Details of Public Law 117-2, section 5001 , Modifications to the Paycheck Protection Program

The section allocates an additional $7.25 billion towards Paycheck Protection Program (PPP) funding under the existing PPP sections, and expands eligibility under the PPP program for First Draw and Second Draw PPP loans.

The section expands PPP eligibility to include an "additional covered nonprofit entity," which includes certain Code 501(c) nonprofit organizations that employ no more than 500 employees per physical location. An additional covered nonprofit entity is eligible for a PPP loan if the organization employs no more than 300 employees; does not receive more than 15 percent of its receipts from lobbying activities; lobbying activities do not comprise more than 15 percent of the organization's total activities; and the cost of lobbying activities does not exceed $1,000,000 during the most recent tax year that ended prior to 2/15/2020.

The section also expands PPP eligibility to Internet-only news publishers and Internet-only periodical publishers that employ no more than 500 employees or the size standard established by the SBA administrator for the organization's North American Industry Classification code, per physical location of the publishing organization. These organizations must make a good faith certification that loan proceeds will be used to support expenses at the part of the business concern or organization that supports local or regional news.

California conforms to IRC section 61, as of the specified date of 1/1/2015, with modifications. California does not conform to IRC section 265, regarding expenses and interest relating to tax-exempt income, but instead has stand-alone language that disallows certain deductions related to tax-exempt income.

For taxable years beginning on or after 1/1/2019, California amended sections 17131.8 and 24308.6 (AB 1577 Stats. 2020 Ch. 39 and AB 80 Stats. 2021 Ch. 17) to partially conform to the CARES Act and the CAA relating to:

Exclusions from gross income for PPP loan forgiveness and certain EIDL loan forgiveness,

The allowance of deductions for expenses paid with the forgiven loan amounts not included in income under such sections, and

The allowance of tax basis increases and not requiring tax attribute reduction as a result of those forgiven loan amounts being excluded from gross income.

For PPP loans forgiven, these sections do not apply to ineligible entities, which are defined as:

A publicly-traded company, the securities of which are listed on a national securities exchange, and

An entity that does not meet the gross receipts requirement by demonstrating at least a 25 percent reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. Special rules apply to entities that were not in business during certain quarters in 2019.

Taxpayers with loans forgiven under the Economic Injury Disaster Loan (EIDL) Grant or Targeted EIDL Advance, are not required to meet these qualifications to deduct expenses.