Personal Income Taxes: Corporation Taxes: gross income: Federal Consolidated Appropriations Act, 2021.
This legislation is designed to prevent potential tax liabilities that could arise for small businesses due to forgiven PPP loans. By formally adopting the federal standards into state law, AB 936 aims to alleviate the financial burden on businesses that have faced significant challenges due to the COVID-19 pandemic. The bill's immediate enactment as an urgency statute reflects the urgent need to secure the financial stability of these businesses, particularly those providing essential services like food and healthcare.
Assembly Bill 936, introduced by Assembly Member Chen, seeks to amend specific sections of the Revenue and Taxation Code to align state personal income and corporation tax laws with federal provisions outlined in the Consolidated Appropriations Act of 2021. The bill aims to ensure that amounts of covered loans forgiven under the federal CARES Act are not included in gross income calculations for taxable years beginning on and after January 1, 2020. This exclusion is critical for businesses that have received Paycheck Protection Program (PPP) loans, as it directly impacts their taxable income and corresponding tax liabilities.
Although the bill has garnered broad support for its intention to protect small businesses, there are concerns regarding the long-term implications of conforming state tax laws to federal regulations. Critics argue that reliance on federal provisions may constrain the state's ability to tailor tax policies that address specific local economic conditions. Furthermore, there are ongoing debates over the adequacy of support for businesses that may not qualify for PPP loans, highlighting the need for a more comprehensive approach to economic recovery.