In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. California has NOT passed AB 80: the PPP forgiveness bill March 9, 2021 AB 80, the bill that would allow up to $150,000 of expenses to be deducted if paid with PPP forgiven loan amounts has not yet passed. These pages do not include the Google translation application. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. California law excludes PPP loans forgiven under the CARES Act from gross income has been saved, California law excludes PPP loans forgiven under the CARES Act from gross income has been removed, An Article Titled California law excludes PPP loans forgiven under the CARES Act from gross income already exists in Saved items. Wordfence is a security plugin installed on over 4 million WordPress sites. 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). Certain services may not be available to attest clients under the rules and regulations of public accounting. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. 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. 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. 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. On April 29, 2021, AB 80 (Consolidated Appropriations Act (CAA) Conformity) was enacted which allowed the additional income exclusion for second draw PPP loans and Economic Injury Disaster Loan (EIDL) advance grants and allowed the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers, for tax years beginning on or after January 1, 2019. Find out how the technology, banking and asset management sectors are adapting their strategies to handle todays threats. This tax treatment would also extend to the Economic Injury Disaster Loans as well. REV. (CAL. If you have questions regarding A.B. At Grant Thornton, we dont just understand your business. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. 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. How does ESG fit into business strategy? OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi 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. Access from your area has been temporarily limited for security reasons. 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. News Spidell's California Minute . 636(a)(37)(A)(iv)(I)(bb). On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. Consult with a translator for official business. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. Friday, September 18th, 2020. On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. 20 See A.B. In addition, the following provision is included in the agreement: The agreement restores previously enacted reductions, effective July 1st, for the University of California, California State University, the Judicial Branch, Child Support Services and for moderate-income housing. CODE 17131.8(g)(3); 24308.6(g)(3). Podcast: New hiring credit enacted for small businesses. For federal qualifications regarding income tax treatment, visit Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. & TAX CODE 24271. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. If you think you have been blocked in error, contact the owner of this site for assistance. DTTL and each of its member firms are legally separate and independent entities. It is unclearhowbusinesses that changed entity types during 2020will apply2019 gross receiptstoqualify for the PPPexpense deduction. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. 229 0 obj <>/Filter/FlateDecode/ID[<53445A688FC0F84BB5871A6886EB3172>]/Index[211 40]/Length 93/Prev 93697/Root 212 0 R/Size 251/Type/XRef/W[1 3 1]>>stream 80) providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans.1 Under A.B. 61; CAL. Section 636(a)(37)(A)(iv)(bb), which requires the entity tohave experienced at least a 25% drop in gross receiptsinthe first, second or thirdquarter of 2020, or the fourth quarter if a PPP loan application was submitted on or after January 1, 2021,compared tothe same quarter in 2019. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. Yjk1NTlhZjUzMmI3ODFlN2VlZDM3OWQ5OWM1ZDgzYmM3NTgyMWVkZjViZTQy 2 A.B. Generated by Wordfence at Sat, 4 Mar 2023 17:56:39 GMT.Your computer's time: document.write(new Date().toUTCString());. 12 CAL. The agreement reflects a four-fold increase from $500 million to more than $2 billion for grants up to $25,000 for small businesses impacted by the pandemic, and also allocates $50 million for cultural institutions. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 15 See e.g., I.R.C. For this reason, taxpayers that have already filed or paid tax following the provisions of A.B. Onlyagross receiptsreduction inone quarterin2020mustmeet this25%thresholdtoqualifyforthe PPP loan expense deduction, assuming the entity is notpublicly traded. If you do not qualify for deductions under AB 80, California follows the Rev. 80s partial conformity to the federal treatment of expenses paid with forgiven PPP loan proceeds is welcome news that generally alleviates an otherwise burdensome federal conformity issue. Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C. 80. Taxpayers must have a 25% reduction in gross receipts in any 2020 calendar quarter as compared to the comparable 2019 calendar quarter in order to deduct expenses paid with PPP loan forgiven amounts. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 Who should lead the charge? All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. Friday, September 25th, 2020. & TAX. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 If you have any issues or technical problems, contact that site for assistance. 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. 1577, 1-3 (stating that [t]his act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect). You can count on us to prioritize and complete work to the best of our ability based on these changes. 7 For additional details relating to the federal CARES Act and subsequent legislations relating to the PPP, please refer to the Deloitte Heads Up, Volume 27, Issue 8, Highlights of the CARES Act, updated September 18, 2020 (available here). B expects to apply to the lender for forgiveness of the covered loan in 2021. Podcast: Critical new considerations for September 15 estimated tax payments. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. 636(a)(37)(A)(iv)(I)(bb).10 Generally, to satisfy the gross receipts requirement, a taxpayer must have experienced a 25% or greater reduction in quarterly gross receipts for the first, second or third quarters of 2020 as compared to the same quarter of 2019.11 2023. If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. However, they were amended to apply to taxable years beginning on or after January 1, 2019. 1577, A.B. The agreement adds just over $400 million in new federal funds that will provide stipends of $525 per enrolled child for all state-subsidized child care and preschool providers serving approximately 400,000 children in subsidized care statewide. To stay logged in, change your functional cookie settings. Connecting with our core purpose through a renewed lens. The new legislation supersedes AB 1577. 1557 also disallows otherwise allowable credits and deductions for amounts paid or incurred using forgiven loan funds.3 Because California generally conforms to the version of the Internal Revenue Code (IRC) that existed as of January 1, 2015, California did not automatically conform to the CARES Act and subsequent, related federal legislation.4 Absent conformity, the California Legislature anticipated that California businesses could have to pay more than $3 billion in additional taxes attributable to forgiven PPP loans.5 As a result, the California Legislature enacted A.B. 200 West Roseburg Avenue Modesto, CA 95350 (209) 527-4220 (phone) (209) 527-4247 (fax) https . The path to quality loyalty programs begins with adopting the right analytics looking deeper into customer purchase patterns to uncover true trends. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. 1 Ch. 19 A.B. ZjM4OTJmMjgzYWNmN2I1NzQzMDI5YzFkNDg0ZGEwZGY0Zjk4ZTVmOTczYzhi Generated by Wordfence at Sat, 4 Mar 2023 17:56:41 GMT.Your computer's time: document.write(new Date().toUTCString());. NDZkZjRjZDY4ODVjMjk3OGE5MjViODBjYjExOTliZWFhNzgwY2FjMTkzYjll 5 IRC Sec. Modesto, CA 95350, (209) 527-4220 (phone) 116-136, 1105(i). We are excited to finally have clarity on California's PPP loan forgiveness stance. See how. 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. There have been a few different rounds of applications, and of course, the program is complex as businesses must be fully clear about inclusion/exclusions and how forgiveness and/or repayment terms work. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. We translate some pages on the FTB website into Spanish. Our audits ensure confidence in our clients financial information. 80. ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz A.B. %PDF-1.6 % 297 0 obj <>/Filter/FlateDecode/ID[<681772630396424DB877BF5F6FFE419B>]/Index[276 36]/Info 275 0 R/Length 98/Prev 155748/Root 277 0 R/Size 312/Type/XRef/W[1 2 1]>>stream Read about the challenges and opportunities that could lie ahead. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy More than 750,000 PPP loans were taken out by California small businesses. Follow our normal amended return procedures to claim any deduction or adjustment related to PPP loans. On April 29, 2021, California Gov. CODE 17131.8(b); 24308.6(b), as amended by A.B. section 1106 of the CARES Act for forgiveness of the covered loan. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. 1557 generally conforms California to federal law allowing an exclusion from gross income for covered Paycheck Protection Program (PPP) loans that are forgiven as a part of the federal Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Dana is based in San Jose, California. The agreement also provides $12 million in state funds to support associated county administrative workload. 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).