California Republicans Request Governor Make COVID-19 Relief Business Loans Tax-Free

California State Senate Republicans support legislative efforts that would make state and federal COVID-19 relief dollars free from tax liability for businesses and allow them to fully deduct expenses paid for with forgiven loans. Senate Bill 265 introduced by Senator Andreas Borgeas (R-Fresno) would apply to both future pandemic-related relief funds as well as retroactively to recipients who have already received funds.

With tax season approaching, there is concern among many businesses that the state of California is attempting to tax federal assistance and generate extra revenue. This, California Republicans argue, is fundamentally unfair and urge Governor Newsom to include these provisions in the next early action budget bill likely to be considered next week.

“Businesses and entities that received federal assistance during the pandemic desperately needed that assistance and should not be penalized by the state of California,” said Senate Republican Leader Scott Wilk (R-Santa Clarita). “The state should not balance its budget on the backs of the businesses that qualified for financial assistance. Our businesses fared worse compared to those in other states because of the high cost of operating businesses here coupled with the confusing shutdown and re-opening guidelines ordered by the Governor. Every effort should be taken to assist – not further hurt - those who applied for and received pandemic relief funds.”

“Businesses might be surprised to learn that pandemic relief funds they received may be considered taxable events,” said Senator Borgeas, the author of the bill. “Struggling businesses should not have to turn down relief simply because they cannot afford to be taxed on it by California.”

California has yet to fully conform to the federal tax laws, which exempt COVID-19 relief funds as taxable events. This could leave many struggling businesses with major tax liabilities. It is vital to the recovery of our business community that California pass legislation that will provide businesses with the relief they deserve.