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Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. 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 Rul. A.B. 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. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. -----END REPORT-----. All rights reserved. N2NiMzE4OGQyZTA0YjBmOWI5YTk3ZTg0MTJhOGY3YTVkZGIyNDllOTExZDgw 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. Do not delete! 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. 162, 163; CAL. All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. A.B. 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 . 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. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. DTTL and each of its member firms are legally separate and independent entities. 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. For taxpayers other than ineligible entities, A.B. Together with PitchBook, we give you the focused insights to take advantage of the trends. YjRjOWE1NzUwNDNiNTkxY2NkYmRhODRjM2M0MzBiOWQwNjYwZjIyNDQ3NTEw 11 See 15 U.S.C. Manufacturers need a two-pronged approach to manage risks. Now, your competitors are following an automation roadmap to save work and weather economic turbulence. For this reason, taxpayers that have already filed or paid tax following the provisions of A.B. 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. We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. 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). Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. Additionally, A.B. On April 29, 2021 Governor Newsom signed California A.B. This message will not be visible when page is activated. 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. 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. 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- BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. L. No. 636(a)(37)(A)(iv)(I)(bb). Watch industry leaders discuss advice on innovation. endstream endobj 277 0 obj <. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. (%mu9YS-+e"D3mU3]3|.efah4Yi^=|jmMg16^2*5+Qh . Partner, State and Local Tax West Region Leader. 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. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. REV. KServicing stated they were 1.) 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. Businesses are struggling. 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. 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). NDZkZjRjZDY4ODVjMjk3OGE5MjViODBjYjExOTliZWFhNzgwY2FjMTkzYjll Illinois Governor J.B. Pritzker signed new legislation (P.A. 211 0 obj <> endobj 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. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 YWFjZWQ2YzBhMWI1ZWY2ZDgwYmYxYzVmNDY5OTYxYTNkOTUyMTJlNzk0YTZk 1577 attempted to do, A.B. Podcast: Should borrowers submit PPP loan forgiveness applications early? Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. Credit: Spidell Tax, Analysis, and Education, 200 West Roseburg Avenue CODE 17131.8(g)(3); 24308.6(g)(3). Principal, SALT Services SESS. 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. If you have any issues or technical problems, contact that site for assistance. You meet the 25% gross receipts reduction qualifications. 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. Modesto, CA 95350, (209) 527-4220 (phone) SESS. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh ODE0ZjA1OTZlMmYzNGViM2E4NWJiYTMwNzQ0N2I2YmVhZTE1MDVlNWJjOTJk 1 A.B. 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. SBA Forgiveness Portal. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. 2020 set a new high in annual PE software deal value. Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C. 39 (A.B. The documentation must clearly identify both of the reference quarters (if not using annual comparison), must The payments will be provided to these households shortly after they file their 2020 tax returns. 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. No calculations required. Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. REV. On September 9, 2020, Californias Governor Newsom signed Assembly Bill 1577 (A.B. L. 116-260) was enacted. 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. Don't let tax be the only deciding factor in your relocation. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. Y2ZjZmQ1NzgyYTlkZmE1NGZmOTRmOTU2ZWE5M2Y5OWRlZTY2NTU3M2QxNmJh 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. the forgiveness of PPP loans. 80) providing greater conformity to federal law regarding the deductibility of expenses paid using forgiven Paycheck Protection Program (PPP) loans.1 Under A.B. Combined, the agreement represents a total of 5.7 million payments to low-income Californians. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. 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. For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. Podcast: New hiring credit enacted for small businesses. A.B. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. 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. By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 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. CalFresh Student Outreach and Application Assistance. Answer: For a Second Draw PPP Loan amount of $150,000 or less, the borrower must provide documentation substantiating the reduction in gross receipts before or at the time the borrower seeks loan forgiveness (or upon SBA request). This box/component contains JavaScript that is needed on this page. 636(a)(37)(A)(iv)(I)(bb). & TAX. 1577, 1-3 (stating that [t]his act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect). This material may not be applicable to, or suitable for, the readers specific circumstances or needs and may require consideration of tax and nontax factors not described herein. You can count on us to prioritize and complete work to the best of our ability based on these changes. hb```b``V``e``[ ,@QR40 Mjy{zf9sUnhRn(=vl&G99I\@V7?$vt0Ft 0AU:\l0 c`\=H$X$BCA~'YlxH/t>x Wordfence is a security plugin installed on over 4 million WordPress sites. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. 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, Connecting with our core purpose through a renewed lens. Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday - Friday, 8 a.m. - 8 p.m. EST. 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. Multistate Tax alert | September 30, 2020. 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 1557 also disallows otherwise allowable credits and deductions for amounts paid or incurred using forgiven loan funds.3 Because California generally conforms to the version of the Internal Revenue Code (IRC) that existed as of January 1, 2015, California did not automatically conform to the CARES Act and subsequent, related federal legislation.4 Absent conformity, the California Legislature anticipated that California businesses could have to pay more than $3 billion in additional taxes attributable to forgiven PPP loans.5 As a result, the California Legislature enacted A.B. 1 Ch. 200 West Roseburg Avenue Modesto, CA 95350 (209) 527-4220 (phone) (209) 527-4247 (fax) https . We translate some pages on the FTB website into Spanish. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. 3 P.L. These loans are not forgivable. 1577 and how these changes impact their California tax liabilities. 1577) into law. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. 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. However, they were amended to apply to taxable years beginning on or after January 1, 2019. 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. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi 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. 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. 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. 80, California Assembly, April 15, 2021. In addition, the agreement provides a $600 one-time payment to taxpayers with Individual Tax Identification Numbers (ITINs) who were precluded from receiving the $1,200 per person federal payments issues last spring and the more recent $600 federal payments. Assembly Floor Analysis for A.B. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". Fullwidth SCC. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. Friday, September 18th, 2020. eyJtZXNzYWdlIjoiNWIzZGU0MDczYTM5MDRlMGI1ZTJmM2QxOGExOTlmZjY0 This article provides an introduction to renewable energy tax credits and highlights several key factors that buyers and sellers of these credits should consider. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. Cybersecurity can never rest. California aligning with fed PPP loan treatment. California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. 116-136. 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. 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. OTFhMGFmZGQ0YThjYTRlMDNjYWE5NDNlMmI2NjY2ZTFiYTdmNzc0NGFjM2Zj A custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. Modesto, CA 95350, (209) 527-4220 (phone) Sec. of research and economic analysis. MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. 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. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? The compromise builds on the initiatives in the Governors state budget proposal to provide cash relief to lower-income Californians, increase aid to small businesses and provide license renewal fee waivers to businesses impacted by the pandemic. 2023. 1577, A.B. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 To help guide planning, weve highlighted key topics under focus from regulators worldwide and what those developments could mean for business. 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. Find out how the technology, banking and asset management sectors are adapting their strategies to handle todays threats. CODE 17131.8(g)(3)(B); 24308.6(g)(3)(B). Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. 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. MWRkNGI5MjIxZWY4NWUwMzU3N2Y0MDFmODQ1ZmQzMjliYzI1YWJjM2E3OGU2 REV. MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 Certain services may not be available to attest clients under the rules and regulations of public accounting. AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. section 1106 of the CARES Act for forgiveness of the covered loan. 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. Additional Aid for Individuals and Families. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy You meet the 25% gross receipts reduction qualifications. 117-6). N2QwYTc0NzQ2ZDg0NGM3YzhhYTM2YWM5N2IwZWUzODM5NzI2OTlkODM5M2Q5 ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. We strive to provide a website that is easy to use and understand. MTU3YmNhZDYyNDc5ZTczNDMyNzc0ZjU1YTI3NWRlZjg3OWVkNGRiYjAzNjUz All Rights Reserved. NDQyOTJlYTVmOTZkMzNjMTFiNDZlY2VjNjdlMmViOTViNWVlZmRkMzIyZWNl 1577, 2019-2020 REG. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. document.write(new Date().getFullYear()) California Franchise Tax Board. 80 has been satisfied to avoid being classified as an ineligible entity.. 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. MTQ4MmJiZjg5ZGY5MWQyZDU2ZmFiZDM1ZmZmZjkyM2E3MDRkYmViZTViM2Yz Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. MWM2OTQ4NmFlOWMzMjAzOGE0OWFjNWI2NmU3ZmQ0MjU3Y2U0ZDcwMWMxYWU1 DTTL (also referred to as "Deloitte Global") does not provide services to clients. Automation used to be a possibility a goal for the future. Social login not available on Microsoft Edge browser at this time. April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. Sec. 16 See I.R.S. :D 8 Our goal is to provide a good web experience for all visitors. Emergency Financial Relief to Support Community College Students. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. 80), Laws 2021. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. California law does not conform to this expansion of PPP eligibility. We are excited to finally have clarity on Californias PPP loan forgiveness stance. If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. 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. 636(a)(37)(A)(iv)(I)(bb) was added by Section 311 of Division N of the CAA. 6 P.L. See how we connect, collaborate, and drive impact across various locations. 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. 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. Exceptional organizations are led by a purpose. The Multistate Tax alert archive includes external tax alerts issued byDeloitte Tax LLP's Multistate Tax practiceduring the last three years. 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.