Is CA only going to be a problem this year if the PPP has been forgiven before 12/31/2020? Because we have to wait to see.

"A.B. 1577 denies business expense deductions for those expenses that were paid for using forgiven loan funds."

Technically it is not the cancelation of the PPP debt that cause an increase in net income, taxable to CA, but rather the denial of the expenses paid with "forgiven" loan funds.

If my client's PPP loan is not yet forgiven at 12/31/2020 then the expenses paid are allowable on my 2020 return, and not disallowed until 2021 when the loan is forgiven (at which point I'll just include them in income for simplicity; 6 of one or half dozen of the other!).