New Paycheck Protection Program (PPP) Forgiveness Rules for $50,000 and 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. The new legislation supersedes AB 1577. 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. 0 Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. 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. 1577, A.B. This Google translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. 276 0 obj <> endobj If you do not qualify for deductions under AB 80, California follows the Rev. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. 1577, 2019-2020 REG. For additional information on the RRF grants, visit Section 5003 of the ARPA, RTC 17158.2(a), and SBA guidance. 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). 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- YWFjZWQ2YzBhMWI1ZWY2ZDgwYmYxYzVmNDY5OTYxYTNkOTUyMTJlNzk0YTZk If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. 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. 16 See I.R.S. Please see www.deloitte.com/about to learn more about our global network of member firms. When policy shifts, our insights and analysis can help you plan and respond. The agreement broadens this initial plan and now provides direct relief to more lower-income Californians through a $600 one-time grant to households enrolled in the CalWORKS program and recipients of SSI/SSP and Cash Assistance Program for Immigrants (CAPI). California Conforms to Federal PPP Loan Forgiveness Rules Paycheck Protection Program Loan Forgiveness and Treatment - California 1577, 1, 2; CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020 (available here); see also Coronavirus Aid, Relief, and Economic Security Act, Pub. GTIL does not deliver services in its own name or at all. Copyright 2023 BDO USA LLP. 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. Specifically, A.B. Businesses are struggling. We are now into the second year of the requirement for most partnerships to file Schedules K-2 and K-3, and the compliance challenges continue. Podcast: Critical new considerations for September 15 estimated tax payments. But yesterday, the Calfornia Senate approved AB 80, which would make forgiven PPP loans tax-deductible - and give businesses a breather. 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. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 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. Y2NjYmFmZTQyOGZhYjViZTYxMTQ0ODRiYWY5OGVkNzNlOWI1NWY0YzU0ZDVl Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. The agreement also reflects fee relief for more than 600,000 barbering and cosmetology individuals and businesses licensed through the Department of Consumer Affairs. Governor Newsom, Legislative Leaders Announce - California Governor The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment. Retroactively effectivefor tax years beginning on or after January 1, 2019,AB 80allowsindividuals andbusinesses todeductcoveredexpenses paid for with forgivenPPPloansorEIDLadvances and targeted grantsreceived under theCARES Act and the CAA. Friday, September 18th, 2020. 80) providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans.1 Under A.B. Grant payments for CalWORKS households are expected by mid-April; timing for the delivery of SSI/SSP and CAPI grants is currently under discussion with federal officials. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi Follow our normal amended return procedures to claim any deduction or adjustment related to PPP loans. SACRAMENTO Governor Gavin Newsom, Senate President pro Tempore Toni G. Atkins and Assembly Speaker Anthony Rendon today announced that they have reached an agreement on a package of immediate actions that will speed needed relief to individuals, families and businesses suffering the most significant economic hardship from the COVID-19 Recession. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 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. NThmOTI5NTJhNjc1MTk0MWYwNDRhODc5Yjk0NWRlY2MxOGViMzcwMTViODJl To be eligible, businesses must have: Employed 50 or less full-time employees Had gross revenue of less than $5 million in 2019 Sec. Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000. 19 A.B. OTFhMGFmZGQ0YThjYTRlMDNjYWE5NDNlMmI2NjY2ZTFiYTdmNzc0NGFjM2Zj All Rights Reserved. Fullwidth SCC. Additional Aid for Individuals and Families. For forms and publications, visit the Forms and Publications search tool. 2023 Grant Thornton LLP - Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. You can outsource cybersecurity, but you can't outsource your risks. 1577 and how these changes impact their California tax liabilities. PPP Forgiveness: Urgent News About Nonconformity in California, Key Tax Credits Have Expired: What This Could Mean for You, 79245 Corporate Centre Drive, La Quinta, CA 92253. 0 This tax treatment would also extend to the Economic Injury Disaster Loans as well. hb```b``V``e``[ ,@QR40 Mjy{zf9sUnhRn(=vl&G99I\@V7?$vt0Ft 0AU:\l0 c`\=H$X$BCA~'YlxH/t>x YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. California Conforms to Federal PPP Loan Forgiveness Rules Additionally, A.B. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. Learn how were making the game more inclusive for all. Do not include Social Security numbers or any personal or confidential information. 116-136, 1105(i). California Largely Conforms to Forgiven PPP Loan Deductibility 2 Under the Consolidated Appropriations Act, 2021, as referenced in A.B. 2020 set a new high in annual PE software deal value. Spidell's California Minute - Spidell We understand you. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh REV. ZjM4OTJmMjgzYWNmN2I1NzQzMDI5YzFkNDg0ZGEwZGY0Zjk4ZTVmOTczYzhi Modesto, CA 95350, (209) 527-4220 (phone) 4 CAL. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 On April 29, 2021 Governor Newsom signed California A.B. 9 For additional details relating to the federal Flexibility Act, please refer to the Deloitte Tax News & Views Capitol Hill Briefing, dated June 12, 2020 (available here). You meet the 25% gross receipts reduction qualifications. 12 CAL. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. To stay logged in, change your functional cookie settings. A.B. News Spidell's California Minute . Spidell Publishing one of Californias leading continuing education organizations is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. ~A=.d XmtLY RLqg! U SB 113 also allows the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers for SVO and RRF grants. Businesses allege Bank of America pressured them to take out bigger PPP ZjM5OWM1NmRhZmIzYzYxY2VlZmY4NDExYjhjMDA0YmRlOThjMjBhYjk3Nzkz 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. 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. 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. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. 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. endstream endobj startxref 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 ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz B expects to apply to the lender for forgiveness of the covered loan in 2021. 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. & TAX. 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. %PDF-1.6 % A.B. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. 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. 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. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. 10 CAL. A.B. However, California disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. REV. MWRkNGI5MjIxZWY4NWUwMzU3N2Y0MDFmODQ1ZmQzMjliYzI1YWJjM2E3OGU2 All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. 311 0 obj <>stream 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. California: Update to Paycheck Protection Program Loan Conformity Due to the timing of A.B. 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. 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. 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. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. California has NOT passed AB 80: the PPP forgiveness bill - Spidell If you have any questions related to the information contained in the translation, refer to the English version. Principal, SALT Services REV. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. 1577, 2019-2020 REG. 80, California Assembly, April 15, 2021. 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 2 A.B. Californians have been hurting. For taxpayers other than ineligible entities, A.B. When addressing the new expectations of your workforce, speed is a key factor. 2023. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 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. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". Unable to verify your submitted forgiveness amount and/or documents or 2.) Rul. 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. Overview. California Partially Conforms to Federal PPP Forgiveness - Moss Adams 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. Who should lead the charge? We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. If you think you have been blocked in error, contact the owner of this site for assistance. ZTg2N2Y3NGIyZGIwODA1ODY4OWI3ZDYzNWNjOTk5OTUyZmU4YTllMzc2OTVj MTU3YmNhZDYyNDc5ZTczNDMyNzc0ZjU1YTI3NWRlZjg3OWVkNGRiYjAzNjUz 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. 250 0 obj <>stream A.B. 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. Together with PitchBook, we give you the focused insights to take advantage of the trends. Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. Executives are advised to pay special attention to emerging trends that will shape how boards and investors talk about ESG in 2021. Sec. 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. 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. The owner of this site is using Wordfence to manage access to their site. 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). %%EOF hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? Please enable JavaScript to view the site. 1577), Laws 2020. 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. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. Don't let tax be the only deciding factor in your relocation. 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. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. 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. 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. REV. 2020) (available here). Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. 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 custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics. 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. 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. 80s gross income exclusion also extends to any Economic Injury Disaster Loan (EIDL) advance grants received under the CARES Act and the CAA.12, Though enacted later than many taxpayers would have liked, A.B. California Law Excludes PPP Loans Forgiven Under The Cares Act From 18 A.B. NmIyNjRmZjA0MDdkNzU5Y2IwOGU3MjMzZTk5MTBkNmQwYTY0OTQ3YTg3ODc1 SESS., 1 (see new CRTC 17131.8(b)), 2 (see new CRTC 24308.6(b)). 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 GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. See how we connect, collaborate, and drive impact across various locations. The 2023 BDO CFO Outlook Survey offers critical insights to support strategic decision-making and help your company thrive. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. 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. 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. 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. 80's treatment of expenses paid with forgiven loan proceeds A.B. 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. This box/component contains JavaScript that is needed on this page. x000K@4CgCGt@1: L%v5Fo- j-YW v