Effective January 1, 2025, lenders and affiliated entities in California will no longer be able to claim bad debt deductions or request refunds for accounts deemed worthless, per Senate Bill (SB) 167. However, they may still claim deductions or refunds for accounts written off before this date, provided claims are filed within three years.
Retailers, however, remain unaffected by this change and may continue to claim bad debt deductions on sales or use tax paid on accounts later deemed uncollectible. Those impacted should review their policies and ensure compliance before the new rule takes effect. (California Department of Tax and Fee Administration, S.B. 167, January 1, 2025)