Sec. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 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. These new provisions provide [f]or taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to section 1106 of the [CARES Act], pursuant to the [Enhancement Act], or pursuant to the [Flexibility Act].17 For this purpose covered loan is defined as having the same meaning as in section 1106 of the [CARES Act].18 Thus, the Forgiven Loan Amount is not included in gross income for PITL or CTL purposes. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. 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. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? (HTTP response code 503). 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. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. We translate some pages on the FTB website into Spanish. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. Sec. 2020 set a new high in annual PE software deal value. 200 West Roseburg Avenue Modesto, CA 95350 (209) 527-4220 (phone) (209) 527-4247 (fax) https . L. 116-260) was enacted. 636(a)(37)(A)(iv)(I)(bb). 1577 attempted to do, A.B. The path to quality loyalty programs begins with adopting the right analytics looking deeper into customer purchase patterns to uncover true trends. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. 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. 1577, 2019-2020 REG. 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). Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. Watch industry leaders discuss advice on innovation. 1577, 2019-2020 REG. 17 A.B. 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. 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). 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. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. 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. Notice 2020-32 (available here). Partner, State and Local Tax West Region Leader. 4 CAL. 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. Lauren is a senior associate working in the Washington National Tax practice of Deloitte Tax LLP. 311 0 obj <>stream All Rights Reserved. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. This tax treatment would also extend to the Economic Injury Disaster Loans as well. 211 0 obj <> endobj 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. Additional Aid for Individuals and Families. 636(a)(37)(A)(iv)(I)(bb) was added by Section 311 of Division N of the CAA. 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, 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. This message will not be visible when page is activated. 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. 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. 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. Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. 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). :D 8 Sign up to receive the latest BDO news and insights. California Rebuilding Fund Small businesses may be eligible for a loan up to $100,000 from the California Rebuilding Fund. 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). Credit: Spidell Tax, Analysis, and Education Go Back Print. If you have additional questions about this article or your business qualification status, contact your GC accountant or email us at contactus@gccpas.net. 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. ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz eyJtZXNzYWdlIjoiNWIzZGU0MDczYTM5MDRlMGI1ZTJmM2QxOGExOTlmZjY0 1577, 2019-2020 REG. Rul. 5 INCOME TAXES: FEDERAL CARES ACT: GROSS INCOME: LOAN FORGIVENESS, JULY 8, 2020 (available here). Immediate Relief for Small BusinessesQuadrupled. The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment. section 1106 of the CARES Act for forgiveness of the covered loan. ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. 80 has been satisfied to avoid being classified as an ineligible entity.. (CAL. SESS., 1 (see new CRTC 17131.8(a)), 2 (see new CRTC 24308.6(a)). US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. We strive to provide a website that is easy to use and understand. Connecting with our core purpose through a renewed lens. 1577 and how these changes impact their California tax liabilities. The new legislation supersedes AB 1577. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 Please enable JavaScript to view the site. CODE 17131.8(b); 24308.6(b), as amended by 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. 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi Companies must focus on attracting and retaining talent, modernizing HR to serve new business needs while becoming more efficient. Podcast: Should borrowers submit PPP loan forgiveness applications early? 80, California Assembly, April 15, 2021. The potential is great what to know before taking action. The information contained herein is general in nature and is based on authorities that are subject to change. N2QwYTc0NzQ2ZDg0NGM3YzhhYTM2YWM5N2IwZWUzODM5NzI2OTlkODM5M2Q5 This box/component contains JavaScript that is needed on this page. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. 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. Golf is better when were all playing together. AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. 6 P.L. & TAX CODE 17024.5(a); 23051.5(a). On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. KServicing stated they were 1.) We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. 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. 8 CAL. Drive maximum value across your supply chain. GTIL refers to Grant Thornton International Ltd (GTIL). 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. 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. ZjM5OWM1NmRhZmIzYzYxY2VlZmY4NDExYjhjMDA0YmRlOThjMjBhYjk3Nzkz For a complete listing of the FTBs official Spanish pages, visit La esta pagina en Espanol (Spanish home page). 1577, A.B. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. 1577 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk For additional information, visit Section 311 of the CAA, 2021, Revenue and Taxation Code (RTC) section 17131.8(g)(3)), and Small Business Administration (SBA) guidance. 1577. SESS., 1 (see new CRTC 17131.8(c)), 2 (see new CRTC 24308.6(c)). 17 (A.B. How does ESG fit into business strategy? For forms and publications, visit the Forms and Publications search tool. This Google translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. Assembly Floor Analysis for A.B. NThmOTI5NTJhNjc1MTk0MWYwNDRhODc5Yjk0NWRlY2MxOGViMzcwMTViODJl 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). It does not apply to SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, or Restaurant Revitalization Grants. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. Californians have been hurting. Do not delete! For federal qualifications regarding income tax treatment, visit Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. DTTL and each of its member firms are legally separate and independent entities. 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). 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. A.B. ZmEwMjJhMjJhYSJ9 If you claimed a deduction that you do not qualify for, you must file an amended return using our normal amended return procedures. REV. 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. How we work matters as much as what we do. The payments will be provided to these households shortly after they file their 2020 tax returns. For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. 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). 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. An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj No Results Found. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy & TAX. 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. MzA1NjUwNDUyNzBkY2M0YTcxMWY2NGYzZjRhMzk3NGVkODkwNWRlNjQ0YWY2 & TAX CODE 24344; 24344.5; 24344.7. 80), Laws 2021. 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. If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. A medical researcher accelerated purchases by 45% with a new tech implementation plan. You must pay it back within either 3 or 5 years. YjFhOWM4Y2FkNDM3NWJjM2ZmZjE2YmFmNjhlNjc3MDJjM2Q3NjJhMmE1NDgz %PDF-1.6 % 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. No calculations required. 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. Emergency Financial Relief to Support Community College Students. 1577) into law. We are excited to finally have clarity on Californias PPP loan forgiveness stance. You meet the 25% gross receipts reduction qualifications. The agreement also reflects fee relief for more than 600,000 barbering and cosmetology individuals and businesses licensed through the Department of Consumer Affairs. 3 P.L. 16 See I.R.S. You meet the 25% gross receipts reduction qualifications. MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy Learn how were making the game more inclusive for all. Illinois Governor J.B. Pritzker signed new legislation (P.A. & TAX CODE 24271. endstream endobj 277 0 obj <. eligibility) criteria for receiving a second draw PPP loan for federal income tax purposes under the CAA.13 Although this requirement only applied to second draw PPP loans for federal income tax purposes, it appears to be incorporated as a general limitation for California purposes when determining whether a taxpayer is classified as an ineligible entity under A.B. These loans are not forgivable. . Sec. 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. ZmU1YzEwNzA1MTAyYzc0ODZiODFlZjZkNTUzYmQ2YzFmNmVlOTA2M2JlM2Y3 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. But yesterday, the Calfornia Senate approved AB 80, which would make forgiven PPP loans tax-deductible - and give businesses a breather. The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. 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. The agreement would provide the $600 payments to households with ITINs and income below $75,000. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses. ~A=.d XmtLY RLqg! U x000K@4CgCGt@1: L%v5Fo- j-YW v MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 N2Y5N2FjOGU2ZGVmZWI4MDRhNTg4NjNjZjgxYjA2MzBlYjU1MmMzNDY0NTY1 80) providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans.1 Under A.B. 1577), Laws 2020. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. 2020), A.B. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. 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. 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). The authors of this alert would like to acknowledge the contributions of Lauren Kim to the drafting process. 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. REV. 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. People are hungry and hurting, and businesses our communities have loved for decades are at risk of closing their doors. In September 2020, California enacted AB 1577, which conformed to the CARES Act exclusion from gross income for PPP loan forgiveness. 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. 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. 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. For this reason, taxpayers that have already filed or paid tax following the provisions of A.B. You can count on us to prioritize and complete work to the best of our ability based on these changes. Dana is based in San Jose, California. %%EOF 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. The agreement provides roughly $6 million to support outreach and application assistance to University of California, California State University and California Community College students made newly eligible for CalFresh the state-administered federal program for supplemental food assistance. 7 Ch. National Tax Office Leader. MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 Otherwise . NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. To help guide planning, weve highlighted key topics under focus from regulators worldwide and what those developments could mean for business. Mjg2ZDhmNTczMDFhNjc3MjY1YjcxNGU5YjlmODg2YzdmYjUyOWIyNjQ1Njhj MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 You can also read the documentation to learn about Wordfence's blocking tools, or visit wordfence.com to learn more about Wordfence. REV. Please see www.deloitte.com/about to learn more about our global network of member firms. 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. By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 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. 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. Ultimately, this will make tax planning for 2021 essential if a business received loan forgiveness during the year, as this nonconformity was not anticipated. DTTL (also referred to as "Deloitte Global") does not provide services to clients. We are excited to finally have clarity on California's PPP loan forgiveness stance. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh There's more to consider. Copyright 2023 BDO USA LLP. of research and economic analysis. 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 1577) into law.1 A.B. 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- News Spidell's California Minute . Together with PitchBook, we give you the focused insights to take advantage of the trends.