Summary of Federal Income Tax Changes

This section appropriates $21.55 billion in funding to states, territories, and tribes to grant financial assistance for rent, utilities, and other household related expenses to an eligible household. Grantees may allocate funds to eligible households, which includes a household that:

• Has one or more individuals that qualified for unemployment benefits or experienced a reduction in household income, incurred significant costs, or experienced other financial hardship during or due, directly or indirectly, to the coronavirus pandemic.
• Has one or more individuals that can demonstrate a risk of experiencing homelessness or housing instability.
• Is a low-income family, as defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)).

Funding is available to assist with rental payments for up to 18 months. This section also sets aside $2.5 billion for high-need grantees, which are areas with very low-income renter households paying more than 50 percent of income on rent or living in substandard or overcrowded conditions. Grantees may use excess funds for affordable rental housing and eviction prevention activities.

The section also extends the 2021 funds allocated under section 501 of the Consolidated Appropriations Act (CAA), PL 116-260, from 12/31/2021 to 9/30/2022.

California generally conforms to IRC section 61 as of the specified date of 1/1/2015, with modifications. California does not conform to the Emergency Rental Assistance program modifications under this section.

Senate Bill 91 (Stats. 2021, Ch. 2) established the State Rental Assistance Program to allocate federal rental assistance funds provided pursuant to the federal Emergency Rental Assistance program describe above, and uses the federal definition of eligible household.

California exempts the assistance payments provided by the federal Emergency Rental Assistance program, under section 501 of the CAA, from California taxable income for taxable years beginning on or after 1/1/2021, and provides that forgiveness of rent liability is not included in taxable income for taxable years beginning on or after 1/1/2020 and before 1/1/2025.

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.

California conforms to IRC section 61, as of the specified date of 1/1/2015, with modifications.

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

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.

This section establishes the Restaurant Revitalization Fund and appropriates $28.6 billion for the SBA to provide grants to an eligible entity. During the covered period, grants can be used for certain expenses incurred as a direct result of, or during, the COVID–19 pandemic. The specific expenses generally include payroll costs, principal or interest on mortgage payments, rent payments, utilities, maintenance expenses, supplies, food and beverage expenses, covered supplier costs, operational expenses, paid sick leave, and other expenses SBA determines to be essential to maintaining the eligible entity.

Eligible entities can receive a grant amount equal to their "pandemic-related revenue loss," which is defined as the eligible entity's gross receipts during 2020 minus their gross receipts during 2019, if the sum is more than $0. Different rules apply for eligible entities not in operation for all of 2019 that opened during 2020, or had incurred certain expenses but had not opened by the time of application. The aggregate grant amount cannot exceed $10 million to an eligible entity and any affiliated businesses of the eligible entity, and is limited to $5 million per physical location of the eligible entity. Eligible entities that do not use all grant funds or permanently cease operations on or before the last day of the covered period will be required to return any funds not used for allowable expenses.

The Tax Cuts and Jobs Act enacted a business loss limitation, restricting a noncorporate taxpayer’s losses to $250,000 ($500,000 in the case of a joint return) for tax years 2018 through 2025. Excess business losses are disallowed for the taxable year and are carried forward and treated as part of the taxpayer's NOL carryforward in subsequent taxable years. An excess business loss for the taxable year is the excess of aggregate deductions of the taxpayer attributable to the taxpayer's trades and businesses, over the sum of aggregate gross income or gain of the taxpayer plus a threshold amount.

Section 2304 of the CARES Act temporarily suspended this loss limitation, allowing taxpayers to deduct excess business losses arising in taxable years 2018 through 2020. This section extends the limit on excess business losses for one year, through taxable years beginning before January 1, 2027.

Under the PITL and CTL, California conforms to IRC section 461 as of the specified date of January 1, 2015, with modifications.

California has modified conformity to IRC section 461(l), relating to limitation on excess business losses on noncorporate taxpayers, for taxable years beginning after December 31, 2018. For California purposes, losses are treated as an excess business loss carryover to the following taxable year as opposed to a net operating loss carryover under IRC section 172. Therefore, California does not conform to the federal changes in the ARPA that allows excess business losses to be deducted for taxable years beginning after December 31, 2020, and ending before January 1, 2027.

This section allows assistance-eligible individuals (AEIs) to receive 100% premium assistance for COBRA premiums for any period of COBRA coverage during the period beginning on 4/1/2021 and ending on 9/30/2021. AEIs are individuals whose loss of coverage results from a reduction in hours or an involuntary termination of employment and who elect COBRA coverage. For tax years ending after 3/11/2021, AEIs are not eligible for the health coverage tax credit (HCTC) for any period of coverage in which they receive a COBRA premium assistance. COBRA premium assistance amounts are not be included in gross income.

Employers will be allowed a quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by AEIs. If the credit amount exceeds the quarterly Medicare payroll tax, the excess will be treated as a refundable overpayment. In addition, any amount of credit increase under this section is subject to the same denial of double benefit, and therefore gross income inclusion, as provided in sections 7001 and 7003 of the CAA.

Individuals receiving premium assistance who become eligible for coverage under a group health plan or Medicare must notify the plan providing COBRA premium assistance. If the individual fails to notify the plan, they may be subject to a penalty of $250 for each failure to notify, or in the case of a fraud a penalty equal to the greater of $250 or 110 percent of the premium assistance improperly received after eligibility for COBRA premium assistance ended.

Under the section, all US residents with adjusted gross income (AGI) of up to $75,000 for individuals filing as single, $112,500 for head of household filing status, and $150,000 for married individuals filing joint returns, who are not a dependent of another taxpayer, and have a valid social security number, are eligible for a rebate of $1,400, except for married individuals filing a joint return who are eligible for a rebate of $2,800. In addition, taxpayer’s are eligible for a rebate of $1,400 for each dependent.

The rebate amount is phased out completely at an AGI of $80,000 for individuals filing as single, $120,000 for head of household filing status, and $160,000 for married individuals filing joint returns.

California does not conform to the federal section that allows 2021 recovery rebates to individuals. The federal recovery rebate is treated as an advance refundable credit, so it is not included in income for state or federal purposes. (See FTB Legal Ruling 2001-3.)

California has authorized its own stimulus programs called the Golden State Stimulus I (GSS I) and GSS II.

Senate Bill 88 (Stats. 2021, Ch. 8), as amended by Assembly Bill 88 (Stats. 2021, Ch. 12), authorizes the California State Controller to make a one-time GSS I tax refund payment to qualified recipients in the amount of either $600 or $1,200. A qualified recipient shall not receive more than one payment.

Senate Bill 139 (Stats. 2021, Ch. 71) authorizes the California State Controller to make a one-time GSS II tax refund payment to qualified recipients an amount ($500, $600, $1,000, or $1,100) depending on their qualifications. A qualified recipient shall not receive more than one payment.

This section makes the following changes to the federal child tax credit:

• Increases the credit amount to $3,000, and to $3,600 in the case of a child under age six at end of the calendar year;
• Allows credit eligibility for children aged 17 and under at the end of the 2021 year;
• Phases out the credit amount for individuals with modified adjusted gross income (AGI) above:
  • $150,000 for married filing joint filing status;
  • 112,500 for head of household filing status;
  • $75,000 for all other filing statuses;
• The credit is refundable for taxpayers living in the US for more than half of the taxable year.
• Requires the Secretary of the Treasury to establish a program for making periodic advance payments to taxpayers of up to 50 percent of the estimated credit amount between July 2021 and December 2021.
• Requires an online portal to allow opting out of advance payments, or to provide information to make modifications to the credit amount.

The IRS will make payments to US territories with mirror code tax systems for tax years beginning after 12/31/2020, that equal the loss in revenue caused by the territory’s child tax credit mirror code tax systems for the taxable year. However, the child tax credit will not be allowed under the IRC to a territory resident if the mirror code tax systems allows a child tax credit against income taxes of the territory.

For taxable years beginning after 12/31/2020, a Puerto Rico bona fide resident may claim a fully refundable child tax credit by filing a return with the IRS. However, advance child tax credit payments are not available to Puerto Rico residents.

Under certain circumstances, the IRS will estimate and make payments to the American Samoa equal to the estimated aggregate benefits that American Samoa residents would have been allowed as a child tax credit if a mirror code tax system had been in effect in the taxable year. In addition, American Samoa bona fide residents may claim a fully refundable child tax credit by filing a return with IRS, under rules similar to those discussed above for Puerto Rico.

California does not conform to the federal child tax credit. Also, California does not have child tax credit payment sections relating to US territories, Puerto Rico, and the American Samoa.

California has a refundable Young Child Tax Credit (YCTC). The YCTC is allowed to an eligible individual who has been allowed the California Earned Income Tax Credit (EITC), has at least one qualifying child for the EITC, and has one qualifying child under the age of six years old as of the last day of the year. The maximum amount of the refundable credit is $1,000 and phases in at $25,000 of earned income and phases out at $30,000.

For the 2021 tax year, in the case of a taxpayer with no qualifying children, the minimum age to qualify for the Earned Income Tax Credit (EITC) is reduced from 25 to 19. However, if the individual is a specified student (or, in the case of a married individual, if both the individual and the individual’s spouse are specified students), the minimum age is reduced from 25 to 24. The section further reduces the minimum age to 18 for any qualified former foster youth or qualified homeless youth.

The section also temporarily removes the upper age limit on the credit for taxpayers with no qualifying children. Therefore, taxpayers 65 and older without qualifying children may claim the credit in 2021.

This section also increases the federal credit and phase out percentages and the earned income and phase out amounts for those that do not have a qualifying child.

This section also requires the Secretary of the Treasury to develop and implement procedures to use information returns under IRC section 6050S to check the status of individuals as specified students.

For purposes of the earned income tax credit (EITC), if the earned income for the 2021 taxable year is less than the earned income of a taxpayer for the 2019 taxable year, the taxpayer may elect to substitute the earned income of the 2019 taxable year for the earned income for the 2021 taxable year. In the case of a joint return, the earned income of the taxpayer for the 2019 taxable year is the sum of the earned income of each spouse for the 2019 taxable year.

For purposes of this section, the IRS shall treat the incorrect use of earned income on a return as a mathematical or clerical error. Also, except with regard to this section, the substitution of earned income shall have no effect on gross income under the IRC.

This section also authorizes the Secretary of the Treasury to make payments to US possessions with mirror code tax systems due to the application of this section relating to the EITC. For US possessions that do not have a mirror code tax system, the section authorizes payments for the EITC benefits that would result due to application of this section if such US possession had a mirror code tax system.

For each taxable year beginning on or after 1/1/2015, California’s PITL conforms to the federal EITC as in effect under federal law for that taxable year, with modifications. California does not conform to the section to substitute the earned income for the 2019 year for the earned income of the first taxable year that begins during 2021. Therefore, for purposes of the CalEITC, 2021 earned income must be used for the 2021 taxable year.

California does not have EITC payment sections relating to US possessions.

The section temporarily expands the child and dependent care tax credit for taxable years beginning after 12/31/2020, and before 1/1/2022. The section makes the credit refundable for a taxpayer who has a principal place of abode in the United States for more than one half of the taxable year. In the case of a joint return, refundability is allowed if at least one spouse satisfies the principal place of abode requirement.

In addition, the section increases the maximum credit rate from 35 percent to 50 percent and increases the amount at which the maximum credit rate begins to phase out from $15,000 to $125,000. The limitation on employment-related child and dependent care expenses is increased to $8,000 from $3,000 in the case of one qualifying individual and to $16,000 from $6,000 if there are two or more qualifying individuals.

The section applies a two-part phase out to the 50-percent credit rate. Under the first part, the 50-percent credit rate is reduced, but not below 20 percent, by one percentage point for each $2,000 (or fraction thereof) of adjusted gross income (AGI) above $125,000. Under the second part, the 20 percent credit rate "floor" is reduced, but not below zero, by one percentage point for each $2,000 (or fraction thereof) of AGI above $400,000.

This section also authorizes the Secretary of the Treasury to make payments to US possessions with mirror code tax systems due to the application of this section relating to the child and dependent care credit. For US possessions that do not have a mirror code tax system, the section authorizes payments for the child and dependent care credit benefits that would result due to application of this section if such US possession had a mirror code tax system.

California conforms to the child and dependent care credit as of the specified date of 1/1/2015 with modifications, but does not conform to the federal section that makes the credit refundable, increases the maximum credit rate, increases the phase out amount, and increases the credit limitation amounts for taxable years that begin during 2021.

The California child and dependent care credit is allowed based on a percentage of the taxpayer’s federal child and dependent care tax credit. The percentages are:

The credit is limited to household services and care provided within California.

California does not have child and dependent care credit payment sections relating to US possessions.

For taxable year 2021, the section temporarily increases the amount of the exclusion from gross income for employer-provided dependent care assistance. The section increases such amount from $5,000 to $10,500 (and half of such dollar amount in the case of a separate return by a married individual).

Under certain conditions, the section also provides that a plan that otherwise satisfies the requirements of a dependent care assistance program or cafeteria plan shall not fail to meet those requirements if the plan is amended to satisfy this section and such amendment is retroactive if specified requirements are met.

The section allows eligible self-employed individuals, as defined, a refundable credit against federal income tax equal to the qualified sick leave equivalent amount with respect to the eligible self-employed individual, for up to 10 days occurring during the period beginning on 4/1/2021 and ending on 9/30/2021. The qualified sick leave equivalent amount is generally determined by:

• The number of days an individual is unable to perform services in a trade or business due to certain conditions relating to sickness caused by COVID-19 multiplied by,
• The lessor of $200 ($511 in certain situations), or 67 percent (100 percent in certain situations) of the average daily self-employment income of the individual for the taxable year.

The section allows eligible self-employed individuals, as defined, a refundable credit against federal income tax equal to the qualified family leave equivalent amount with respect to the eligible self-employed individual, for up to 60 days occurring during the period beginning on 4/1/2021 and ending on 9/30/2021. The qualified family leave equivalent amount is generally determined by:

• The number of days (not to exceed 60) an individual is unable to perform services in a trade or business due to caring for their child because COVID-19 caused a school or place of care to close multiplied by,
• The lesser of $200, or 67 percent of the average daily self-employment income of the individual for the taxable year.

California does not conform to IRC 36B, relating to refundable credits for qualified health plan under the ACA, nor to Subtitle K, Group Health Plan Requirements, of the IRC.

California has a standalone program providing a California Premium Assistance Subsidy (PAS) to applicable return filers that use the IRC section 36B eligibility requirements, with modifications. The California PAS provides financial assistance to pay the premiums for a qualified health plan through the California health insurance marketplace. This federal change increases the federal PTC, which decreases the California PAS amount to zero for these taxable years.

California does not conform to IRC 36B, relating to refundable credits for qualified health plan under the ACA, nor to Subtitle K, Group Health Plan Requirements, of the IRC.

California has a standalone program providing a California Premium Assistance Subsidy (PAS) to applicable return filers that use the IRC section 36B eligibility requirements, with modifications. The California PAS provides financial assistance to pay the premiums for a qualified health plan through the California health insurance marketplace. This federal change does not impact the requirement for program participants receiving advance PAS to reconcile PAS on their 2020 California individual tax return.

California does not conform to IRC 36B, relating to refundable credits for qualified health plan under the ACA, nor to Subtitle K, Group Health Plan Requirements, of the IRC.

California has a standalone program providing a California Premium Assistance Subsidy (PAS) to applicable return filers that use the IRC section 36B eligibility requirements, with modifications. The California PAS provides financial assistance to pay the premiums for a qualified health plan through the California health insurance marketplace. The federal change allowing individuals with income above 400 percent of the federal poverty level described in Section 9661 increases the federal Premium Tax Credit, which decreases the California PAS amount to zero for these taxable years. This section has no impact on California's PAS.

This section modifies the information reporting requirement for third party settlement organizations to not require reporting on third party network transactions of participating payees if the amount that would be required to be reported is below $600. Third party settlement organizations were previously not required to report unless reportable transactions exceeded 200 transactions and $20,000 dollars.

Additionally, the section included additional clarification of the phrase "third party network transactions" for purposes of the reporting requirement.

California does not conform to IRC sections requiring information returns to be filed, but instead provides that FTB may require a copy of any information return required to be filed with the Secretary under IRC section 6050W, relating to payments made in settlement of payment card and third party network transactions, at the time and in the form and manner as the FTB may, by forms and instructions, require.

For calendar years beginning after 12/31/2021, any information returns (i.e., Forms 1099-K) filed under IRC section 6050W that are required to be filed for California purposes would include the information as modified by this federal act.

California law generally conforms to the federal income tax rules relating to the cancellation of student loans as of the specified date. In addition, the state has stand-alone sections for which no similar federal sections exist.

California allows an exclusion from gross income for student loan debt that is cancelled or repaid under the income-based repayment programs administered by the U.S. Department of Education. This exclusion applies to discharges of indebtedness occurring on or after 1/1/2014 (Revenue and Taxation Code (RTC) section 17132.11(a)).

Existing state law also excludes from gross income student loan debt that is cancelled or repaid under the Income Contingent Repayment plan, the Pay As You Earn Repayment plan, and the Revised Pay As You Earn Repayment plan as administered by the U.S. Department of Education (Title 20, U.S.C. section 1087e(e)). This exclusion applies to cancellation or repayments, beginning on or after 1/1/2017, and before 1/1/2022 (RTC 17132.11(b)).

For discharges of indebtedness occurring on or after 1/1/2015, and before 1/1/2020, existing state law excluded from an eligible individual’s gross income amounts that would otherwise result from a student loan forgiven as a result of the closure of Corinthian Colleges and similar closures (RTC section 17144.7). This section was repealed on 12/1/2020.

California provides an exclusion from gross income for the discharge of a student loan of an eligible individual (RTC section 17144.6) for taxable years beginning on and after 1/1/2019, and before 1/1/2024. An individual would be eligible for the exclusion if any of the following apply:

• Is granted a discharge of any student loan because the individual successfully asserts that the school did something wrong or failed to do something that it should have done or because the individual could not complete a program of study due to the school closing.
• Attended a Brightwood College school on or before 12/5/2018, and is granted a discharge of any student loan made in connection with attending that school.
• Attended a location of The Art Institute of California and is granted a discharge of any student loan made in connection with attending that school.

California automatically conforms to IRC sections 412 and 432 under RTC section 17501(b), including this section’s temporary delay of the designation of multiemployer plans as in endangered, critical, or critical and declining status. However, California does not conform to IRC section 4971 regarding the taxes on failure to meet minimum funding standards.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 432 under RTC section 17501(b), including this section’s five year extension of the funding improvement and rehabilitation periods for multiemployer pension plans in critical and endangered status for 2020 or 2021.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 431 under RTC section 17501(b), including this section’s adjustments to funding standard account rules.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 432 under RTC section 17501(b).

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 430 under RTC section 17501(b), including this section’s extended amortization period and the reduction of the shortfall amortization bases and installments for single employer plans.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 430 under RTC section 17501(b), including this section’s extended amortization for single employer plans.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

California automatically conforms to IRC section 430 under RTC section 17501(b), including this section’s special rules for minimum funding standards for community newspaper plans.

ERISA Preemption

Additionally, federal ERISA sections specifically preempt state laws relating to certain employee benefit plans in California.

For taxable years beginning on or after 12/31/2026, the section expands the $1 million limit on the deduction for compensation paid to a covered employee to also include the five highest compensated employees, other than a corporation’s:

1. Principal executive officer and principal financial officer, or an individual acting in such a capacity.
2. Highest three compensated officers, as required to be reported under the Securities Exchange Act of 1934.

For taxable years beginning on or after 1/1/2019, California partially conforms to the CARES Act and the CAA sections relating to:

• Exclusions from gross income for PPP loan forgiveness,
• The allowance of deductions for expenses paid with forgiven loan amounts not included in income under such sections, and
• Allowing tax basis increases and not requiring tax attribute reduction as a result of those forgiven loan amounts being excluded from gross income.

However, 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.

California does not exclude from gross income PPP loans forgiven due to the extended covered period in this section.

This section provides an employer a credit applied against the Social Security Tax (SST) and the Railroad Retirement Tax (RRT) for each calendar quarter in an amount equal to 100% of the qualified sick leave wages paid by such employer with respect to such calendar quarter, subject to certain limitations. For purposes of this section, the term “qualified sick leave wages” means wages, defined by IRC section 3121(a), and compensation, defined by IRC section 3231(e), paid by an employer, which is required to be paid by reason of the Emergency Paid Sick Leave Act.

The credit allowed for any calendar quarter is limited to the SST and RRT tax imposed for such calendar quarter, and any excess will be treated as an overpayment that can be refunded under IRC section 6402(a), credits against estimated taxes, and IRC section 6413(b), overpayments of certain employment taxes. The amount of the credit allowed under this provision can be increased by certain employer qualified health plan expenses. In addition, the gross income of the employer for the taxable year that includes the last day of any calendar quarter with respect to which a credit is allowed under this section shall be increased by the amount of such credit. Any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under IRC section 45S, the employer credit for paid sick leave.

Employers can elect not to have these provisions apply.

This section provides a refundable income tax credit to eligible self-employed individuals for any taxable year for an amount equal to qualified sick leave equivalent amount, as defined. An eligible self-employed individual is one who carries on any trade or business and would be entitled to receive paid leave during the taxable year pursuant to the Emergency Paid Sick Leave Act (EPSLA) if the individual were an employee of an employer (other than the individual themselves).

The term “qualified sick leave equivalent amount” means an amount equal to the number of days during the taxable year (but not more than the applicable number of days) that the individual is unable to perform services in any trade or business for a reason to which such individual would be entitled to receive sick leave under the EPSLA if the individual were an employee of an employer (other than the individual themselves), multiplied by the lesser of (i) $200 ($511 in the case of any day of paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the EPSLA), or (ii) 67% (100% in the case of any day of paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the EPSLA) of the average daily self-employment income of the individual for the taxable year. The term “average daily self-employment income” means an amount equal to the net earnings from self-employment of the individual for the taxable year, divided by 260.

The term “applicable number of days” means, with respect to any taxable year, the excess (if any) of 10 days over the number of days taken into account in determining the qualified sick leave equivalent amount in all preceding taxable years.

An eligible self-employed individual must maintain such documentation as prescribed by the Secretary of the Treasury (or the Secretary’s delegate) to qualify for the credit. In addition, this section denies a double benefit in the case of an individual who receives wages or compensation paid by an employer, which are required to be paid by reason of the EPSLA.

This section provides an employer a credit applied against the Social Security Tax (SST) and the Railroad Retirement Tax (RRT) for each calendar quarter in an amount equal to 100% of the qualified family leave wages paid by such employer with respect to such calendar quarter. For purposes of this credit, the amount of qualified family leave wages taken into account with respect to any individual cannot exceed for any day (or portion thereof) for which the individual is paid qualified family leave wages, $200, and, in the aggregate, with respect to all calendar quarters, cannot exceed $10,000.

The credit allowed for any calendar quarter is limited to the SST and RRT tax imposed for such calendar quarter, and any excess will be treated as an overpayment that can be refunded under IRC section 6402(a), credits against estimated taxes, and IRC section 6413(b), overpayments of certain employment taxes. The amount of the credit allowed under this provision can be increased by certain employer qualified health plan expenses.

For purposes of this section, the term “qualified family leave wages” means wages, defined by IRC section 3121(a), and compensation, defined by IRC section 3231(e), paid by an employer, which is required to be paid by reason of the Emergency Family and Medical Leave Expansion Act, including amendments made by this Act.

In addition, the gross income of the employer for the taxable year, which includes the last day of any calendar quarter with respect to which a credit is allowed under this section, shall be increased by the amount of such credit. Any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under IRC section 45S, the employer credit for paid family and medical leave.

Employers can elect not to have these provisions apply.

This section provides a refundable income tax credit for an eligible self-employed individual for any taxable year an amount equal to 100% of the qualified family leave equivalent amounts, as defined. An eligible self-employed individual is one who carries on any trade or business and would be entitled to receive paid leave during the taxable year pursuant to the Emergency Family and Medical Leave Expansion Act (EFMLEA) if the individual were an employee of an employer (other than the individual themselves).

The term “qualified family leave equivalent amount” means an amount equal to the product of the number of days (not to exceed 50) during the taxable year that the individual is unable to perform services in any trade or business for a reason to which such individual would be entitled to receive paid leave under the EFMLEA if the individual were an employee of an employer (other than the individual themselves), multiplied by the lesser of: (i) 67% of the average daily self-employment income of the individual for the taxable year, or (ii) $200. The term “average daily self-employment income” means an amount equal to the net earnings from self-employment income of the individual for the taxable year, divided by 260.

An eligible self-employed individual must maintain such documentation as prescribed by the Secretary of the Treasury (or the Secretary’s delegate) to qualify for the credit. In addition, this section denies a double benefit in the case of an individual who receives wages or compensation paid by an employer, which are required to be paid by reason of the EFMLEA. In this case, the qualified family leave equivalent amount would be reduced (but not below $0) to the extent that the sum of the qualified family leave equivalent amount and the wages described in PL 116-127, section 7003(b)(1) for the Payroll Credit for Required Paid Family Leave, exceeds $10,000.

California conforms to IRC section 72(t), additional tax on early distributions from qualified plans tax as applicable for federal purposes for the same taxable year using a rate of 2 1/2% in lieu of the federal tax rate. The COVID-19 early distributions would not be subject to a California early withdrawal tax if they are not subject to the federal additional tax on early distributions. (RTC section 17085(c))

RTC section 17081 conforms to federal law regarding loans from qualified plans as of 1/1/2015, and generally allows a qualified employer plan, to provide specified loans to a participant or a beneficiary that are not treated as taxable distributions from the plan if specified conditions are met.

AB 276 was chaptered on 9/11/2020 to conform to Section 2202(b) of the federal CARES Act, relating to qualified retirement plan loans.

The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during that year.

If all or a portion of a calendar year 2020 distribution that would have been a required minimum distribution is instead an eligible rollover distribution, the distribution (or portion thereof) is not treated as an eligible rollover distribution for purposes of the direct rollover and notice requirements, or the mandatory 20-percent income tax withholding for eligible rollover distributions.

California conforms to the definition of adjusted gross income under IRC section 62, as of the specified date of 1/1/2015, with modifications, but does not conform to the allowance of this partial above the line deduction for charitable contributions.

Therefore, a taxpayer would not be entitled to the same deduction at the state level.

Under the PITL, California generally conforms to the federal charitable contribution rules under IRC section 170 as of the specified date of 1/1/2015, and as a result, does not conform to the provisions related to increased limitations and carryovers for charitable contributions that were made during 2020.

Under the CTL, California does not conform to IRC section 170, but instead has standalone law that is generally similar to federal law allowing corporations a deduction for charitable contributions. There are no similar provisions for the increased charitable contribution limitations and carryovers for contributions made during 2020.

The provision suspending application of the 80% taxable income limitation applies to taxable years beginning after 12/31/2017, and to taxable years beginning on or before 12/31/2017, to which NOL arising in taxable years beginning after 12/31/2017, are carried.

The provision modifying the rules relating to carrybacks applies to NOLs arising in taxable years beginning after 12/31/2017, and taxable years beginning before, on, or after such date to which such NOLs are carried.

The technical amendments made by the provision are effective as if included in section 13302 of PL 115-97.

This provision suspended the application of the 80% taxable income limitation for taxable years beginning after 12/31/2017, and before 1/1/2021. The 80% taxable income limitation continues to apply in the case of any taxable year beginning after 12/31/2020. The 80% taxable income limitation was also eliminated for net operating losses (NOLs) arising in taxable years beginning after 12/31/2017, and carried to such a taxable year.

The CARES Act also modified the rules regarding carrybacks for NOLs arising in 2018, 2019, and 2020. Specifically, any NOL arising in a taxable year beginning after 12/31/2017, and before 1/1/2021, may be carried back to the 5 taxable years preceding the taxable year of such loss.

In general, California allows a taxpayer to calculate an NOL in accordance with federal rules, but has not conformed to the federal changes that apply to taxable years beginning after 12/31/2017 because California conforms to the Internal Revenue Code as of 1/1/2015.

NOLs attributable to taxable years beginning on or after 1/1/2008, may be carried forward 20 years. For NOLs attributable to taxable years beginning before 1/1/2013, and after 12/31/2018, NOL carrybacks are unavailable. California conforms to the federal NOL carryback rules for NOLs attributable to taxable years beginning on or after 1/1/2013, and before 1/1/2019, with modifications.

AB 85 was chaptered on 6/29/2020, and it includes provisions to suspend the use of NOL deductions. The suspension does not apply to taxpayers with a net business income or modified adjusted gross income of less than $1 million under the PITL or for taxpayers with income subject to tax under the CTL of less than $1 million for taxable years 2020, 2021, and 2022. This provision also extends the carryover period for NOL deductions disallowed under this provision.

Therefore, the 80-percent taxable income limitation is not applicable in California and any NOL arising in a taxable year beginning after 12/31/2017, and before 1/1/2021, may not be carried back.

This provision extends the due date to January 1, 2021, for certain required minimum contributions to single-employer defined benefit pension plans that would be due during the 2020 calendar year. The amount of each required minimum contribution is increased by the interest accruing between the original due date and the payment date.

In addition, a plan sponsor can elect to treat the plan’s adjusted funding target attainment percentage for the last plan year ending before January 1, 2020, as the adjusted funding target attainment percentage for plan years that include calendar year 2020.

The Personal Income Tax Law (PITL) automatically conforms to federal changes made to IRC sections 430 and 436. As a result, the federal modifications to single-employer plan funding rules automatically apply under California law.

However, the Corporate Income Tax Law (CTL) conforms to federal changes made to IRC sections 430 and 436, as of the specified date, January 1, 2015. The legislature hasn’t passed a law that would conform to this provision. As a result, CA doesn’t conform under the CTL to the federal modifications to single-employer plan funding rules in this provision.

The provision applies to distributions from HSAs and MSAs for amounts paid after December 31, 2019.

The provision applies to reimbursements from health FSAs and HRAs for expenses incurred after December 31, 2019.

The Joint Committee on Taxation, Description of the Tax Provisions of Public Law 116-136 states:

This provision amends the definition of qualified medical expense for Archer Medical Savings Arrangements (MSAs) to permit distributions for over-the-counter medicine and menstrual care products.

The provision also amends the definition of qualified medical expense for health Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) to permit reimbursements for expenses incurred for over-the-counter medicine and menstrual care products.

Health Savings Accounts (HSAs)

California does not conform to any of the federal HSA provisions. Thus, contributions to an HSA are not excludable or deductible under California law.

Flexible Spending Arrangements (FSAs)

California conforms to FSAs as of the “specified date” of January 1, 2015. Thus, California does not conform to the inclusion within qualified medical expenses for FSA purposes of amounts paid for menstrual care products.

Archer Medical Savings Accounts (MSAs)

California conforms to Archer MSAs as of the “specified date” of January 1, 2015, with modifications. California law allows an Archer MSA contribution deduction equal to the amount deducted on the federal return for the same taxable year; however, because California conforms to the federal amount of qualified medical expenses as of the “specified date,” California does not conform to the inclusion within qualified medical expenses for Archer MSA purposes of amounts paid for menstrual care products.

The federal recovery rebate is treated as an advance refundable credit, so it is not included in income for state or federal purposes. (See FTB Legal Ruling 2001-3.)

California has authorized its own stimulus program called the Golden State Stimulus (GSS).

Senate Bill 88 (Stats. 2021, Ch. 8), as amended by Assembly Bill 88 (Stats. 2021, Ch. 12), authorizes the California State Controller to make a one-time GSS tax refund payment to qualified recipients in the amount of either $600 or $1,200. A qualified recipient shall not receive more than one payment.

The federal recovery rebate is treated as an advance refundable credit, so it is not included in income for state or federal purposes. (See FTB Legal Ruling 2001-3.)

California has authorized its own stimulus program called the Golden State Stimulus (GSS).

Senate Bill 88 (Stats. 2021, Ch. 8), as amended by Assembly Bill 88 (Stats. 2021, Ch. 12), authorizes the California State Controller to make a one-time GSS tax refund payment to qualified recipients in the amount of either $600 or $1,200. A qualified recipient shall not receive more than one payment.

Internal Revenue Service Notice 2020-65 allows employers to defer the withholding and payment of the employee share of social security tax ordinarily due during the period beginning on 9/1/2020 and ending on 12/31/2020, for employees with earnings below a threshold amount. The IRS notice indicates employers that defer the withholding and payment of taxes in 2020 must withhold and pay the deferred taxes ratably over the period beginning on 1/1/2021 and ending on 4/30/2021. Interest, penalties, and additions to tax on the deferred taxes will begin to accrue on 5/1/2021.

The provision changes the deferred withholding and payment of taxes ending date from 4/30/2021 to 12/31/2021, and changes the interest, penalties, and additions to tax begin date from 5/1/2021 to 1/1/2022.

The original Payroll Protection Program (PPP) loan provision is effective for taxable years beginning after 3/27/2020

The subsequent PPP loans provision is effective for taxable years ending after 12/27/2020

California generally conforms to IRC section 61 pursuant to RTC section 17071, under the PITL, and section 24271, under the CTL, as of 1/1/2015, except as otherwise provided.

For taxable years beginning on or after 1/1/2020, sections 17131.8 and 24308.6 were added to the RTC to exclude from gross income, for state income tax purposes, any covered loan amount forgiven pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), PL 116-136, section 1106(i), and to reduce by the amount of such exclusion any credit or deduction otherwise allowed for amounts paid or incurred using the excluded amount.

In addition, 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 under RTC sections 17280 and 24425.

However, California does not conform to the allowance of deductions for expenses paid with the amounts not included in income by this section, or the provision stating tax basis and other tax attributes will not be modified as a result of those amounts being excluded from gross income.

Under the provision, certain emergency financial aid grants under the CARES Act and other emergency financial aid grants that provide relief during the coronavirus emergency are excluded from the gross income of college and university students.

In addition, grants excluded from gross income will not be considered for purposes of the determining the amount of the American Opportunity and Lifetime Learning tax credits allowed to an individual.

Also, the exclusion does not apply to payment received for teaching, research, or other services required as a condition of the grant.

California generally conforms to IRC section 61 pursuant to RTC sections 17071, under the PITL, and section 24271, under the CTL, as of 1/1/2015, except as otherwise provided.

California does not conform to the federal exclusion from gross income of emergency financial aid grants, and also does not conform to the federal American Opportunity and Lifetime Learning tax credits.

The provisions related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), PL 116-136, including PPP-related provisions, Economic Injury Disaster Loan (EIDL) advances, and subsidies for certain loan payments under the CARES Act are effective for taxable years ending after 3/27/2020.

The provision relating to grants for shuttered venue operators is effective for taxable years ending after 12/27/2020.

The provision relating to EIDL advances under Division N, Title III, section 331 (Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act) is effective for taxable years beginning after 12/27/2020.

California generally conforms to IRC section 61 pursuant to RTC sections 17071 and 24271 as of 1/1/2015, except as otherwise provided. For taxable years beginning on or after 1/1/2020, sections 17131.8 and 24308.6 were added to the RTC to exclude from gross income, for state income tax purposes, any covered loan amount forgiven pursuant to the CARES Act section 1106(i), and to reduce by the amount of such exclusion any credit or deduction otherwise allowed for amounts paid or incurred using the excluded amount.

In addition, 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 under RTC sections 17280 and 24425.

California does not conform to the forgiveness of certain loans, emergency EIDL grants, and certain loan repayment assistance as provided by the CARES Act under this provision, nor to forgiveness of grants for shuttered venues. California also does not conform to the allowance of deductions for expenses paid with the amounts not included in income by this section, or the provision stating tax basis and other tax attributes will not be modified as a result of those amounts being excluded from gross income.

Operative for coronavirus-related distributions, as defined, made on or after

1/1/2020, and before 12/31/2020.

In general, California allows a taxpayer to calculate an NOL in accordance with federal rules, but has not conformed to the federal changes that apply to taxable years beginning after 12/31/2017 because California conforms to the IRC as of 1/1/2015, with modifications.

NOLs attributable to taxable years beginning on or after 1/1/2008, may be carried forward 20 years. For NOLs attributable to taxable years beginning before 1/1/2013, and after 12/31/2018, NOL carrybacks are unavailable. California conforms to the federal NOL carryback rules for NOLs attributable to taxable years beginning on or after 1/1/2013, and before 1/1/2019, with modifications.

AB 85 was chaptered on 6/29/2020, and it includes provisions to suspend the use of NOL deductions. The suspension does not apply to taxpayers with a net business income or modified adjusted gross income of less than $1 million under the PITL or for taxpayers with income subject to tax under the CTL of less than $1 million for taxable years 2020, 2021, and 2022. This provision also extends the carryover period for NOL deductions disallowed under this provision.

Therefore, the 80-percent taxable income limitation is not applicable in California and any NOL arising in a taxable year beginning after 12/31/2017, and before 1/1/2021, may not be carried back.

The provision amends section 1106 of the Social Security Act, and IRC section 6103(k) to:

1. Direct the Commissioner of Social Security to enter into an agreement with the Secretary of the Treasury to indicate as to whether an individual receives disability insurance benefits or supplemental security income benefits, with appropriate safeguards to assure that such information is used solely for the Treasury’s determination of the exclusion of such individuals from its private debt collection program;

2. Require the Secretary to pay the Commissioner’s full costs (including systems and administrative costs) of providing the information in 1; and

3. Allow the Secretary to disclose the taxpayer identity and date of birth to Social Security Administration (SSA) officers, employees, and contractors so that SSA can provide the information in 1.

California does not currently conform to IRC section 6103. However, with respect to federal tax information, the FTB is subject to the confidentiality and disclosure rules of IRC section 6103.

California law contains confidentiality and disclosure rules specifically applicable to state tax information.

California does not currently conform to IRC section 6103. However, with respect to federal tax information, the FTB is subject to the confidentiality and disclosure rules of IRC section 6103.

California law contains confidentiality and disclosure rules specifically applicable to state tax information.

The provision makes the following expenses allowable and forgivable under the PPP:

• Covered operations expenditures. Payment for any software, cloud computing, and other human resources and accounting needs.
• Covered property damage costs. Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance or other compensation.
• Covered supplier costs. Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.
• Covered worker protection expenditure. Operating or capital expenditures to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to coronavirus during the period between 3/1/2020, and the end of the national emergency declaration.

The provision allocates $25 billion for fiscal year 2021 for the new federal Emergency Rental Assistance program to provide financial assistance and housing stability services to certain eligible households. Financial assistance for eligible households requires that at least 90 percent of the funds received be used for:

• Rent,
• Rental arrears,
• Utilities and home energy costs,
• Utilities and home energy cost arrears, and
• Other expenses related to housing that are incurred either directly or indirectly due to COVID-19.

No more than 10 percent of the funds can be used by grantees for housing stability services including providing case management and other services related to COVID-19.

Eligible households may receive up to 12 months of funding, plus an additional three months if necessary to ensure housing stability, and subject to the availability of funds. The payments that are made on behalf of eligible households will not be considered income and are not regarded as a resource for purposes of determining the eligibility of the household or any member of the household for benefits or assistance, under any federal program, or federally funded state or local program.

Eligible households may generally only received three months prospective rent payments, but may receive additional prospective rent payments, subject to the availability of funds and the 12 month maximum. Rent in arrears must be provided for first, after which prospective rent payments can be made.

An eligible household is defined as one or more individuals who are obligated to pay rent on a residential dwelling, and one or more such individuals:

1. Qualifies for unemployment benefits, or has experienced a reduction in household income, incurred significant costs, or other financial hardship caused by COVID-19,
2. At least one of the individuals demonstrates a risk of homelessness or housing instability, and
3. The household income is not more than 80 percent of the area median household income.

Applications for rental assistance must be considered first if either an eligible household’s income is at or below 50 percent of the area median income, or one or more members in the household is unemployed for 90 days or more before the submission date of the application.

California generally conforms to the federal definition of gross income, with modifications, as of the specified date of 1/1/2015.

Senate Bill 91, Chaptered 1/29/2021, establishes the State Rental Assistance Program to allocate federal rental assistance funds provided pursuant to the federal Emergency Rental Assistance program describe above, and uses the federal definition of eligible household. Under Section 50897.1(j)(1) of the Health and Safety Code, the bill exempts any assistance provided from income, for purposes of the PITL or used to determine eligibility for an eligible household, or any member of an eligible household, for any state program or local program financed wholly or in part by state funds.

Senate Bill 91 is effective immediately and operative for taxable years beginning on or after 1/1/2021.

Assembly Bill 81, Chaptered 2/23/2021, makes several non-substantive technical and conforming changes to Section 50897.1 of the Health and Safety Code. Assembly Bill 81 is effective immediately and operative for taxable years beginning on or after 1/1/2021.

California exempts the assistance payments provided by the federal Emergency Rental Assistance program from California taxable income for taxable years beginning on or after 1/1/2021. In addition, forgiveness of rent liability under this provision is not included in taxable income for taxable years beginning on or after 1/1/2020 and before 1/1/2025.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision requires group health plans to implement certain procedures to prevent surprise medical bills, which can result from the use of out-of-network medical providers.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

The provision determines certain of out-of-network rates to be paid by group health plans, and provides for an independent dispute resolution process.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision requires group health plans to implement certain procedures to prevent surprise air ambulance bills, which can result from the use of out-of-network medical providers.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision requires group health plans to report certain information relating to air ambulance services, including cost data, ambulance bases, aircraft, and the number of ambulance transports.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision establishes requirements that will facilitate transparency regarding certain in-network and out-of-network deductibles and out-of-pocket limitations relating to group health plans.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision establishes requirements for group health plans to provide advance explanations of benefits and a good faith estimate of amounts the plan and the participant or beneficiary must pay relating to costs for medical items and services.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision establishes requirements for group health plans to provide continuity of care when such plan terminates certain contractual relationships with providers of medical items and services.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision establishes requirements for group health plans to offer and maintain certain price comparison guidance tools for individuals enrolled in such plan relating to medical items and services.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision establishes requirements for group health plans to establish certain verification processes, response protocols, and health care provider and facility databases relating to medical items and services.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision prohibits group health plans to enter into agreements with health care service providers and other related entities that would restrict such plans from providing certain cost or quality of care information to plan participants or beneficiaries

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision requires certain group health plans to perform and document comparative analyses of the design and application of nonqualified treatment limitation requirements, imposed on medical and surgical benefits and on mental health or substance abuse disorder benefits, and to make such analyses available to certain state or federal agencies upon request.

Group health plans are subject to various requirements under Subtitle K of the IRC, which were enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).

This provision requires group health plans to report certain information on health plan pharmacy benefits and drug costs relating plan participants and beneficiaries.

This provision is not applicable under California Law.

Under the PITL, California specifically does not conform to the federal deduction for energy efficient commercial buildings, and the deduction has not been adopted under the CTL.

California conforms, under the PITL and CTL, to the federal rules for capitalization and inclusion in inventory for costs of certain expenses, also known as the UNICAP rules, under IRC section 263A, as of the specified date of January 1, 2015, but does not conform to this federal provision that makes permanent the exception to the UNICAP rules for the allocation of interest for the production period for beer, wine, and distilled spirits.

FTB does not administer the laws that affect beer, wine, and distilled spirits.

The new markets tax credit is equal to 39 percent of capital invested by an individual, trust, partnership, or corporation in a qualified community development entity. A qualified community development entity must serve or provide investment capital for low-income communities or persons. The credit allocations for the 2020 calendar year is $5 billion.

The provision extends the $5 billion allocations for the new markets tax credit for each of the calendar years 2021 through 2025, and extends the carryover of any unused allocations for calendar years through 2030.

California does not conform to the work opportunity credit.

However, California allows a Prison Inmate Labor Tax Credit that is equal to 10 percent of the wages paid to each prisoner who is employed under an approved joint venture with the California Department of Corrections.

The credit amount is based on wages paid to each qualifying employee during the taxable year for the duration of the contract agreement. The credit applies only to wages paid pursuant to a contract agreement, between the director of corrections and the joint venture employer, executed on or before the day the individual begins work for the employer.

The provision extends for five additional years, before 1/1/2026, the exclusion from gross income for discharges of qualified principal residence indebtedness.

The provision also reduces the acquisition indebtedness limitation from $2,000,000 ($1,000,000 in the case of a married individual filing a separate return) to $750,000 ($375,000 in the case of a married individual filing a separate return) for purposes of the discharge of qualified principal residence indebtedness.

California generally conforms to the federal definition of gross income, including income from the discharge of indebtedness, and conformed to the federal rules for the exclusion of discharge-of-indebtedness income by reason of a discharge of qualified principal residence indebtedness (i.e., mortgage forgiveness debt relief), as of the specified date of 1/1/2015, with the modifications described below:

1. The exclusion does not apply to discharges occurring after 2013.
   1. The California exclusion applies to discharges occurring on or after 1/1/2007, and before 1/1/2014.
   2. The federal exclusion generally applies to discharges occurring on or after 1/1/2007, and before 1/1/2026.
2. The maximum amount of qualified principal residence indebtedness (i.e., the amount of principal residence indebtedness eligible for the exclusion) is reduced.
   1. The California maximum amount of qualified principal residence indebtedness is $800,000 ($400,000 in the case of a married/registered domestic partner (RDP) individual filing a separate return).
   2. The federal maximum amount of qualified principal residence indebtedness is $2,000,000 ($1,000,000 in the case of a married individual filing a separate return).
3. The total amount that may be excluded from gross income is limited.
   1. For discharges occurring in 2007 or 2008, California limits the total amount that may be excluded from gross income to $250,000 ($125,000 in the case of a married/RDP individual filing a separate return).
   2. For discharges occurring in 2009, 2010, 2011, 2012, or 2013, California limits the total amount that may be excluded from gross income to $500,000 ($250,000 in the case of a married/RDP individual filing a separate return).
   3. There is no comparable federal limitation in any year.
4. Interest and penalties are not imposed with respect to 2007, 2009, or 2013 discharges.
   1. California prohibits the imposition of any interest or penalties with respect to discharges of qualified principal residence that occurred during the 2007, 2009, or 2013 taxable years.
   2. There is no comparable federal prohibition.

This provision is not applicable under California law.

The PITL conforms to Modified Accelerated Cost Recovery System (MACRS), with modifications. Regarding the recovery period for motorsports entertainment complexes, the PITL conformed to the seven-year recovery period for property placed in service on or after 1/1/2005, and before 12/31/2007, but specifically does not conform to the seven-year recovery period for property placed in service on or after 1/1/2008.

The CTL does not adopt MACRS. Instead, the CTL is generally in substantial conformity to the pre-1981 federal Asset Depreciation Range (ADR) rules that generally allow property to be depreciated based on its useful life. The CTL temporarily adopted the seven-year recovery period for motorsports entertainment complexes, for property placed in service on or after 1/1/2005, and before 12/31/2007. The seven-year recovery period is not allowed for property placed in service on or after 1/1/2008.

This provision is not applicable under California law.

Under the PITL and the CTL, California specifically does not conform to the federal election to deduct the cost of any qualifying film and television production in the year the expenditure is incurred in lieu of capitalizing the cost and recovering it through depreciation allowances.

Instead, under both the PITL and the CTL, California generally conforms to the federal income-forecast method to determine the depreciation recovery periods of property such as films, videotapes, television, book rights, patents, master sound recordings, video games, and like items.

The provision modifies and extends the tax incentives to:

• Extend the period for which an empowerment zone is in effect through 12/31/2025,
• Eliminate the enhanced IRC section 179 expensing for any property placed in service after 12/31/2020,
• Eliminate the election to defer gain for the sales of qualified empowerment zone assets for sales in taxable years beginning after 12/31/2020, and
• Allow an extension of the termination date of an empowerment zone with a 12/31/2020 termination date.

California does not conform to empowerment zone tax incentives.

However, California allows a New Employment Tax Credit. This credit is for qualified employers that:

• Hire qualified full-time employees,
• Receive a reservation for such employees,
• Pay wages for work performed by such employees in a designated geographic area (DGA), and
• Report the credit on a timely filed (including extensions) original return.

FTB provides a searchable database on its website that includes the following information:

• Employer names,
• Amount of tax credit claimed,
• Number of new jobs created for each taxable year.

Eligible employers may claim a general business credit equal to 12.5 percent of the amount of wages paid to qualifying employees during any period in which such employees are on family and medical leave if the rate of payment under the program is 50 percent of the wages normally paid to an employee. The credit is increased by 0.25 percentage points (but not above 25 percent) for each percentage point by which the rate of payment exceeds 50 percent. The maximum amount of family and medical leave that may be taken into account with respect to any employee for any taxable year is 12 weeks.

The provision extends the operation of the employer credit for paid family and medical leave 5 years, making the credit inoperative for wages paid in taxable years beginning after December 31, 2025.

Section 2202 of the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act), enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward payment of an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The CARES Act provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before 1/1/2021.

The provision extends the CARES Act exclusion by making it applicable to payments made by an employer on behalf of an employee before 1/1/2026.

Solar Energy Property

The provision extends the 30-percent energy credit for solar energy property used to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting use to heat a swimming pool, the construction of which begins before 1/1/2024. However, see below for the phase-out of this energy credit.

Extension of Fiber-Optic Solar Property

The provision extends the 30-percent energy credit for equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight with respect to property the construction of which begins before 1/1/2024. However, see below for the phase-out of this energy credit.

Extension of Fuel Cell Property

The provision extends the 30-percent energy credit for qualified fuel cell property, with respect to property the construction of which begins before 1/1/2024. However, see below for the phase-out of this energy credit.

Extension of Qualified Small Wind Energy Property

The provision extends the 30-percent energy credit for qualified small wind energy property, with respect to property the construction of which begins before 1/1/2024. However, see below for the phase-out of this energy credit.

Extension of Thermal Energy Property

The provision extends the 10-percent energy credit for equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, with respect to property the construction of which begins before 1/1/2024.

Extension of Qualified Microturbine Property

The provision extends the 10-percent energy credit for qualified microturbine property, with respect to property the construction of which begins before 1/1/2024.

Extension of Combined Heat and Power System Property

The provision extends the 10-percent energy credit for combined heat and power system property, with respect to property the construction of which begins before 1/1/2024.

Phase-out of 30-Percent Credit Rate for Fiber-Optic Solar, Qualified Fuel Cell, and Qualified Small Wind Energy Property

The provision phases out the 30-percent energy credit for qualified fuel cell property, qualified small wind property, and fiber-optic solar property by reducing the credit percentage for each to 26 percent for any such property placed in service after 12/31/2021, and before 1/1/2023; and to 22 percent for any such property placed in service after 12/31/2022, and before 1/1/2024. Such property that is not placed in service before 1/1/2026, shall not be eligible for an energy credit.

Phase-out of 30-Percent Credit Rate for Solar Energy Property

The provision phases out the 30-percent energy credit for solar energy property by reducing the credit percentage for each to 26 percent for any such property placed in service after 12/31/2021, and before 1/1/2023; and to 22 percent for any such property placed in service after 12/31/2022, and before 1/1/2024. The credit percentage for property that is not placed in service before 1/1/2026, is 10 percent.

Under the PITL, for taxable years beginning on or after January 1, 2015, California law, as it relates to the Modified Accelerated Recovery System (MACRS) in general, conforms to IRC section 168 as of a specified date of 1/1/2015, with modifications.

For taxable years beginning on or after January 1, 2010, the PITL conformed to the special recovery period that provided that any race horse that was placed in service before 1/1/2014, was assigned a three-year recovery period. The PITL does not conform to any later federal extensions of this special recovery period, and does not conform to this most recent federal extension.

Under the CTL, California does not conform to federal MACRS depreciation. Instead, the CTL is generally in substantial conformity to the pre-1981 federal asset depreciation range (ADR) rules, which generally allow property to be depreciated based on its useful life. The CTL does not conform to this provision.

The PITL generally conforms to the Modified Accelerated Cost Recovery System (MACRS), but specifically does not conform to accelerated depreciation for business property on an Indian reservation.

The CTL does not adopt MACRS. The CTL is generally in substantial conformity to the pre-1981 federal alternative depreciation system (ADS) rules, which generally allow property to be depreciated based on its useful life.