Problem: Elizabeth is a sole proprietor with 30 employees. On January 15, 2021, she borrowed $50,000, through the Paycheck Protection Program (PPP). She spent the entire amount on eligible expenses. Which of the following statements is TRUE? California does not conform to the federal PPP loan forgiveness rules. Elizabeth may not deduct any expenses paid with the PPP loan funds on her California return. The amount of the forgiven PPP loan may be excluded from taxable income on her return. She can also deduct the eligible expenses paid with the PPP loan funds. The amount of the forgiven PPP loan must be included as taxable income on her California return.