Personal Income Taxes: Corporation Taxes: gross income: Federal Consolidated Appropriations Act, 2021.
Impact
The enactment of AB 708 is a strategic move to support small and essential businesses in California that have faced economic hardships due to the COVID-19 pandemic. The legislation clarifies that forgiven loans will not be classified as taxable income, thereby encouraging businesses to utilize the Paycheck Protection Program (PPP) and similar federal financial aid without the concern of tax implications. This bill aims to facilitate recovery by ensuring that these funds can bolster business continuity without incurring additional financial burdens.
Summary
Assembly Bill 708, introduced by Assembly Member Eduardo Garcia, aims to amend Sections 17131.8 and 24308.6 of the Revenue and Taxation Code concerning personal and corporate income taxes. Specifically, the bill seeks to exclude any covered loan amount forgiven under certain federal acts, including the CARES Act and its subsequent amendments, from gross income calculations for state tax purposes. This exclusion applies retroactively from January 1, 2020, thus aligning state tax law with federal provisions and offering immediate financial relief to qualifying businesses.
Contention
However, the bill could face scrutiny regarding its implications for state revenue and the potential for increased fiscal burdens on the state budget. While proponents argue that it serves the public good by stimulating recovery efforts, critics may contend that it inadvertently benefits larger corporations that qualify for substantial loans under the federal programs, rather than focusing solely on supporting smaller, more vulnerable enterprises. This balance in prioritization could be a point of contention in future discussions about the effectiveness of COVID-19 economic relief measures.