SACRAMENTO – Senator Borgeas is requesting Governor Gavin Newsom support legislative efforts that would make state and federal COVID-19 relief dollars free from tax liability for businesses and allow them to fully deduct expenses paid for with forgiven loans.
“Businesses might be surprised to learn that pandemic relief funds they received may be considered taxable events,” said Senator Borgeas, the author of Senate Bill 265. “Struggling businesses should not have to turn down relief simply because they cannot afford to be taxed on it by California.”
The state of California has yet to fully conform to the federal tax laws, which exempt COVID-19 relief funds as taxable events. This could leave many struggling businesses with major tax liabilities.
“With tax season approaching, there is concern among many businesses that the state of California is attempting to tax federal assistance and generate extra revenue,” added Senator Borgeas. “This is fundamentally unfair and that is why I am urging Governor Gavin Newsom and legislative leaders to include these provisions in the next early action budget bill.”
Senate Bill 265 would apply to both future pandemic-related relief funds as well as retroactively to recipients who have already received funds. The bill has been designated as an ‘urgency’ measure and would go into effect immediately upon receiving Governor Newsom’s signature.