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AB-936 Personal Income Taxes: Corporation Taxes: gross income: Federal Consolidated Appropriations Act, 2021.(2021-2022)

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Date Published: 02/17/2021 09:00 PM
AB936:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 936

Introduced by Assembly Member Chen
(Coauthor: Assembly Member Patterson)

February 17, 2021

An act to amend Sections 17131.8 and 24308.6 of the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


AB 936, as introduced, Chen. Personal Income Taxes: Corporation Taxes: gross income: Federal Consolidated Appropriations Act, 2021.
The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provide various exclusions from gross income. Existing law, in conformity with the federal CARES Act, and its subsequent amendments in the Paycheck Protection Program and Health Care Enhancement Act and the Paycheck Protection Program Flexibility Act of 2020, among other things, excludes any amounts of covered loans forgiven under the CARES Act from gross income for purposes of the Personal Income Tax Law and the Corporation Tax Law. Existing law reduces the amount of any credit or deduction otherwise allowed under the Personal Income Tax and the Corporation Tax Law for any amount paid or incurred by the taxpayer upon which this exclusion is based by the amount of the exclusion allowed.
Existing federal law, the Consolidated Appropriations Act, 2021, prohibits reductions in tax deductions, denials of basis adjustments, and reductions in tax attributes for federal income tax purposes based on the exclusion from gross income provided in the federal CARES Act and its subsequent amendments.
This bill would adopt the provisions of the Consolidated Appropriations Act, 2021, prohibiting any reduction in tax deductions, denials of basis adjustments, and reductions in tax attributes based on the exclusion from gross income provided for any loan amount forgiven in conformity with the federal CARES Act and its subsequent amendments.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would provide findings to comply with the additional information requirement for any bill authorizing a new tax expenditure.
This bill would also make findings and declarations related to a gift of public funds.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17131.8 of the Revenue and Taxation Code is amended to read:

17131.8.
 (a) For taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), or pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142).
(b) Any credit or deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section. For purposes of this part, the provisions of Section 276 of the federal Consolidated Appropriations Act, 2021 (Public Law 116-260), clarifying the tax treatment of forgiveness of covered loans, shall apply.
(c) For purposes of this section, “covered loan” has the same meaning as in Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).

SEC. 2.

 Section 24308.6 of the Revenue and Taxation Code is amended to read:

24308.6.
 (a) For taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), or pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142).
(b) Any credit or deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section. For purposes of this part, the provisions of Section 276 of the federal Consolidated Appropriations Act, 2021 (Public Law 116-260), clarifying the tax treatment of forgiveness of covered loans, shall apply.
(c) For purposes of this section, “covered loan” has the same meaning as in Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136).

SEC. 3.

 For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares the following the purposes, goals, and objectives of the new tax expenditure created by this bill are the following:
(a) To help Californians realize the maximum benefit of the Paycheck Protection Program loans, and thereby promote economic recovery from the disruptions caused by the global COVID-19 pandemic.
(b) Without a change in statute, small businesses with forgiven Paycheck Protection Program loans are facing a likely tax, thereby undermining the purpose of the original loans.
(c) Conforming to federal tax law for state tax purposes is in the best interest of the taxpayer and tax administrators.

SEC. 4.

 The Legislature hereby finds and declares that the deductions and other tax benefits authorized by the amendments to Sections 17131.8 and 24308.6 of the Revenue and Taxation Code made by this bill serve the public purpose of securing the financial condition of businesses that offer essential goods and services such as food, health care, and dental care by maximizing the benefit of Paycheck Protection Program loans, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.

SEC. 5.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent the closure of essential businesses by maximizing the benefit of the Paycheck Protections Program loans, it is necessary that this measure take effect immediately.