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. 2 A.B. ZTg2N2Y3NGIyZGIwODA1ODY4OWI3ZDYzNWNjOTk5OTUyZmU4YTllMzc2OTVj ZmEwMjJhMjJhYSJ9 California Conforms to Federal PPP Loan Forgiveness Rules KServicing stated they were 1.) 1 A.B. Gavin Newsom signed Assembly Bill 80 (AB 80), which generally conforms to the federal income tax treatment of Paycheck Protection Program (PPP) loan forgiveness and of the deductibility of expenses paid with a PPP loan that is forgiven, with a notable exception. 7 Ch. Do not delete! 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. Modesto, CA 95350, (209) 527-4220 (phone) 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. 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. On April 29, 2021, California Gov. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. 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. Grant Thornton LLP is a member firm of GTIL. DTTL (also referred to as "Deloitte Global") does not provide services to clients. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj 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. This tax treatment would also extend to the Economic Injury Disaster Loans as well. For taxpayers other than ineligible entities, A.B. CLASS ACTION LAWSUIT AGAINST KSERVICING/KABBAGE for PPP LOAN - reddit 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 Y2NjYmFmZTQyOGZhYjViZTYxMTQ0ODRiYWY5OGVkNzNlOWI1NWY0YzU0ZDVl If you think you have been blocked in error, contact the owner of this site for assistance. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. ZGU2YzllYThlZmU0NDllMTQxZDgyMWZmZWNlNGNkNjliYzNkMjQyNTQ1YWFj It is unclearhowbusinesses that changed entity types during 2020will apply2019 gross receiptstoqualify for the PPPexpense deduction. Governor Newsom, Legislative Leaders Announce - California Governor OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi 13 Specifically, A.B. Paycheck Protection Program Loan Forgiveness and Treatment - California B expects to apply to the lender for forgiveness of the covered loan in 2021. 80 is not a complete conformity bill, and there are some key distinctions to be made from the federal treatment of PPP loans. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. To help guide planning, weve highlighted key topics under focus from regulators worldwide and what those developments could mean for business. 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. 3 P.L. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 Review the site's security and confidentiality statements before using the site. 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. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. PDF Billing code: 8026-03 SMALL BUSINESS ADMINISTRATION RIN 3245-AH79 All rights reserved. California has NOT passed AB 80: the PPP forgiveness bill - Spidell NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk Together with PitchBook, we give you the focused insights to take advantage of the trends. Partner, State and Local Tax West Region Leader. 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. Credit: Spidell Tax, Analysis, and Education, 200 West Roseburg Avenue People are having a hard time making ends meet. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 section 1106 of the CARES Act for forgiveness of the covered loan. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? See how. Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C. 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. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. California Largely Conforms to Forgiven PPP Loan Deductibility He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. 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. The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. 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. & TAX. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. 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. Rul. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. The 25% gross receipts limitation does not apply to the EIDL advance grants, so taxpayers may exclude the EIDL grants and may fully deduct these expenses even if they dont meet the threshold reduction. AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. 4 See P.L. If you claimed a deduction that you do not qualify for, you must file an amended return using our normal amended return procedures. 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. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. 1577) into law. hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G REV. 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). Your access to this service has been limited. 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. 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. Read about the challenges and opportunities that could lie ahead. 6 P.L. 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. Spidell's California Minute - Spidell 1577, 2019-2020 REG. 636(a)(37)(A)(iv)(I)(bb). Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. California Conforms to Federal PPP Loan Forgiveness Rules Report any allowable deductions on your original return. Although businesses who do not qualify for an exclusion may fully deduct expenses paid with forgiven PPP loan amounts on their California return, the taxability of the PPP forgiveness will come as a big surprise for many California businesses. Our audits ensure confidence in our clients financial information. YWFjZWQ2YzBhMWI1ZWY2ZDgwYmYxYzVmNDY5OTYxYTNkOTUyMTJlNzk0YTZk 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. We are excited to finally have clarity on California's PPP loan forgiveness stance. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. document.write(new Date().getFullYear()) California Franchise Tax Board. 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 . The agreement would provide the $600 payments to households with ITINs and income below $75,000. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 By showing up as I am, Im elevating my career. 1577 may consider the need to amend their California return and/or recompute their claimed deductions for expenses paid with PPP loan proceeds that were forgiven. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. 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). For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. 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. 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 Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B.