Consult with a translator for official business. Sources: Tax Foundation; state tax statutes, forms, and instructions; Bloomberg BNA. 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. It is common for states to conform to certain parts of the federal tax code but decouple from others. document.write(new Date().getFullYear()) California Franchise Tax Board. Governor Gavin Newsom signed Assembly Bill 80 into law on April 29, 2021, thus adding California to the states that partially conform to the federal treatment of forgiven Paycheck Protection Program (PPP) loans. Stay informed with our COVID-19 resource center, updated weekly with leading research and analysis. H\n0E|"x&P6i,>@Iw.1|lc7O]m California finally decides how it will tax Paycheck Protection Program Nevada treats forgiven PPP loans as a taxable gross revenue; Ohio, Texas, and Washington do not. This new tax relief is in addition to the support that Governor Newsom has already provided for small businesses and workers throughout the pandemic. AB 80, as initially drafted, would provide at least partial conformity to the federal provision allowing Paycheck Protection Program (PPP) loan borrowers to deduct expenses paid with PPP forgiven loan amounts. States that use rolling conformity automatically adopt federal tax changes as they occur, which is the simplest approach and provides the most certainty to taxpayers. 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 . In Los Angeles County, Governor visits small businesses supported by federal Paycheck Protection Program loans and announces new tax relief worth a combined $6.2 billion. Taxpayers who meet the documentation requirements at the federal level will be considered as having met them for California purposes as well. On April 26, the Assembly gave final passage by a vote of 73-0 to Assembly Bill 80, authored by Assembly Revenue and Taxation Committee Chair Autumn Burke. ISO/IEC 27001 services offered through Cadence Assurance LLC, a Moss Adams company. COVID Relief Act: Federal Tax Conformity Bill Finally Passes CA More than 750,000 PPP loans were taken out by California small businesses. Governor Newsom, Legislative Leaders Issue - California Governor 80 relating to PPP loans Tax Alert Overview On April 29, 2021, the California Governor signed A.B. CalCPA offers a wide variety of benefits and services for CPAs and financial professionals. In the February 2021 edition of Tax News, we published an article, What's new for . California small businesses are drivers of economic growth creating two-thirds of new jobs and employing nearly half of all private sector employees. Ohio imposes an individual income tax and a GRT. For the full text of the bill, visit:http://leginfo.legislature.ca.gov. 287 0 obj As noted above, California has recent legislation in the works to conform to the federal treatment of expenses paid with PPP loan proceeds. This federal law provides the computation for determining whether a taxpayer has a 25% or greater reduction in gross receipts by comparing total sales. We also added a specific input for taxable SBA loans and other grants (excluding EIDL), so you can include this income on the California return without altering the nonconformity calculations on multi-state return files. Critical diagnostic ref. California Governor Gavin Newsom signed Assembly Bill 80 (AB 80) into law on April 29, 2021. Services from India provided by Moss Adams (India) LLP. We strive to provide a website that is easy to use and understand. f ;AE}wjhZ `i{H!lC5mGFek#y:D5QfU(PHB3I>\K5)Fu#j0L Z}2~O4$_C -QZ The 2022 Marcum Year-End Tax Guide provides an overview of many of the issues affecting tax strategy and planning for individuals and businesses in 2022 and 2023. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. PDF Rev. Rul. 2020-27 ISSUE - IRS tax forms This small business tax relief is exactly what is needed to keep businesses open so they can continue paying their employees.. If you have any issues or technical problems, contact that site for assistance. This is important new information that needs to be shared with businesses immediately . EIN: 94-613084. Review the site's security and confidentiality statements before using the site. Newsom and legislative leaders released the following statement updating the status of PPP conformity . AB 80 expands Californias September 9, 2020, law change under AB 1577. Impacted by California's recent winter storms? Exceptions to this federal conformity for PPP treatment include publicly traded companies and . . A recent survey from Marcum LLP and Hofstra Universitys Frank G. Zarb School of Business found that nine in 10 mid-market CEOs are concerned about a recession. tax guidance on Middle Class Tax Refund payments, General information for the Middle Class Tax Refund, FAQs for Paycheck Protection Program (PPP), Paycheck Protection Program Loans and Changes of Ownership. States that use static conformity link to the federal tax code as it stood on a certain date and must proactively adopt legislation to accept more recent changes. 27, 2020), established the PPP as a loan program administered by the U.S. Small Business Where are you entering the PPP loan amount on the California return. If you have any questions related to the information contained in the translation, refer to the English version. AB 1577, AB 80, SB 113, and AB 194 provide gross income exclusions for covered loan amounts forgiven pursuant to the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act, the Paycheck Protection Program Flexibility Act of 2020, the CAA, PPPEA, EIDL grants under the CARES Act, targeted EIDL advances, SVO grants under the CAA, and RRF grants under the ARPA. Under current California tax law, the state isn't allowing deductions on PPP loans. California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. Paycheck Protection Program (PPP) loan forgiveness | COVID-19 - California . When reviewing state conformity for purposes of the PPP loan forgiveness exclusion, a state could take a position that section 1106(i) has no impact on whether the loans are forgiven for state tax purposes because, while the state may conform to the IRC, it may not conform to section 1106(i) and the other federal provisions in Title 15 (where . California PPP conformity - wck-cpa.com tk3o*TK:zQT4k]&mi;.a}#Sj=p7hy+MR. Yes, pursuant to AB 80 and SB 113, California adopted Section 311 of Division N of the CAA. r+AW] t%JgW]yzzxzzzxzzzxzzzxzxxxN(Y,E2KRd);QtDAtP8(N(}ta'N(:1vblp6:glp6:glp6~Gw4:W*|a!A(\<7ilcz>|00 California enacted legislation earlier this year that allows forgiven PPP loan amounts to be excluded from income and allows the deduction of expenses paid with forgiven PPP loan amounts, as long as the business is not publicly traded and meets the 25% or greater gross receipts reduction test set . Kev Kurdoghlian April 21, 2021 9:01 pm Mike Garcia. California has yet to make a final determination on whether to conform state tax code to current federal tax rules related to the treatment of expenses associated with forgiven Paycheck Protection Program (PPP) loans. How to enter CA stimulus, PPP, & grants in Lacerte - Intuit California: Update to Paycheck Protection Program Loan Conformity The PPPEA extends the covered period of the PPP to June 30, 2021. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. Some States May Tax Forgiven PPP Loan Proceeds Generally, in order to meet the 25% reduction in gross receipts test, taxpayers may compare annual gross receipts in 2020 with annual gross receipts in 2019 or gross receipts in any calendar quarter of 2020 with the same quarter of 2019. KPMG report: Treatment of PPP loans - KPMG United States Under Ohios Commercial Activity Tax (CAT), the loans are excluded from taxable gross revenue but, consistent with gross receipts taxation, the CAT does not allow a deduction for business expenses. If the loan was obtained through one of these programs and the taxpayer cannot demonstrate a 25% or greater reduction in gross receipts, then the taxpayer will be considered an ineligible entity and cannot deduct expenses paid with the loan. FAQs for Paycheck Protection Program (PPP) | FTB.ca.gov ISO/IEC 27001 services offered through Cadence Assurance LLC, a Moss Adams company. CA to give businesses tax break on PPP loans from feds - The Sacramento Bee Ask questions, get answers, and join our large community of Intuit Accountants users. The Governor's budget proposes to exempt the RRF and SVOG grants from state taxation by conforming the state tax laws to federal law. AB 80 is widely seen as a significant improvement over prior versions of the legislation. Insights . The bill also . 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. This interpretation came as a surprise to many lawmakers, since excluding the forgiven loans from taxation, but then denying the deduction, essentially cancels out the benefit Congress provided. Static conformity states, unless they have passed legislation to conform to the most recent version of the IRC or the provisions of the CARES Act, are technically not in conformity with exempting forgiven PPP loans . Any amounts entered for SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, or Restaurant Revitalization Grants should remain as these subsidies/grants are still taxable for California Purposes. May 10 - KPMG reports: California (market-based sourcing); California (PPP conformity); Hawaii and Indiana (federal tax conformity); Maine (NOL carryforward) May 7 - Oil and gas, percentage depletion on marginal properties for 2021, reference price for 2020. California is home to 4.1 million small businesses, representing over 99 percent of all businesses in the state and employing nearly half of the states total workforce. In February, the Governor signed into law a comprehensive package of immediate actions that sped up much-needed relief to businesses suffering the most significant economic hardship due to COVID-19 a package that provided $2.5 billion in grants worth up to $25,000 each for small businesses across California, more than half of which have gone to minority and underserved businesses. <>stream 6Yg rCD California: A regulatory project to revise California's market-based sourcing regulation continues. document.write(new Date().getFullYear()) California Franchise Tax Board. Today, the California Legislature passed a bill supported by the California Medical Association (CMA) that would bring full conformity between California state tax code and federal law with regards to Paycheck Protection Program (PPP) loans, making forgiven PPP loans tax-deductible and delivering . . The U.S. Small Business Administration's Paycheck Protection Program (PPP) is providing an important lifeline to help keep millions of small businesses open and their workers employed during the COVID-19 pandemic.Many borrowers will have these loans forgiven; eligibility for forgiveness requires using the loan for qualifying purposes (like payroll costs, mortgage interest payments, rent, and . As Michelman & Robinson has reported time and again, PPP loans are subject to forgiveness when borrowers use proceeds to pay for payroll costs, interest on mortgage obligations, rent, and utilities. 1 A.B. If Proposition 30 had passed, the tax rate on individuals making more than $2 million would have increased from 13.3% to 15.05%. When the CARES Act was enacted on March 27, 2020, Congress intent was that forgiven PPP loans be tax-free at the federal level, which is a departure from usual practice. The Legislature passed and Governor Newsom signed two federal tax law conformity measures dealing with the CARES Act. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. If the balance sheet is out of balance by the amount of the relief grant: Enter the non-EIDL amount of assistance in. Do not include Social Security numbers or any personal or confidential information. Nearly half the states are taxing companies over PPP loans that have Garcia joins call for PPP relief in California. In Ohio, Nevada, and Washington,there is no deduction for business expenses, consistent with gross receipts taxation. If you look at most state income tax returns, one of the first lines is usually, "Enter your federal adjusted gross income" or "federal taxable income." The remainder of the form then consists of adding back into income those federal deductions that the state doesn't allow and deducting state . (1) Sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. To learn more about this legislation and how it may impact you or your business, contact your Moss Adams professional. 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. AB 276 by Assemblywoman Laura Friedman (D-Glendale), conforms state tax law to the federal CARES Act to increase the maximum loan amount permitted from an employee's retirement . California is not adding additional supporting documentation requirements. The California Assembly did away . If, however, the baseline scenario is one in which forgiven PPP loans did not existthe status quo ex antethen following federal guidance is revenue neutral. 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. April 2021 Tax News. Unlike a sales tax, a gross receipts taxis assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. 2020-27. News. 80") providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans. California has passed AB 80, which excludes EIDL Grants and PPP expenses (if receipts meet the 25% reduction threshold) from California income. 21st Supplemental Emergency Proclamation CARB-Accredited LCFS Verification and Validation, IRS Extends Tax Deadline for California, Alabama, and Georgia Disaster Areas, 7 FAQs for Colorado Businesses Preparing for New FAMLI Rules, Schedule K-2 and K-3 Filing Requirements for 2022: IRS Changes Timeline, Summary of Proposed American Families Plan, How to Secure and Update an Estate Plan Ahead of Changes . This Google translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. For over 80 years, our goal has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. With AB 80s passage, California allows taxpayers to deduct otherwise nondeductible business expenses, such as wages, even if those expenses were paid with forgiven funds from PPP, with certain exceptions. One major exception to federal conformity is that taxpayers who did not experience at least a 25% reduction in gross receipts will be excluded from deducting expenses paid with forgiven PPP loans. The Virginia deduction may be claimed solely for Taxable Year 2020. endobj California Gov. Enter the grant as income on the activity it belongs to. This allows an exclusion from gross income for the amount of PPP loans that are forgiven as part of the CARES Act, while disallowing the deductions for amounts paid or incurred using the forgiven loan . The California fix for that problem, Assembly Bill 80, is now on Gov. If you continue to use this site we will assume that you are happy with it. Do not include Social Security numbers or any personal or confidential information. California generally conforms to the pension-related items such as early withdrawal penalty, minimum distribution rule changes, etc. Earlier this evening Gov. The U.S. Small Business Administrations Paycheck Protection Program (PPP) is providing an important lifeline to help keep millions of small businesses open and their workers employed during the COVID-19 pandemic. ** Virginia excludes forgiven PPP loans from taxable income but allows only the first $100,000 in expenses paid for using forgiven PPP loans to be deducted. Help us continue our work by making a tax-deductible gift today. "We remain committed to an equitable and broad-based recovery and acting expeditiously to provide additional relief to businesses in the stateespecially those that have been hardest hit by COVID-19, such as bars, restaurants, barbers, nail and hair salons and performing arts venues, among others.". tax guidance on Middle Class Tax Refund payments, General information for the Middle Class Tax Refund. endstream Podcast: What if your client took the California PPP exclusion, but shouldn't have? Some businesses also received grants from the state that can be excluded from state income, but are taxable on the federal return. 1577") into law.1 A.B. We are constantly on the watch for California's move on many tax decisions, especially towards PPP loans. California's Partial PPP Conformity Bill Partial PPP Conformity Bill: On April 29, 2021, Governor Newsom signed into law Assembly Bill No. What You Need to Know About Virginia's Conformity Legislation for 2020 California PPP Loan Partial Conformity | Marcum LLP For assistance, see Help with penalties and fees. AB 80 was introduced earlier this month as a legislative vehicle to partially conform and allow some PPP related deductions for state tax purposes. When static conformity states do update their conformity dates, they sometimes decouple from specific changes on an ad hoc basis. The details of AB 80, passed by the California Assembly on April 26, 2021, closely conform to the federal treatment for deductibility of such expenses. We added a checkbox to the California Miscellaneous Information screen to allow you to apply AB 80 on a client-by-client basis for those who qualify. May 6 - IRS updates FAQs on relief for retirement plans, IRAs (COVID-19) These pages do not include the Google translation application. Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. No. These dates vary greatly; for example, California's conformity date is 2015, Wisconsin's is 2017, and Virginia's is 2019. California Businesses Get Answers on PPP Deductibility: Summary of Assembly Bill 80, Guidance for how to treat PPP deductibility of qualifying expenses in California. California Law Excludes PPP Loans Forgiven Under The Cares Act From endobj No, taxpayers should follow FTBs normal amended return procedures. We translate some pages on the FTB website into Spanish. California recently passed Assembly Bill 80 (AB80). To qualify for expense deductions, basis adjustments, and lack of reduction of tax attributes related to AB 80 and SB 113, you must meet the following qualifications. 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. Gavin Newsom signed Assembly Bill 80 ("A.B. Do not include Social Security numbers or any personal or confidential information. Our goal is to provide a good web experience for all visitors. Since the EIDL grants and Targeted EIDL advances do not contain a prohibition against ineligible entities, taxpayers are not required to meet the 25% reduction in gross receipts test to deduct expenses paid with by these specific loans or advances. Enter the grant amount as a negative number in. Governor Newsom signs $6.2 billion tax cut for small businesses, visits local shops with Danny Trejo. California small businesses are drivers of economic growth - creating two-thirds of new jobs and employing nearly half of all private sector employees. It was a long slow and tumultuous process, but California Assembly Bill 80 is now officially law, providing partial conformity to federal law allowing taxpayers to deduct expenses paid with PPP forgiven loan amounts as well as EIDL targeted and advance grants.The California Assembly also, and thankfully, did away with the $150,000 limitation that has been debated for several months now. CalCPA Institute is a registered 501(c)(3). PPP provides a direct incentive for small businesses to keep their workers on payroll. California Largely Conforms to Forgiven PPP Loan Deductibility ~| G .7&z=3(en6tpfXgDh$FxZ PPP Loan Expense Deduction Conformity. Founded in 1909, the California Society of Certified Public Accountants (CalCPA) is the largest statewide professional association of certified public accountants in the United States. But California has not done so, and the stimulus law's language says states are prohibited from "using the . Deductible. Conformity only applies to PPP loans and EIDL advance grants. For more information regarding how state tax requirements may affect your business, please contact your Marcum State and Local Tax professional. Our goal is to provide a good web experience for all visitors. Gavin Newsom's desk.