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. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi 2 Under the Consolidated Appropriations Act, 2021, as referenced in A.B. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. 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. Access from your area has been temporarily limited for security reasons. Lauren is a senior associate working in the Washington National Tax practice of Deloitte Tax LLP. -----BEGIN REPORT----- 15 See e.g., I.R.C. 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. What will help even more is using a holistic approach to create a winning strategy. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. N2Y5N2FjOGU2ZGVmZWI4MDRhNTg4NjNjZjgxYjA2MzBlYjU1MmMzNDY0NTY1 There's more to consider. 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. Please see www.deloitte.com/about to learn more about our global network of member firms. The agreement would provide the $600 payments to households with ITINs and income below $75,000. Please enable JavaScript to view the site. Assembly Floor Analysis for A.B. 1577, 2019-2020 REG. 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. & TAX. 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 search again using different keywords and/or filters. 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. 116-136, 1105(i). KServicing stated they were 1.) We translate some pages on the FTB website into Spanish. 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. Sign up to receive the latest BDO news and insights. 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. Review the site's security and confidentiality statements before using the site. 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. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw We strive to provide a website that is easy to use and understand. NThmOTI5NTJhNjc1MTk0MWYwNDRhODc5Yjk0NWRlY2MxOGViMzcwMTViODJl 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. 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. 1 A.B. 16 See I.R.S. Do not delete! A.B. See how we connect, collaborate, and drive impact across various locations. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday - Friday, 8 a.m. - 8 p.m. EST. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. Friday, September 18th, 2020. 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.
REV. 162, 163; CAL. 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. & TAX. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". However, California disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. National Tax Office Leader. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C.
1557 to provide some relief.6, On March 27, 2020, the federal government enacted the CARES Act in response to the COVID-19 pandemic.7 Sections 1102 and 1106 of the CARES Act amend section 7(a) of the Small Business Act to create the PPP, through which up to $349 billion in funding was provided to businesses through federally guaranteed loans. Californians have been hurting. 1577, 2019-2020 REG. 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. 80), Laws 2021. 1577 which had previously denied the deductibility of expenses paid with forgiven PPP loan proceeds. You must pay it back within either 3 or 5 years. 1577 and how these changes impact their California tax liabilities. 3 P.L. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. 12 CAL. 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. Sec. 211 0 obj
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California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. Multistate Tax alert | September 30, 2020. 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. 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 . AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. 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. 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. 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). US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. 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). 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. When policy shifts, our insights and analysis can help you plan and respond. 636(a)(37)(A)(iv)(I)(bb). April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi 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. 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. (%mu9YS-+e"D3mU3]3|.efah4Yi^=|jmMg16^2*5+Qh . 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. REV. The information contained herein is general in nature and is based on authorities that are subject to change. How we work matters as much as what we do. 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, 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. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. Sec. 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 Additional Aid for Individuals and Families. Report any allowable deductions on your original return. The owner of this site is using Wordfence to manage access to their site. 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. & TAX. If you have any issues or technical problems, contact that site for assistance. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk To be eligible, businesses must have: Employed 50 or less full-time employees Had gross revenue of less than $5 million in 2019 13 Specifically, A.B. 1577) into law. How does ESG fit into business strategy? 102-1125) on February 3, 2023, that makes significant enhancements to a variety of Illinois credit and incentive programs. The new legislation supersedes AB 1577. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. Grant Thornton LLP is a member firm of GTIL. (209) 527-4247 (fax). hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G
Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. ZDE5MjljNTlmOGNmNzlmYTg5MGFiZWU3MjM1M2I1Yjg2OTA3NzZmYmU3NmFi -----END REPORT-----. Principal, SALT Services 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. 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. 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. & TAX. OTFhMGFmZGQ0YThjYTRlMDNjYWE5NDNlMmI2NjY2ZTFiYTdmNzc0NGFjM2Zj %%EOF
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. 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. 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. If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 REV. ZjM4OTJmMjgzYWNmN2I1NzQzMDI5YzFkNDg0ZGEwZGY0Zjk4ZTVmOTczYzhi 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. 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). Drive maximum value across your supply chain. 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. At Grant Thornton, we dont just understand your business. 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. Be ready to demonstrate diligence for the FCPA. 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. GTIL does not deliver services in its own name or at all. We are excited to finally have clarity on California's PPP loan forgiveness stance. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. Companies must focus on attracting and retaining talent, modernizing HR to serve new business needs while becoming more efficient. We understand you. OTQyYWYwNjA5N2Y5ZTg1YTcwMGMzNTUyNjE3NjcyYWIzNzk2NzI3OGM4MzM1 Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. ODU0M2JiMTQ1YmRhYjQ5Yjc2ZWQzNTA3Mjc4MDM1OWI3N2RmYmE4YjEzZTI3 MTQ4MmJiZjg5ZGY5MWQyZDU2ZmFiZDM1ZmZmZjkyM2E3MDRkYmViZTViM2Yz AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. A.B. People are hungry and hurting, and businesses our communities have loved for decades are at risk of closing their doors. the forgiveness of PPP loans. Executives are advised to pay special attention to emerging trends that will shape how boards and investors talk about ESG in 2021. Notice 2020-32 (available here). OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi Due to the timing of A.B. 1577. 2020) (available here). If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. Certain services may not be available to attest clients under the rules and regulations of public accounting. DTTL and each of its member firms are legally separate and independent entities. 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. hb```b``V``e``[ ,@QR40 Mjy{zf9sUnhRn(=vl&G99I\@V7?$vt0Ft 0AU:\l0 c`\=H$X$BCA~'YlxH/t>x Podcast: New hiring credit enacted for small businesses. 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. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. 200 West Roseburg Avenue Modesto, CA 95350 (209) 527-4220 (phone) (209) 527-4247 (fax) https . 1577) into law.1 A.B. 8 CAL. 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. Gavin Newsom signed Assembly Bill 80 (A.B. Modesto, CA 95350, (209) 527-4220 (phone) This tax treatment would also extend to the Economic Injury Disaster Loans as well. 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. 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 This isnt the tech you know. NmIyYjY1ZGFjODY4OTViMmNkMGJiYjAzM2JjYTBhMDJhZDYyYThmNTg3Yjcw The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment. All rights reserved. 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. See how. 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. You meet the 25% gross receipts reduction qualifications. Don't let tax be the only deciding factor in your relocation. 636(a)(37)(A)(iv)(I)(bb). MTU3YmNhZDYyNDc5ZTczNDMyNzc0ZjU1YTI3NWRlZjg3OWVkNGRiYjAzNjUz eyJtZXNzYWdlIjoiNWIzZGU0MDczYTM5MDRlMGI1ZTJmM2QxOGExOTlmZjY0 (HTTP response code 503). 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. California's partial PPP conformity bill sent to Governor (04-26-21) The California General Assembly has sent AB 80 to the Governor, and he is expected to sign it. You can count on us to prioritize and complete work to the best of our ability based on these changes. When addressing the new expectations of your workforce, speed is a key factor. 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. MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj The authors of this alert would like to acknowledge the contributions of Lauren Kim to the drafting process. You can also read the documentation to learn about Wordfence's blocking tools, or visit wordfence.com to learn more about Wordfence. 116-260. 117-6). A custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics.