At issue is a provision in the American Rescue Plan Act that bans states who are receiving additional funding through the Act from using these funds to enact state income tax cuts. What this prohibition encompasses is a wide open question and the Governor and Legislature are waiting for guidance to see if AB 80 can actually be enacted.
As an alternative, our sources report that the state might provide additional grants or other ways to help small businesses.
We will keep you posted as soon as there are any further developments.
In the meantime, we highly recommend that, unless we get guidance in time, you plan to send extension payments on the appropriate voucher to the FTB and pay an amount due based on the assumption that legislation will not be enacted.
The Governor’s press release can be found here: