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AB-1380 Taxation: Federal Consolidated Appropriations Act, 2021. (2021-2022)

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Date Published: 02/19/2021 09:00 PM
AB1380:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1380


Introduced by Assembly Member Fong
(Coauthors: Assembly Members Megan Dahle and Valladares)

February 19, 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 1380, as introduced, Fong. Taxation: Federal Consolidated Appropriations Act, 2021.
The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally define “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 Coronavirus Aid, Relief, and Economic Security Act (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 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.
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 specified 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 modified conformity with the federal CARES Act and its subsequent amendments. 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 or 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). 116-142), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).

(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.

(b) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2020, Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply.
(c) (1) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2020, Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided in this subdivision.
(2) Subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “UNITED STATES TREASURY PROGRAM MANAGEMENT AUTHORITY.--For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.”
(3) Subsections (b), (c), (d), and (e) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply.

(c)

(d) 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). 116-142), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(e) For the purposes of complying with Section 41 with respect to this section and Section 24308.6, the Legislature finds and declares as follows:
(1) The specific goal, purpose, and objective that the tax expenditure will achieve is to provide California businesses relief from taxation on expenses made with Paycheck Protection Program loans.
(2) Detailed performance indicators for the Legislature to use in determining whether the tax expenditure meets the goals, purposes, and objectives stated in subdivision (a) are the following:
(A) The number of businesses claiming expenditures made with Paycheck Protection Program loans.
(B) The change in total deductions, in dollars, taken by businesses for taxable years after enactment of the amendments made by this bill, compared to the total deductions for taxable years prior to the enactment of the amendments made by this bill.
(3) Notwithstanding Section 19542, the Franchise Tax Board shall provide a written report, in compliance with Section 9795 of the Government Code, containing data on the performance indicators described in subdivision (b) to the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, the Assembly and Senate Committees on Appropriations, the Assembly Committee on Revenue and Taxation, and the Senate Committee on Governance and Finance.
(f) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2020.

SEC. 2.

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

24308.6.
 (a) For taxable years beginning on and or 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).116-142), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).

(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.

(b) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2020, Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply.
(c) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2020, Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided in this subdivision.
(2) Subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “UNITED STATES TREASURY PROGRAM MANAGEMENT AUTHORITY.--For purposes of the Internal Revenue Code of 1986” with “For purposes of this part.”
(3) Subsections (b), (c), (d), and (e) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply.

(c)

(d) 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). 116-142), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(e) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2020.

SEC. 3.

 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 providing California businesses relief from taxation on expenses made with 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. 4.

  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 provide, as soon as possible, California businesses relief from taxation on expenses made with Paycheck Protection Program loans, it is necessary that this act go into immediate effect.