Please enable JavaScript to view the site. Friday, September 25th, 2020. 13 See I.R.C. 1577), Laws 2020. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. 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. CODE 17131.8(b); 24308.6(b), as added by A.B. What will help even more is using a holistic approach to create a winning strategy. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 & TAX CODE 17024.5(a); 23051.5(a). YWFjZWQ2YzBhMWI1ZWY2ZDgwYmYxYzVmNDY5OTYxYTNkOTUyMTJlNzk0YTZk x000K@4CgCGt@1: L%v5Fo- j-YW v 116-260. 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. 16 See I.R.S. A medical researcher accelerated purchases by 45% with a new tech implementation plan. Review the site's security and confidentiality statements before using the site. The agreement incorporates the Governors Golden State Stimulus plan to assist California households that have borne the disproportionate economic burden of the COVID-19 Recession those with incomes below $30,000, as well as those unfairly excluded from previous federal stimulus payments. 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. Podcast: Should borrowers submit PPP loan forgiveness applications early? 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. You meet the 25% gross receipts reduction qualifications. 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). 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. 2020-27. No calculations required. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. %%EOF This article provides an introduction to renewable energy tax credits and highlights several key factors that buyers and sellers of these credits should consider. Under the express terms of the CARES Act, forgiven loan amounts are excluded from the borrowers gross income.4 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. -----END REPORT-----. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. 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. California Governor Gavin Newsom onApril29 signedinto law legislation that generallyconformsthe states tax treatment of Covid-19 aid in the form of loans and grants with the federalindividual and corporate income tax treatment of such aid, including the CARES Act and the Consolidated Appropriations Act, 2021 (CAA). document.write(new Date().getFullYear()) California Franchise Tax Board. US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. 0 GTIL and each member firm of GTIL is a separate legal entity. Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 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. 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 13 Specifically, A.B. SESS., 1 (see new CRTC 17131.8(c)), 2 (see new CRTC 24308.6(c)). It does not apply to SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, or Restaurant Revitalization Grants. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw . For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. Wordfence is a security plugin installed on over 4 million WordPress sites. SESS., 1 (see new CRTC 17131.8(a)), 2 (see new CRTC 24308.6(a)). Rul. An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. The California Franchise Tax Board (FTB) plans to issueguidanceexplainingqualification and other requirements with respect to AB 80, and it is expected to include guidance for taxpayers that have already filed 2020 California individual or corporate tax returns. People are hungry and hurting, and businesses our communities have loved for decades are at risk of closing their doors. 15 U.S.C. The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment. When addressing the new expectations of your workforce, speed is a key factor. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. There's more to consider. The agreement provides $600 in one-time relief to households receiving the California EITC for 2020. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. ODU0M2JiMTQ1YmRhYjQ5Yjc2ZWQzNTA3Mjc4MDM1OWI3N2RmYmE4YjEzZTI3 The potential is great what to know before taking action. 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 CODE 24344; 24344.5; 24344.7. The agreement also provides $12 million in state funds to support associated county administrative workload. This message will not be visible when page is activated. MWRkNGI5MjIxZWY4NWUwMzU3N2Y0MDFmODQ1ZmQzMjliYzI1YWJjM2E3OGU2 & TAX CODE 24271. 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. Podcast: New hiring credit enacted for small businesses. 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. SESS. Our goal is to provide a good web experience for all visitors. For forms and publications, visit the Forms and Publications search tool. Immediate Relief for Small BusinessesQuadrupled. Unable to verify your submitted forgiveness amount and/or documents or 2.) Scott Smith, State & Local Tax, National Technical Practice Leader, Business Restructuring & Turnaround Services, Total Tax Transparency & ESG Tax Strategy, Financial Institutions & Specialty Finance, California: Update to Paycheck Protection Program Loan Conformity, Do Not Sell My Personal Information as to BDO Investigative Due Diligence. 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. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. 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. 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. 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. 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. 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. Sec. This isnt the tech you know. More than 750,000 PPP loans were taken out by California small businesses. OTQyYWYwNjA5N2Y5ZTg1YTcwMGMzNTUyNjE3NjcyYWIzNzk2NzI3OGM4MzM1 %%EOF 636(a)(37)(A)(iv)(I)(bb). endstream endobj 277 0 obj <. 1577 attempted to do, A.B. Now, your competitors are following an automation roadmap to save work and weather economic turbulence. If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. 18 A.B. MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. GTIL does not deliver services in its own name or at all. 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). 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 . A diversity, equity and inclusion video series. SESS., 1 (see new CRTC 17131.8(b)), 2 (see new CRTC 24308.6(b)). MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. 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. 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. Friday, September 18th, 2020. 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. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. 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. Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. 200 West Roseburg Avenue Modesto, CA 95350 (209) 527-4220 (phone) (209) 527-4247 (fax) https . 80's treatment of expenses paid with forgiven loan proceeds A.B. AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. (HTTP response code 503). The agreement also reflects fee relief for more than 600,000 barbering and cosmetology individuals and businesses licensed through the Department of Consumer Affairs. B expects to apply to the lender for forgiveness of the covered loan in 2021. 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. YjFhOWM4Y2FkNDM3NWJjM2ZmZjE2YmFmNjhlNjc3MDJjM2Q3NjJhMmE1NDgz Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. The fourth quarter of 2020 and 2019 only becomes a measure in this test if taxpayers submit their PPP loan application on or after January 1, 2021. 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) was added by Section 311 of Division N of the CAA. MzA1NjUwNDUyNzBkY2M0YTcxMWY2NGYzZjRhMzk3NGVkODkwNWRlNjQ0YWY2 636(a)(37)(A)(iv)(I)(bb). The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. Consult with a translator for official business. 1577, and provides some taxpayer considerations. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. 1577, 1, 2; CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020 (available here); see also Coronavirus Aid, Relief, and Economic Security Act, Pub. 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. 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. Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. Combined, the agreement represents a total of 5.7 million payments to low-income Californians. 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). 265 disallows deductions related to tax-exempt income. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. View the list of archivedMultistate Tax alerts. 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- Dana is based in San Jose, California. When policy shifts, our insights and analysis can help you plan and respond. The agreement would provide the $600 payments to households with ITINs and income below $75,000. 1577 and how these changes impact their California tax liabilities. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. Jamie Yesnowitz, principal serving as the State and Local Tax (SALT) leader within Grant Thornton's Washington National Tax Office, is a national technical resource for Grant Thornton's SALT practice. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. 1577, 2019-2020 REG. 80) providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans.1 Under A.B. 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. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. A.B. Yjk1NTlhZjUzMmI3ODFlN2VlZDM3OWQ5OWM1ZDgzYmM3NTgyMWVkZjViZTQy 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. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 Ultimately, this will make tax planning for 2021 essential if a business received loan forgiveness during the year, as this nonconformity was not anticipated. 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. Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. Fill the form below and we'll contact you to schedule an appointment: Grimbleby ColemanCertifiedPublicAccountants,Inc. California Conforms to Federal PPP Loan Forgiveness Rules. MWM2OTQ4NmFlOWMzMjAzOGE0OWFjNWI2NmU3ZmQ0MjU3Y2U0ZDcwMWMxYWU1 On April 29, California Gov. If you have questions regarding A.B. 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). Find out how to manage the business risks behind data. 1577) into law.1 A.B. 117-6). Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000. KServicing stated they were 1.) 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. & TAX. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. 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.