This box/component contains JavaScript that is needed on this page. As the forgiveness of a PPP loan is excluded from gross income, for LLCs, the amount of the forgiven PPP loan amount does not come within the meaning of "total income from all sources derived from or attributable to this state" and should not be included in the computation of the fee. From child care, relief for small business owners, direct cash support to individuals, financial aid for community college students and more, these actions are critical for millions of Californians who embody the resilience of the California spirit., Were nearly a year into this pandemic, and millions of Californians continue to feel the impact on their wallets and bottom lines. COVID-19 has caused PE firms to adjust their valuation practices postponing valuations to avoid reset triggers, exploring new approaches to valuations or diversifying existing ones. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. Impacted by California's recent winter storms? See how we connect, collaborate, and drive impact across various locations. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 %PDF-1.7 % Drive maximum value across your supply chain. This will bring conformity to the federal treatment of PPP loan forgiveness and EIDL grants, with one important exception relating to reduction in gross receipts in the 2019-2020 taxable year. MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 4 CAL. 80 is not a complete conformity bill, and there are some key distinctions to be made from the federal treatment of PPP loans. Lauren is a senior associate working in the Washington National Tax practice of Deloitte Tax LLP. However, they were amended to apply to taxable years beginning on or after January 1, 2019. You meet the 25% gross receipts reduction qualifications. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. Careful consideration will need to be given to these issues, as well as the need for documentation to support that the 25% diminution in gross receipts requirement of A.B. OTFhMGFmZGQ0YThjYTRlMDNjYWE5NDNlMmI2NjY2ZTFiYTdmNzc0NGFjM2Zj 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- In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. 2023. 116-136, 1105(i). Specifically, A.B. Combined, the agreement represents a total of 5.7 million payments to low-income Californians. If you have any issues or technical problems, contact that site for assistance. For federal qualifications regarding income tax treatment, visit Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. LAW Section 1102 and 1106 of the CARES Act, established the PPP as a new loan program administered by the U.S. Small Business Administration (SBA) as part of its 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). The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. Podcast: Should borrowers submit PPP loan forgiveness applications early? Due to the timing of A.B. Note that the citation to the federal law presumably should be 15 U.S.C. & TAX. California conforms to the federal gross receipts test requiring a 25% or greater reduction in gross receipts and will therefore follow the rationale of this related federal guidance. PPP Loan Forgiveness for Borrowers International China Practice India Practice Latin America Practice Consulting Technology Risk & IT Compliance Strategy & Operations Transactions Specialty Technology Automation Data Analytics & BI Development & Integration Enterprise Systems Technology Products Technology Strategy Automation DTTL (also referred to as "Deloitte Global") does not provide services to clients. California taxpayers that have received PPP loans or EIDL advance grants will likely want to consider the new law when filing their 2020 California corporate and individual income tax returns. Credit: Spidell Tax, Analysis, and Education, 200 West Roseburg Avenue NmIyYjY1ZGFjODY4OTViMmNkMGJiYjAzM2JjYTBhMDJhZDYyYThmNTg3Yjcw If this reduction threshold is not met, the expenses cannot be deducted on the California tax return. 7 Ch. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh View the list of archivedMultistate Tax alerts. 636(a)(37)(A)(iv)(I)(bb). 17 (A.B. 636(a)(37)(A)(iv)(I)(bb) was added by Section 311 of Division N of the CAA. To stay logged in, change your functional cookie settings. 80, some California taxpayers may have either filed their 2020 returns prior to its enactment, or made an extension payment based on the provisions of A.B. 80 defines an ineligible entity in part as a taxpayer that does not meet the reduction from the gross receipts requirements of Section 636(a)(37)(A)(iv)(bb) of Title 15 of the United States Code, as added by Section 311 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). See CAL. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. 2020-27. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 276 0 obj <> endobj 80 amends California law to operate more consistently with the federal CAA regarding the permissibility of deductions for expenses paid with forgiven PPP loan proceeds. ODE0ZjA1OTZlMmYzNGViM2E4NWJiYTMwNzQ0N2I2YmVhZTE1MDVlNWJjOTJk When policy shifts, our insights and analysis can help you plan and respond. These new provisions provide [f]or taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to section 1106 of the [CARES Act], pursuant to the [Enhancement Act], or pursuant to the [Flexibility Act].17 For this purpose covered loan is defined as having the same meaning as in section 1106 of the [CARES Act].18 Thus, the Forgiven Loan Amount is not included in gross income for PITL or CTL purposes. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. Onlyagross receiptsreduction inone quarterin2020mustmeet this25%thresholdtoqualifyforthe PPP loan expense deduction, assuming the entity is notpublicly traded. 15 See e.g., I.R.C. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. If your PPP amount is over $150, 000 and you received your PPP loan through a bank in the SmartBiz network, your bank will be contacting you directly about applying for Forgiveness. 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. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. By showing up as I am, Im elevating my career. 80 has been satisfied to avoid being classified as an ineligible entity.. The new federal resources will extend care for children of essential workers through June of 2022, and funds increased access to subsidized child care for more than 8,000 children of essential workers and at-risk children who are not currently served in the system through June of 2022. A custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics. Copyright 2023 BDO USA LLP. Additional Aid for Individuals and Families. 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. 636(a)(37)(A)(iv)(I)(bb). A diversity, equity and inclusion video series. Drivers, key risks and opportunities from our leaders and Nareits senior v.p. hb```"{ AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". A.B. endstream endobj 212 0 obj <>/Pages 210 0 R/StructTreeRoot 12 0 R/Type/Catalog/ViewerPreferences 230 0 R>> endobj 213 0 obj <>/MediaBox[0 0 612.12 792.12]/Parent 210 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 214 0 obj <>stream The agreement provides for two years of fee relief for roughly 59,000 restaurants and bars licensed through the states Department of Alcoholic Beverage Control that can range annually from $455 to $1,235. A sign calling for student loan debt relief is seen in front of the Supreme Court as the justices are scheduled to hear oral arguments in two cases involving President Joe Biden's bid to reinstate . ZmE2MjY1MzQ2MjA0N2IxZDNmNTlhNjdhMDU1ZmY2NjQwYjZiMDRlZDRkZTBm A.B. The agreement also provides a combined $35 million for food banks and diapers. On June 30, 2022, AB 194 was enacted which allowed an income exclusion for covered loan amounts forgiven pursuant to the Paycheck Protection Program Extension Act of 2021 (PPPEA)(Public Law 117-6). We can harness the power of people, process, data and technology to transform your companys tax operating model into a strategic function of the business. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. (CAL. Under the express terms of the CARES Act, forgiven loan amounts are excluded from the borrowers gross income.4 Digs with Dignity is on a mission to provide those transitioning from homelessness with custom, fully furnished living spaces that feel like home. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. To qualify for expense deductions, basis adjustments, and lack of reduction of tax attributes related to an SOV grant under SB 113, you must meet the following qualifications. On June 30, 2022, AB 194 was enacted which allowed an income exclusion for covered loan amounts forgiven pursuant to the Paycheck Protection Program Extension Act of 2021 (PPPEA) (Public Law 117-6). This isnt the tech you know. Connecting with our core purpose through a renewed lens. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. endstream endobj startxref ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz ODU0M2JiMTQ1YmRhYjQ5Yjc2ZWQzNTA3Mjc4MDM1OWI3N2RmYmE4YjEzZTI3 hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? The agreement would provide the $600 payments to households with ITINs and income below $75,000. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. The potential is great what to know before taking action. 6 P.L. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. and CTL purposes. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. This Tax alert provides a brief overview of the federal legislation relating to the PPP, summarizes the notable changes to California law made by A.B. In addition, the agreement provides a $600 one-time payment to taxpayers with Individual Tax Identification Numbers (ITINs) who were precluded from receiving the $1,200 per person federal payments issues last spring and the more recent $600 federal payments. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. NDZkZjRjZDY4ODVjMjk3OGE5MjViODBjYjExOTliZWFhNzgwY2FjMTkzYjll If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. The COVID-19 is having a huge impact on the global economy, with manufacturers and the travel industry bearing the initial brunt as the impact expands. REV. The agreement provides an additional $100 million in emergency financial aid for qualifying low-income students carrying six or more units, with award amounts to be determined locally and made available by early April. (CAL. Golf is better when were all playing together. How we work matters as much as what we do. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. Follow our normal amended return procedures to claim any deduction or adjustment related to PPP loans. Principal, SALT Services 1577, 2019-2020 REG. Cybersecurity can never rest. 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. & TAX. California law excludes PPP loans forgiven under the CARES Act from gross income, Telecommunications, Media & Entertainment, Background on federal legislation relating to the PPP, Overview of notable changes under A.B. April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. 19 A.B. The SBA offered banks, and later fintech companies, processing fees based on the size of loans, which ranged from 5% for loans of $350,000 or less to 1% for loans of $2 million. Please see www.deloitte.com/about to learn more about our global network of member firms. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. of research and economic analysis. GTIL refers to Grant Thornton International Ltd (GTIL). Learn how were making the game more inclusive for all. These loans are not forgivable. If you make an election under Rev. All rights reserved. Those processing fees gave BofA an incentive to increase the size of PPP loans, according to the small businesses that are suing the $3.05 trillion-asset bank. Specifically, the new law states that [a]ny credit or deduction otherwise allowed under this part [(Part 10 for the PITL and Part 11 for the CTL)] for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section.19. 116-136. NmIyNjRmZjA0MDdkNzU5Y2IwOGU3MjMzZTk5MTBkNmQwYTY0OTQ3YTg3ODc1 1577 adds two identical California tax provisionsCalifornia Revenue & Taxation Code (CRTC) section 17131.8 under the Personal Income Tax Law (PITL) and CRTC section 24308.6 under the Corporation Tax Law (CTL). Grant Thornton LLP is a member firm of GTIL. N2NiMzE4OGQyZTA0YjBmOWI5YTk3ZTg0MTJhOGY3YTVkZGIyNDllOTExZDgw It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. The agreement also partially conforms California tax law to new federal tax treatment for loans provided through the Paycheck Protection Plan, allowing companies to deduct up to $150,000 in expenses covered by the PPP loan. SB 113 also allows the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers for SVO and RRF grants. Y2ZjZmQ1NzgyYTlkZmE1NGZmOTRmOTU2ZWE5M2Y5OWRlZTY2NTU3M2QxNmJh How does ESG fit into business strategy? This tax treatment would also extend to the Economic Injury Disaster Loans as well. 1577 added new corporate and income tax statutes providing that [a]ny credit or deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section.8, A.B. 1577 and how these changes impact their California tax liabilities. 1577 or other California tax matters, please contact any of the following Deloitte professionals: Roburt Waldow, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 612 397 4487, Christopher Campbell, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 3072, Valerie Dickerson, partnerMultistate, Deloitte Tax LLP, Washington National Tax, +1 202 220 2693, Kathy Freeman, managing directorMultistate, Deloitte Tax LLP, Sacramento, +1 916 288 3392, Shirley Wei, senior managerMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 1715. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. No Results Found. 311 0 obj <>stream 162 and 163) will be disallowed to the extent PPP loan proceeds are ultimately forgiven.5 Later in 2020, the IRS issued Revenue Ruling 2020-27 further explaining that taxpayers cannot deduct expenses paid with PPP loan proceeds if the taxpayer reasonably expects forgiveness of the covered loan regardless of the year when forgiveness occurs. 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. 80. The agreement incorporates the Governors Golden State Stimulus plan to assist California households that have borne the disproportionate economic burden of the COVID-19 Recession those with incomes below $30,000, as well as those unfairly excluded from previous federal stimulus payments. We cannot guarantee the accuracy of this translation and shall not be liable for any inaccurate information or changes in the page layout resulting from the translation application tool. CODE 17131.8(b); 24308.6(b), as amended by A.B. People are having a hard time making ends meet. No calculations required. On April 29, 2021 Governor Newsom signed California A.B. %%EOF Companies must focus on attracting and retaining talent, modernizing HR to serve new business needs while becoming more efficient. We understand you. 1577 attempted to do, A.B. Don't let tax be the only deciding factor in your relocation. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses. Sec. What will help even more is using a holistic approach to create a winning strategy. Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. You can outsource cybersecurity, but you can't outsource your risks. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi 116-260. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. Find out how to manage the business risks behind data. 39 (A.B. Sec. According to the legislative analysis, this date was changed to ensure that all fiscal year filers are captured. 2 A.B. MWRkNGI5MjIxZWY4NWUwMzU3N2Y0MDFmODQ1ZmQzMjliYzI1YWJjM2E3OGU2 1577, and provides some taxpayer considerations. Consult with a translator for official business. 8 CAL. ZDE5MjljNTlmOGNmNzlmYTg5MGFiZWU3MjM1M2I1Yjg2OTA3NzZmYmU3NmFi However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk Spidell Publishing one of Californias leading continuing education organizations is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. 3 P.L. 1577. :D 8 Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. 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 April 29, California Gov. 1 A.B. AB 80 generally conforms to the federal treatment of PPP loan forgiveness and EIDL grants, with one major exception. ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. Furthermore, to the extent a taxpayer is an ineligible entity, it may be faced with difficult questions regarding how to treat deductions for expenses paid in 2020 that later become disallowed upon loan forgiveness occurring in a different tax year (e.g., the expense occurs in 2020 but becomes disallowed upon PPP loan forgiveness occurring in 2021). NThmOTI5NTJhNjc1MTk0MWYwNDRhODc5Yjk0NWRlY2MxOGViMzcwMTViODJl Generated by Wordfence at Sat, 4 Mar 2023 17:56:39 GMT.Your computer's time: document.write(new Date().toUTCString());. We translate some pages on the FTB website into Spanish. 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. For a complete listing of the FTBs official Spanish pages, visit La esta pagina en Espanol (Spanish home page). MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy Additionally, A.B. Notice 2020-32 (available here). 162, 163; CAL. All Rights Reserved. If you do not qualify for deductions under AB 80, California follows the Rev. Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw 4 See P.L. News Spidell's California Minute . AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. SESS. See Terms of Use for more information. The new application form for PPP loans under $50,000 only requires borrowers to confirm the PPP-loan proceeds were used for eligible costs, and to provide supporting documentation showing expense payments. Be ready to demonstrate diligence for the FCPA. 80 amends California law to operate more consistently with the federal CAA regarding the permissibility of deductions for expenses paid with forgiven PPP loan proceeds. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi Not-for-profit organizations and higher education institutions, Transportation, logistics, warehousing and distribution, Operation and organizational transformation, Blockchain, digital assets & Web3 solutions, Do not sell/share my personal information. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. document.write(new Date().getFullYear()) California Franchise Tax Board. Businesses are struggling. Fullwidth SCC. Under Section 1106 of the CARES Act, a recipient of a covered loan under the PPP is eligible for forgiveness of indebtedness on the loan in an amount generally equal to the sum of certain costs incurred and payments made during either the eight -week or the 24-week period beginning on the date of the origination of the covered loan, Together with PitchBook, we give you the focused insights to take advantage of the trends. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 This content supports Grant Thornton LLPs marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. ZTg2N2Y3NGIyZGIwODA1ODY4OWI3ZDYzNWNjOTk5OTUyZmU4YTllMzc2OTVj Your ERM needs to cover new gaps and drive new value. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. 17 A.B. CalFresh Student Outreach and Application Assistance. 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. This article provides an introduction to renewable energy tax credits and highlights several key factors that buyers and sellers of these credits should consider. The agreement provides an additional $24 million for financial assistance and services through Housing for the Harvest a program providing support for agricultural workers who have to quarantine due to COVID-19. You can also read the documentation to learn about Wordfence's blocking tools, or visit wordfence.com to learn more about Wordfence. This material may not be applicable to, or suitable for, the readers specific circumstances or needs and may require consideration of tax and nontax factors not described herein. CODE 17131.8(b); 24308.6(b), as added by A.B. Your access to this service has been limited. According to the Franchise Tax Board, because AB 80 only conforms to the federal PPP loan forgiveness provisions as they were last amended by the Consolidated Appropriations Act of 2021, California does not conform to the extension of the PPP loan program by the PPP Extension Act of 2021 (P.L. SBA Forgiveness Portal. 12 CAL. 211 0 obj <> endobj 1577 is effective immediately and applies to taxable years beginning on and after January 1, 2020.20 Taxpayers that have received a PPP loan should be aware that the Forgiven Loan Amount is excluded from gross income for California PITL and CTL purposes. There's more to consider. The information contained herein is general in nature and is based on authorities that are subject to change. We strive to provide a website that is easy to use and understand. 2023 Grant Thornton LLP - Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. ZmEwMjJhMjJhYSJ9 Modesto, CA 95350, (209) 527-4220 (phone) For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. REV. GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. 0 SESS. 1577 and how these changes impact their California tax liabilities. The Multistate Tax alert archive includes external tax alerts issued byDeloitte Tax LLP's Multistate Tax practiceduring the last three years. On April 29, 2021, California Gov. OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy Our response tackles the human and the economic impacts of COVID in a way that echoes President Bidens American Rescue Plan and will help those who are hurting most. 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.