AB 80, the California bill to allow deductions for expenses paid with forgiven PPP debt, has been amended to include significant changes. This bill is not yet final, but here is a summary of the important changes included in the current version:
- There is no longer a $150,000 limit on the amount of expenses that may be deducted.
- However, to qualify to take the deductions, a business must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. If the entity was not in business during all of 2019, then the business must show a 25% reduction in gross receipts during any quarter in 2020 from the 2019 calendar quarters it was in operation. If the PPP application was submitted on or after January 1, 2021, then the fourth quarter of 2020 may be used as well. If they were in business for all of 2019, they can also compare calendar-year 2019 to calendar-year 2020. This language mirrors the gross receipt reduction requirement for eligibility for second draw PPP loans. However, the bill does not include any of the other restrictions from that provision, such as an employee limit.
Our sources say that this bill should be passed by the Legislature in the next few weeks. We will continue to monitor the progress of this bill, and will update you on any changes with future Flash E-mails. (Please make sure your e-mails from Spidell are not going to your spam folder.)
The full text of the bill is available at: