PPP loans are not taxable income under the CDA backed bill signed by the governor
Two bills that will help dental office owners affected by the pandemic became law last week with the signing of Governor Gavin Newsom.
AB 1577 by Assembly Member Autumn Burke (D-Inglewood) conforms state law to federal law by amending the Tax and Tax Code to exclude all loan funds from the Protection Program from gross income paychecks that were canceled through the Federal Coronavirus Aid, Relief and Economic Security Act and subsequent changes to the Paycheck Protection Program and the Better Care Act health 2020.
The CARES Act clarified that PPP loans would not be considered taxable income for federal income tax purposes, but the law did not dictate whether states would consider loan income for state taxes. The new law will protect PPP loan recipients from potentially paying thousands of dollars in unexpected state income tax on their canceled PPP loans.
The gross income exclusion applies to taxable years beginning on January 1, 2020.
PPP loans can be canceled, according to the CARES Act and its amendments, if the loan recipient spends the funds for qualifying expenses within 24 weeks of loan distribution or before December 31, whichever occurs first. Eligible expenses include salary costs, interest on mortgage bonds, rent, and utility payments – but 60% of the loan must be spent on salary costs.
If a business owner has received a PPP loan but does not meet the loan cancellation criteria, they may be able to deduct business expenses that were spent with the loan proceeds. CDA recommends that practice owners consult their own accounting or tax advisor for specific advice.
$ 100 million small business hiring tax credit program
Qualifying small business employers who hire or rehire full-time equivalent employees between July 1 and November 30, 2020, will be eligible for tax credits of up to $ 1,000 in the tax year. in progress only.
Under SB 1447 by Sens. Steven Bradford (D-Gardena) and Anna Caballero (D-Salinas) and Asm. Sabrina Cervantes (D-Corona), the employer can receive the income tax credit or sales tax of $ 1,000 for each employee hired up to a maximum credit of $ 100,000.
A qualifying small business has 100 or fewer employees and must demonstrate a 50% decrease in gross revenue by comparing revenue between April 1 and June 30, 2020, with gross revenue from April 1 to June 30 2019.