Summary of Federal Income Tax Changes

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.

The provision extends, for homes acquired on or before 12/31/2021, the credit to an eligible contractor for each qualified new energy-efficient home that is constructed by the eligible contractor and acquired by a person from such eligible contractor for use as a residence during the taxable year.

The credit equals $1,000 in the case of a new home that meets the 30-percent standard and $2,000 in the case of a new home that meets the 50-percent standard.

The provision extends, for property placed in service on or before 12/31/2023 a personal income tax credit for the purchase of qualified solar electric property and qualified solar water heating property that is used exclusively for purposes other than heating swimming pools and hot tubs. The credit rate is 26 percent for property placed in service after 12/31/2019 and before 1/1/2023, and 22 percent for property placed in service in after 12/31/2022 and before 1/1/2024.

The provision also adds qualified biomass fuel property expenditures to the list of expenditures qualifying for the credit. A qualified biomass fuel property expenditure is an expenditure for property that uses the burning of bio-mass fuel to heat a residence located in the US, or to heat water. The thermal efficiency rating must be at least 75 percent.

California conforms, under the PITL, to IRC section 168(g)(2), relating to the ADS recovery period for residential rental property, as of the specified date of 1/1/2015, but does not conform to the federal change in the recovery period.

California does not conform, under the CTL, to IRC section 168, relating to Modified Accelerated Cost Recovery System (MACRS) depreciation. The CTL has substantially similar language to the pre-1981 ADR deduction. The ADR is based on the “useful life” of depreciable property. As a result, the federal modifications to the recovery periods are not applicable.

The provision adds waste energy recovery property to the list of types of energy property included in the energy credit and specifies that the 30-percent energy credit would apply to waste energy recovery property.

The provision phases out the 30-percent energy credit 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.

The provision changes the minimum interest rate used in life insurance policy cash value accumulation tests to “the applicable minimum test rate.”

It also changes the minimum rate used in analyzing life insurance policy premiums to an “applicable guideline premium rate.”

Wages paid after 3/12/2020

In addition, certain amounts from earlier quarters may be claimed in the fourth quarter of 2020. This will apply only for employers that did not apply the law consistently with the retroactive changes.

The provision allows employers that received Paycheck Protection Program (PPP) loans to also claim the employee retention credit (ERC) on qualified wages. However, an employer may not receive a double benefit by claiming the ERC on wages that the employer paid with forgiven and excluded PPP loan proceeds. Also, employers are not allowed to deduct from income the portion of qualified wages that equal the ERC amount.

The provision clarifies that “qualified health plan expenses” paid by an employer are eligible for the ERC even if such health plan costs are attributable to furloughed employees who are not receiving any other wages from their employer.

The provision clarifies that tax-exempt organizations determining eligibility for the ERC under the “gross receipts” test must account for all gross receipts within the meaning of IRC Section 6033, and not only gross receipts from unrelated trade or business activities.

This provision modifies and extends the employee retention credit (ERC), which is used to reduce Social Security Tax and Railroad Retirement Tax, by increasing the credit from 50 percent to 70 percent of qualified wages that are paid beginning on 3/13/2020 and ending on 6/30/2021. In addition, qualified wages are changed to $10,000 per employee, per quarter in calculating the credit, and employers qualify for the credit if their gross receipts for a calendar quarter are less than 80 percent of the gross receipts of such employer for the same calendar quarter in calendar year 2019.

Also, for employers with greater than 500 full-time employees, qualified wages are wages paid to employees when they are not providing services due to either of the COVID-19-related circumstances. For eligible employers with 500 or fewer full-time employees, all employee wages qualify for the credit if the employer has experienced one of the COVID-19 related circumstances.

The provision also includes various other technical changes to the ERC.

California conforms, under the PITL and the CTL, to the federal rules for the deductibility of fringe benefits under IRC section 274, as of the specified date of 1/1/2015, but does not conform to the federal repeal of the exception under federal law relating to the deduction disallowance for entertainment, amusement, or recreation that is directly related to the active conduct of a trade or business for amounts paid or incurred after 12/31/2017.

In addition, California does not conform to the temporary elimination of the 50 percent limitation on the deduction of expenses for food or beverages provided by a restaurant that are paid or incurred after 12/31/2020, and before 1/1/2023.

For purposes of the child tax credit and the earned income tax credit (EITC), if the earned income for the first taxable year that begins in 2020 is less than the earned income of a taxpayer for the preceding taxable year, the taxpayer may elect to substitute the earned income of the preceding taxable year for the earned income for the first taxable year that begins in 2020. In the case of a joint return, the earned income of the taxpayer for the preceding taxable year is the sum of the earned income of each spouse for the preceding taxable year.

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

California does not conform to the federal child tax credit. The Young Child Tax Credit (YCTC) became available in California for the 2019 taxable year. It applies to taxpayers that qualify for the California EITC (CalEITC) and have a child under the age of 6 as of the end of the taxable year. The YCTC provides for a credit amount of up to $1,000.

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 provision to substitute the earned income for the preceding year for the earned income of the first taxable year that begins during 2020. Therefore, for purposes of the CalEITC, 2020 earned income must be used for the 2020 taxable year.

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 and 2021.

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 and 2021.

The provision expands the carryover period of any unused funds in health and dependent care FSA plans for the 2020 year to plans ending in 2021, and for the 2021 year to plans ending in 2022. For plans that include a grace period, the provision permits an extension of the grace period for plan years ending in 2020 and 2021 to 12 months after the end of such plan year for any unused benefits and contributions to health FSAs and dependent care FSAs.

The provision also allows an employee who ceases to participate in an FSA during the plan years 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year, including any extended grace period.

A temporary rule is added to extend the maximum age of eligible dependents from age 13 to age 14 for purposes of determining eligible dependent care FSA expenses. The rule applies to a plan year for which open enrollment ended before 1/31/2020, including any unused amounts that may be available in the following plan year due to a rollover or grace period.

In addition, the provision temporarily allows health FSAs and dependent care FSAs to allow participants to make prospective mid-year election changes for plan years ending in 2021 for any reason, and includes a special carry forward rule for dependent care FSAs where the dependent aged out during the 2020 calendar year.

The provision waives the 10 percent early withdrawal tax for qualified disaster distributions (QDD) up to $100,000 from qualified retirement accounts. The distribution is taxed ratably over a three-year period, unless the taxpayer elects otherwise, and may be recontributed in three years, with repayments receiving direct rollover treatment.

A QDD is a distribution made to a qualified individual on or after the first day of the incident period of a qualified disaster and before 180 days after 12/27/2020. A qualified individual is defined as having a principal place of abode that is located in a qualified disaster area, and has suffered an economic loss as a result of the qualified disaster.

Disaster-Related Plan Loans

The provision also enables qualified individuals (as described above) to receive retirement plan loans in amounts up to $100,000 or 100 percent of the present value of the participant’s vested account balance. Repayment on these loans may be suspended for a period of up to one year (or up to 180 days after 12/27/2020, if longer) if repayment of the loan normally would be due during the period beginning on the first day of the disaster incident period and ending 180 days from the last day of such incident period. Interest on the plan loan must accrue during the suspension period.

Recontributions of Pre-Disaster Hardship Distributions for Principal Residence

Special recontribution rules allow recipients to recontribute hardship distributions initially taken to purchase or construct a principal residence in a qualified disaster area, but which were used for a different purpose due to the qualified disaster. The hardship distribution must have been received 180 days before and up to 30 days after the qualified disaster incident. The repayment period ends 180 days after 12/27/2020.

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 percent 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 the specified date 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.

RTC section 17085(f) was added to conform to Section 2202(b) of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), PL 116-136, relating to qualified retirement plan loans. However, California does not conform to the federal changes related to distributions from qualified retirement plan loans for disaster-related purposes under this Act.

The provision allows a credit of up to $2,400 per employee to employers impacted by qualified disasters if the employer:

• Had an active trade or business at the time of the disaster, located in a qualified disaster zone and rendered inoperable as a result of the disaster, and
• Continued to pay wages to eligible employees that were employed at the location immediately before the disaster.

Employers must claim the general business credit for the taxable year qualified wages were paid to the employee. The credit equals 40 percent of wages, with a maximum of $6,000 per employee, paid to or incurred for an eligible employee:

• Beginning on the date on which the trade or business first became inoperable as a result of the disaster at the employee’s principal place of employment immediately before the disaster, and
• Ending on the earlier of:
  • The date on which the trade or business resumed significant operations at the employee’s principal place of employment, or
  • 150 days after the last day of the disaster incident period.

Employers cannot claim the qualified disaster credit for wages for which certain other credits are claimed, including the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act), employee retention credit.

Non-governmental tax-exempt organizations, with the exception of certain public colleges, universities and hospitals, may claim the credit against Social Security tax.

Employers may elect for these provisions not to apply. In addition, the provision requires the Secretary of Treasury to issue guidance providing that if an election is made, payroll costs paid or incurred during the covered period can be considered qualified wages to the extent that a covered loan of the eligible employer is not forgiven by reason of a decision under section 7A(g) of the Small Business Act.

Also, employers are not allowed to deduct from income the portion of qualified wages that equal the employee retention credit amount.

This provision also amends the Paycheck Protection Program (PPP) to exclude qualified wages taken into account in determining the Employee Retention Credit (ERC) for Employers Affected by Qualified Disasters or Payroll Tax Credit for Certain Tax-Exempt Organizations from payroll costs.

Contributions paid beginning on 1/1/2020 and ending 60 days after 12/27/2020

Personal casualty losses arising in a qualified disaster area, on or after the first day of the incident period of a related qualified disaster

Charitable Contributions

The provision establishes a new category of qualified disaster relief contributions, for which corporations are allowed a deduction up to 100 percent of taxable income. A qualified disaster relief contribution is defined as any qualified contribution (per section 2205(a)(3) of the CARES Act) if the contribution is paid during the period beginning on 1/1/2020, and ending on the date that is 60 days after 12/27/2020, and is made for relief efforts in one or more qualified disaster areas.

The provision also requires the taxpayer to obtain a contemporaneous written acknowledgment from the organization receiving the donation that the contribution was or is to be used for disaster relief efforts. An election is also required to be made to apply the provision to the contribution.

The provision is applied first to qualified contributions (under the CARES Act section 2205(a)(2)(B)) without regard to qualified disaster relief contributions and then separately to the qualified disaster relief contributions.

Personal Casualty Losses

The provision adds special rules for individuals who have a net disaster loss for any taxable year. Net disaster loss is defined as the excess of qualified disaster-related personal casualty losses over personal casualty gains (as defined in IRC section 165(h)(3)(A)). Qualified disaster-related personal casualty losses are defined as personal casualty losses that arise in a qualified disaster area, on or after the first day of the incident period of a related qualified disaster.

For qualified disaster-related personal casualty losses, the per-casualty floor is increased from $100 to $500. Additionally, the 10 percent adjusted gross income (AGI) limitation does not apply to the net disaster loss. The 10 percent AGI limitation applies only to the excess of the personal casualty losses over personal casualty gains reduced by the net disaster loss amount.

The provision treats the net disaster loss as an addition to the standard deduction of the individual, rather than as an itemized deduction. For alternative minimum tax purposes, the disallowance of the standard deduction does not apply to the increased amount attributable to the net disaster loss.

Charitable Contributions

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. California does not conform to the federal increased 100 percent of taxable income deduction for charitable contributions.

Personal Casualty Losses

Under the PITL, California generally conforms to the federal charitable contribution rules under IRC section 165 as of the specified date of 1/1/2015, and as a result, does not conform to the federal special rules for qualified disaster-related personal casualty losses arising in a qualified disaster area.

The provision increases, for calendar years 2021 and 2022, the credit allocation ceiling for buildings located in any qualified disaster zone, defined as that portion of any qualified disaster area which was determined by the President during the period beginning on 1/1/2020, and ending on the date which is 60 days after 12/27/2020.

For 2021, the increase is equal to the “applicable dollar limitation,” which is the lesser of $3.50 multiplied by the population residing in a qualified disaster zone, or 65 percent of the state’s overall credit allocation authority for calendar year 2020. For 2022, the increase is equal to the “applicable dollar limitation” reduced by the amount of any increase in the credit allocation authority from 2021. Buildings impacted by this provision will also be granted a one-year extension of the placed in service deadline and the 10 percent test.