Legislature passes bill that would allow physicians to deduct PPP expenses on state income taxes

April 26, 2021
Area(s) of Interest: Advocacy 

Today, the California Legislature passed a bill supported by the California Medical Association (CMA) that would bring full conformity between California state tax code and federal law with regards to Paycheck Protection Program (PPP) loans, making forgiven PPP loans tax-deductible and delivering tax relief to businesses hit hardest by the pandemic.

The bill—the Coronavirus Aid, Relief, and Economic Security Act: Federal Consolidated Appropriations Act of 2021 (AB 80, authored by Assemblymember Autumn Burke)— is now on the Governor’s desk for consideration.

“This bill will help ensure the integrity and financial health of our health care infrastructure, particularly smaller physician practices, which have been hit hard by this pandemic,” said CMA President Peter N. Bretan, Jr., M.D. “For physicians, the burden of this time has been extreme. Not only are many dealing with the stress of combating COVID-19 on the front lines, but many are also struggling to keep their practices open amid declining office visits and increased costs. AB 80 will offer some much-needed support to help keep health care networks strong and keep physician practices open.”

By aligning federal and state tax policy, eligible recipients of federal PPP loans will be allowed to deduct eligible expenses from their taxes. PPP loans were granted to businesses like physician practices across the nation in the last year as an essential aid to help them keep their doors open and their employees on payroll.

Physician practices have faced devastating reductions to revenues and increases in costs due to the COVID-19 pandemic, with 87% of practices reporting ongoing fiscal concerns. AB 80 is a critical piece of legislation that will help our front-line physicians and community practices keep their doors open so that they can continue to provide necessary care for residents across the state.

Without this change in the tax law, physician practices that received a PPP loan, could face practice closures, reducing access to health care and crippling the state’s long-term recovery prospects. This bill maximizes the positive effect of the PPP loans for those hardest hit and ensures that struggling practices across the state can keep their doors open and continue to care for patients.

In October a survey of CMA physicians found that 87% of practices are still worried about their financial health. Even with more than 8 out of 10 practices now utilizing telehealth, the average volume of patient visits and practice revenue is still down by one-third, with 25% of practices still experiencing a revenue decline of 50% or more. Surgical specialties are particularly impacted because of their inability to practice via telehealth, with average revenue declines of 41%, compared to 34% for all specialties.


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