KServicing stated they were 1.) 250 0 obj <>stream By showing up as I am, Im elevating my career. California taxpayers canalsofully deduct expenses paid with EIDL fundssince this thresholddoes not apply toEIDL grants. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. Paycheck Protection Program Loan Forgiveness and Treatment - California This agreement builds on Governor Newsoms proposal and in many ways, enhances it so that we can provide the kind of immediate emergency relief that families and small businesses desperately need right now, said Senate President pro Tempore Atkins. Podcast: Should borrowers submit PPP loan forgiveness applications early? There has been no activity, and we can't get good information on when and if it will pass, and what will actually be included in the final bill. California has NOT passed AB 80: the PPP forgiveness bill - Spidell Unable to verify your submitted forgiveness amount and/or documents or 2.) California Conforms to Federal PPP Loan Forgiveness Rules These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses. On April 29, 2021, California Gov. For additional information, visit Section 311 of the CAA, 2021, Revenue and Taxation Code (RTC) section 17131.8(g)(3)), and Small Business Administration (SBA) guidance. section 1106 of the CARES Act for forgiveness of the covered loan. As we continue to fight the pandemic and recover, Im grateful for the Legislatures partnership to provide urgent relief and support for California families and small businesses where its needed most, said Governor Newsom. OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi 19 A.B. NDQyOTJlYTVmOTZkMzNjMTFiNDZlY2VjNjdlMmViOTViNWVlZmRkMzIyZWNl I have already received forgiveness on my second draw, which was thankfully from a different lender, therefore reason 2 of why I was denied is invalid. The documentation must clearly identify both of the reference quarters (if not using annual comparison), must Y2NjYmFmZTQyOGZhYjViZTYxMTQ0ODRiYWY5OGVkNzNlOWI1NWY0YzU0ZDVl NmIyNjRmZjA0MDdkNzU5Y2IwOGU3MjMzZTk5MTBkNmQwYTY0OTQ3YTg3ODc1 National Tax Office Leader. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj On September 9, 2020, Assembly Bill (AB) 1577 (Coronavirus Aid, Relief, and Economic Security (CARES) Act Conformity) was enacted which allowed an income exclusion for tax years beginning on or after January 1, 2020, for forgiven PPP loans. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-136. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. Exceptional organizations are led by a purpose. 116-142, the Flexibility Act) to, among other things, modify certain restrictions imposed in regulations issued by the Small Business Administration (SBA) relating to qualifications for forgiveness of PPP loans.9 Administered by the SBA and overseen by the US Treasury Department, the PPP is designed to provide short-term relief to millions of Americas businesses to ensure they can sustain operations and keep their workers employed as the economy recovers.10, The PPP allows qualifying businesses to apply for a loan to maintain their payroll and some overhead expenses through the period of emergency.11 If a business takes a loan under the PPP, it may apply to have some or all of the loan forgiven (the Forgiven Loan Amount)specifically that portion of the PPP loan used to cover payroll costs, interest on mortgage obligations, rent obligations, and utility payments, subject to specific conditions and during the 24 week period after the loan is distributed (the Loan Forgiveness Eligible Expenses).12 Generally, federal and California law treat the cancellation of debt as gross income.13 However, the CARES Act excludes the Forgiven Loan Amount from gross income for federal tax purposes.14 Additionally, for federal and California tax purposes, certain business expenses may be deducted such as those under IRC sections 162 or 163.15 The Internal Revenue Service, however, issued Notice 2020-32 clarifying that deductions otherwise allowable under any provision of the IRC, including sections 162 and 163, are not allowed to the extent of the Forgiven Loan Amount.16. 1577, 1, 2; CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020, INCOME TAXES: FEDERAL CARES ACT: GROSS INCOME: LOAN FORGIVENESS, JULY 8, 2020, Deloitte Heads Up, Volume 27, Issue 8, Highlights of the CARES Act, updated September 18, 2020, Deloitte Tax LLP's Multistate Tax practice, California legislature allows certain non- NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk PDF California Law Excludes PPP Loans Forgiven under the CARES - Deloitte Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. 1577 which had previously denied the deductibility of expenses paid with forgiven PPP loan proceeds. document.write(new Date().getFullYear()) California Franchise Tax Board. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. On April 29, California Gov. California Governor Gavin Newsom onApril29 signedinto law legislation that generallyconformsthe states tax treatment of Covid-19 aid in the form of loans and grants with the federalindividual and corporate income tax treatment of such aid, including the CARES Act and the Consolidated Appropriations Act, 2021 (CAA). Modesto, CA 95350, (209) 527-4220 (phone) See how we connect, collaborate, and drive impact across various locations. Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. Social login not available on Microsoft Edge browser at this time. Consult with a translator for official business. 1577, addressing the treatment of PPP loans for tax years beginning on and after Jan. 1, 2020.7 Consistent with IRS Notice 2020-32, this legislation generally provided that forgiven PPP loan amounts would be excluded from the borrowers gross income, but that associated deductions would not be allowed for expenses paid with forgiven PPP loans. CFOs are more optimistic about the U.S. economy, according to Grant Thorntons 2022 Q4 survey, as they push for growth while being judicious about costs. PPP Loan Forgiveness FAQ - resources.smartbizloans.com In particular, Californias definition of an ineligible entity borrows its 25% diminution in gross receipts test from the qualification (i.e. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. Ultimately, this will make tax planning for 2021 essential if a business received loan forgiveness during the year, as this nonconformity was not anticipated. 636(a)(37)(A)(iv)(I)(bb). (209) 527-4247 (fax). Multistate Tax alert | September 30, 2020. Shortly after enactment of the CARES Act, the Internal Revenue Service (IRS) issued Notice 2020-32 providing that deductions for business expenses otherwise allowable under the Internal Revenue Code (IRC) (e.g., deductions under IRC Secs. Manufacturers need a two-pronged approach to manage risks. AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. If you have questions regarding A.B. Find out how to manage the business risks behind data. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. endstream endobj 277 0 obj <. the forgiveness of PPP loans. 1577 and how these changes impact their California tax liabilities. You will then receive an email that helps you regain access. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. Notice 2020-32 (available here). If this reduction threshold is not met, the expenses cannot be deducted on the California tax return. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. 162, 163; CAL. However, California disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. 80, gross receipts from the fourth quarter of 2020 may be compared to the fourth quarter of 2019 only with respect to an application submitted on or after Jan. 1, 2021. See 15 U.S.C. Please see www.deloitte.com/about to learn more about our global network of member firms. Separately, the Governor and legislative leaders said that discussions are continuing on measures for the safe reopening of the states K-12 schools, including strategies to address learning loss caused by the pandemic. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. & TAX. Below are key provisions of the Immediate Action Agreement: Direct Relief to Individuals and Families. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 As a result, it provided no California tax relief for fiscal year taxpayers whose tax year began before January 1, 2020, but who obtained a PPP loan after January 1, 2020. Your ERM needs to cover new gaps and drive new value. At Grant Thornton, we dont just understand your business. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. Additionally, A.B. View the list of archivedMultistate Tax alerts. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 18 A.B. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. PPP Forgiveness: Urgent News About Nonconformity in California California Conforms to Federal PPP Loan Forgiveness Rules On February 9, 2022, Senate Bill (SB) 113 (Economic Relief) was enacted to allow an income exclusion for Shuttered Venue Operator (SVO) grants provided under CAA for tax years beginning on or after January 1, 2019 and for Restaurant Revitalization Fund (RRF) grants provided under ARPA for taxable years beginning on or after January 1, 2020.