Recess Bell: Legislature Breaks After Busy Session.

• Author: Fox, Jason
• Position: CapitolBeat

Mid-September marked the end of the first year of the 2021-22 legislative session. The flurry of late session activity sent a number of bills to the governor for action. He will have until Oct. 10 to act.

For CalCPA, the legislative session was largely successful and CalCPA was able to address a number of important issues on behalf of the CPA profession.

Paycheck Protection Program Loans

Early in the year, CalCPA was heavily engaged in the advocacy of state action to determine how Paycheck Protection Program (PPP) loans should be treated for state tax purposes. The delay in state guidance led to confusion and challenges for CPAs and their clients that had received a PPP loan.

CalCPA's grassroots advocacy and position letters helped spur action on a policy that will allow most taxpayers to apply the more favorable federal PPP tax rule for state tax purpose. While the ultimate policy that was outlined by the state will not benefit all taxpayers, it does provide the necessary direction and guidance for practitioners to serve their clients.

Pass-through Entity Tax Later in the year as the state budget came together, CalCPA worked to include legislative language that establishes an elective pass-through entity (PTE) tax. As noted in last month's California CPA, the intention of this is to provide state taxpayers a method to restructure their state income tax compliance in a manner that provides relief from current federal limits.

This tax strategy will benefit a number of taxpayers, including many CPA firms. The fast tracking of this favorable tax policy is the product of CalCPA's advocacy program and strong relationship with key policy leaders.

Changes to Licensure Process Last month, the Legislature passed and sent to the governor's desk for action AB 298, legislation sponsored by the California Board of Accountancy (CBA) and supported by CalCPA that makes thoughtful adjustment to the current CPA licensure process to provide increased flexibility and efficiency for applicants as they work toward their license and entry into the profession.

First, the bill makes changes allowing candidates to apply and sit for the CPA Exam prior to their official degree conferral. Second, the bill updates the current ethics education requirements for licensure to allow additional flexibility in how candidates can meet the ethics education requirements for licensure. More specifics about this bill were highlighted in the June issue of California CPA.

The...