california ppp loan forgiveness spidell

The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. You meet the 25% gross receipts reduction qualifications. 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. California aligning with fed PPP loan treatment. These loans are not forgivable. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. 1577. 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. 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. 20 See A.B. For a complete listing of the FTBs official Spanish pages, visit La esta pagina en Espanol (Spanish home page). The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. of research and economic analysis. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. NDQyOTJlYTVmOTZkMzNjMTFiNDZlY2VjNjdlMmViOTViNWVlZmRkMzIyZWNl 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. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. 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 Californians have been hurting. 12 CAL. Tax laws are ever-changing, which is why you need proficient tax professionals working with you and your business to ensure you are in compliance with the current tax laws. REV. SESS., 1 (see new CRTC 17131.8(b)), 2 (see new CRTC 24308.6(b)). 1577) into law. Assembly Bill 80 (AB 80) allows qualifying taxpayers to exclude from California gross income Paycheck Protection Program (PPP) loans that have been forgiven, and advance grants provided under the Economic Injury Disaster Loan (EIDL) program. 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). SESS., 1 (see new CRTC 17131.8(c)), 2 (see new CRTC 24308.6(c)). We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. Businesses are struggling. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. ODU0M2JiMTQ1YmRhYjQ5Yjc2ZWQzNTA3Mjc4MDM1OWI3N2RmYmE4YjEzZTI3 In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. 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 Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. Notice 2020-32 (available here). 13 See I.R.C. hVkkF+qe6 Al+vji"3{gYiSZ2e):t z$/=N,zG&F0ihH&h jucN^#VBOZ.fY+n?1o%?}j-]drM5~j?oZQ~|f)?gV~R,.jz2,QzOu"JY[#M}K3_OO^6b^,#lYu7O. 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. 162, 163; CAL. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi 80 is not a complete conformity bill, and there are some key distinctions to be made from the federal treatment of PPP loans. SBA Forgiveness Portal. 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. Fullwidth SCC. Your access to this service has been limited. 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. Additional Aid for Individuals and Families. CODE 17131.8(g)(3); 24308.6(g)(3). See how. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 276 0 obj <> endobj 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. 636(a)(37)(A)(iv)(I)(bb). Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. tax guidance on Middle Class Tax Refund payments, General information for the Middle Class Tax Refund, Paycheck Protection Program (PPP) loan forgiveness, FAQs for Paycheck Protection Program (PPP), Coronavirus Tax Relief for Businesses and Tax-Exempt Entities, Revenue and Taxation Code (RTC) section 17131.8(g)(3)). MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj 4 See P.L. %%EOF In addition to these measures, the agreement provides tax relief for businesses, commits additional resources for critical child care services and funds emergency financial aid for community college students. YjRjOWE1NzUwNDNiNTkxY2NkYmRhODRjM2M0MzBiOWQwNjYwZjIyNDQ3NTEw REV. Report any allowable deductions on your original return. 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 . All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. 1577 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. REV. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. CODE 17131.8(b); 24308.6(b), as added by A.B. 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. However, California disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. KServicing stated they were 1.) If you believe Wordfence should be allowing you access to this site, please let them know using the steps below so they can investigate why this is happening. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy Gavin Newsom signed Assembly Bill 80 (A.B. On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. 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- 102-1125) on February 3, 2023, that makes significant enhancements to a variety of Illinois credit and incentive programs. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. If you think you have been blocked in error, contact the owner of this site for assistance. A diversity, equity and inclusion video series. Please see www.deloitte.com/about to learn more about our global network of member firms. A.B. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. Connecting with our core purpose through a renewed lens. Grant Thornton LLP is a member firm of GTIL. Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. How we work matters as much as what we do. (209) 527-4247 (fax). Dana is based in San Jose, California. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. Manufacturers need a two-pronged approach to manage risks. document.write(new Date().getFullYear()) California Franchise Tax Board. Social login not available on Microsoft Edge browser at this time. 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. 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). For federal qualifications regarding income tax treatment, visit Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. N2NiMzE4OGQyZTA0YjBmOWI5YTk3ZTg0MTJhOGY3YTVkZGIyNDllOTExZDgw If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. 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. A medical researcher accelerated purchases by 45% with a new tech implementation plan. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. You can outsource cybersecurity, but you can't outsource your risks. Podcast: Critical new considerations for September 15 estimated tax payments. If your forgiven loan relates to an EIDL Grant or Targeted EIDL Advance, you are not required to meet these qualifications to deduct expenses. ~A=.d XmtLY RLqg! U eyJtZXNzYWdlIjoiNWIzZGU0MDczYTM5MDRlMGI1ZTJmM2QxOGExOTlmZjY0 Now, your competitors are following an automation roadmap to save work and weather economic turbulence. This Google translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. MzA1NjUwNDUyNzBkY2M0YTcxMWY2NGYzZjRhMzk3NGVkODkwNWRlNjQ0YWY2 Identify how to treat the forgiveness of a PPP loan for tax purposes; Recognize how the IAS 20 grant approach is used to account for its PPP loan; Recognize actions that impact a CPA's independence in a PPP loan assistance engagement; Recall some of the rules pertaining to a CPA receiving an agent fee from a PPP loan lender, and The measure awaits the governor's signature. 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. Learn how were making the game more inclusive for all. 117-6). Your ERM needs to cover new gaps and drive new value. In response to the IRSs guidance, Congress enacted the Consolidated Appropriations Act, 2021 (CAA) on Dec. 27, 2020, to allow greater deductibility of expenses paid with forgiven PPP loan proceeds.6 This federal response more broadly allows for the deductibility of expenses paid with forgiven PPP loan proceeds. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 Yjk1NTlhZjUzMmI3ODFlN2VlZDM3OWQ5OWM1ZDgzYmM3NTgyMWVkZjViZTQy You meet the 25% gross receipts reduction qualifications. Credit: Spidell Tax, Analysis, and Education Go Back Print. 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. For tax years beginning in 2019, qualifying taxpayers can now exclude PPP loan forgiveness or EIDL grants from California gross income and deduct allowable covered expenses paid with PPP loan or EIDL grant proceeds. Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. Executives are advised to pay special attention to emerging trends that will shape how boards and investors talk about ESG in 2021. endstream endobj startxref 1 Ch. 80, deductions for expenses paid using PPP loan proceeds are allowed even when the loan is forgiven provided the taxpayer is not an ineligible entity. Under the legislation, an ineligible entity is a taxpayer that either: (i) is a publicly-traded company; or (ii) does not experience a 25% reduction in gross receipts in an applicable quarter of 2020 as compared to the same quarter in 2019.2, The PPP was created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides forgivable business loans when the recipient meets certain eligibility criteria.3 Under the PPP, qualifying borrowers can apply to have some (or all) of their loan forgiven to the extent it was used for certain expenses such as rent, utilities, mortgage payments, and employee payroll. On April 29, 2021, California Gov. -----END REPORT-----. 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. 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. GTIL does not deliver services in its own name or at all. 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. If you have questions regarding A.B. If this reduction threshold is not met, the expenses cannot be deducted on the California tax return. AB 80 generally conforms to the federal treatment of PPP loan forgiveness and EIDL grants, with one major exception. ZjM5OWM1NmRhZmIzYzYxY2VlZmY4NDExYjhjMDA0YmRlOThjMjBhYjk3Nzkz For forms and publications, visit the Forms and Publications search tool. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi Consult with a translator for official business. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. The agreement also provides $20 million to reengage students who have either left their community college studies because of the pandemic or to engage students at risk of leaving. If you do not qualify for deductions under AB 80, California follows the Rev. 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. This measure is part of Californias effort to recover now that the pandemic is easing, state restrictions are lifting, and businesses are moving back towards full operations. Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. REV. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. 1577, and provides some taxpayer considerations. 0 If you have any issues or technical problems, contact that site for assistance. The 2023 BDO CFO Outlook Survey offers critical insights to support strategic decision-making and help your company thrive. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. CalFresh Student Outreach and Application Assistance. 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 Under the express terms of the CARES Act, forgiven loan amounts are excluded from the borrowers gross income.4 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). Overview. NmIyYjY1ZGFjODY4OTViMmNkMGJiYjAzM2JjYTBhMDJhZDYyYThmNTg3Yjcw 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. California law does not conform to this expansion of PPP eligibility. A.B. We strive to provide a website that is easy to use and understand. Friday, September 18th, 2020. AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. The undersigned certify that, as of July 1, 2021 the internet website of the Franchise Tax Board is designed, developed and maintained to be in compliance with California Government Code Sections 7405 and 11135, and the Web Content Accessibility Guidelines 2.1, or a subsequent version, as of the date of certification, published by the Web Accessibility Initiative of the World Wide Web Consortium at a minimum Level AA success criteria. %%EOF Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. If your PPP amount is over $150, 000 and you received your PPP loan through a bank in the SmartBiz network, your bank will be contacting you directly about applying for Forgiveness. More than 750,000 PPP loans were taken out by California small businesses. 1577, 2019-2020 REG. This tax treatment would also extend to the Economic Injury Disaster Loans as well. 3 P.L. See Terms of Use for more information. For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. This material may not be applicable to, or suitable for, the readers specific circumstances or needs and may require consideration of tax and nontax factors not described herein. hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G 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. 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. 636(a)(37)(A)(iv)(I)(bb). You must pay it back within either 3 or 5 years. 2020-27. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. 1577), Laws 2020. 1577 and how these changes impact their California tax liabilities. 2 A.B. 311 0 obj <>stream 16 See I.R.S. The agreement also provides $12 million in state funds to support associated county administrative workload. The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. Because these loans are not considered covered loans as that term was defined when AB 80 was enacted, the forgiveness of these loans do not qualify for the California exclusion. Acting Governor Eleni Kounalakis Signs Legislation to Support States COVID-19 Preparedness, PHOTOS: Governor Newsom Visits Diablo Canyon Power Plant, More Time to File State Taxes for Californians Impacted by December and January Winter Storms, Governor Newsom on Read Across America Day: While Other States Ban Books, Were Helping Students Read, Governor Newsom Proclaims State of Emergency in 13 Counties Due to Winter Storms, Activates California Guard. Podcast: New hiring credit enacted for small businesses. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk 1 A.B. Otherwise . Watch industry leaders discuss advice on innovation. This box/component contains JavaScript that is needed on this page. 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. California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. 11 See 15 U.S.C. MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy 80 has been satisfied to avoid being classified as an ineligible entity.. By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 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. 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. L. 116-260) was enacted. Together with PitchBook, we give you the focused insights to take advantage of the trends. 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. Fill the form below and we'll contact you to schedule an appointment: Grimbleby ColemanCertifiedPublicAccountants,Inc. California Conforms to Federal PPP Loan Forgiveness Rules. The authors of this alert would like to acknowledge the contributions of Lauren Kim to the drafting process. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? & TAX. L. No. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. 1577, 2019-2020 REG. hb```"{ 19 A.B. Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. 80 generally allows for the deductibility of such expenses in years beginning on or after Jan. 1, 2019, provided the taxpayer is not an ineligible entity.9 The legislation defines an ineligible entity as any publicly-traded company, or any entity that does not meet the 25% reduction in gross receipts requirements of 15 U.S.C. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. The new legislation supersedes AB 1577. 6 P.L. ZDE5MjljNTlmOGNmNzlmYTg5MGFiZWU3MjM1M2I1Yjg2OTA3NzZmYmU3NmFi 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes.