Democratic Gov. Gavin Newsom and top Democrats in the state Assembly and Senate said in a Friday statement that they temporarily shelved legislative discussions on conforming to the federal treatment of Paycheck Protection Program loans until the U.S. Department of the Treasury releases guidance on the American Rescue Plan Act
. The new law imposes certain restrictions on states using its batch of federal aid to cut taxes.California enacted a law in September that allowed businesses to exclude PPP loan amounts under the federal Coronavirus Aid, Relief and Economic Security Act
for state tax purposes, but denied businesses a deduction for expenses paid from the loans. A pending bill, A.B. 80, would allow businesses to deduct up to $150,000 of business expenses paid for by PPP loans and would provide an exclusion for loans issued under December's Consolidated Appropriations Act .A.B. 80, which has passed the Assembly and is awaiting action in the Senate, is estimated to cost the state about $6 billion in tax revenue over six fiscal years, according to an analysis of the bill.
"The legislation that would conform to the federal tax treatment of these grants will be delayed temporarily while we seek detailed guidance from the U.S. Treasury Department," Newsom, Senate President pro Tempore Toni Atkins, D-San Diego, and Assembly Speaker Anthony Rendon, D-Lakewood, said.
--Additional reporting by Asha Glover. Editing by Neil Cohen.
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