MWRkNGI5MjIxZWY4NWUwMzU3N2Y0MDFmODQ1ZmQzMjliYzI1YWJjM2E3OGU2 When addressing the new expectations of your workforce, speed is a key factor. REV. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. Your ERM needs to cover new gaps and drive new value. 80 has been satisfied to avoid being classified as an ineligible entity.. CODE 17131.8(b); 24308.6(b), as amended by A.B. 13 See I.R.C. 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. When policy shifts, our insights and analysis can help you plan and respond. 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. REV. 4 CAL. 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. 0 1577 may consider the need to amend their California return and/or recompute their claimed deductions for expenses paid with PPP loan proceeds that were forgiven. 636(a)(37)(A)(iv)(I)(bb). & TAX CODE 17024.5(a); 23051.5(a). COVID-19 has caused PE firms to adjust their valuation practices postponing valuations to avoid reset triggers, exploring new approaches to valuations or diversifying existing ones. & TAX. 1577, 2019-2020 REG. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. SESS., 1 (see new CRTC 17131.8(a)), 2 (see new CRTC 24308.6(a)). Lauren is a senior associate working in the Washington National Tax practice of Deloitte Tax LLP. Combined, the agreement represents a total of 5.7 million payments to low-income Californians. If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. 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). Social login not available on Microsoft Edge browser at this time. Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday - Friday, 8 a.m. - 8 p.m. EST. 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. (CAL. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. In particular, Californias definition of an ineligible entity borrows its 25% diminution in gross receipts test from the qualification (i.e. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. 1 Ch. Report any allowable deductions on your original return. 80 is not a complete conformity bill, and there are some key distinctions to be made from the federal treatment of PPP loans. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 We are excited to finally have clarity on California's PPP loan forgiveness stance. Manufacturers need a two-pronged approach to manage risks. A custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics. 162, 163; CAL. For forms and publications, visit the Forms and Publications search tool. Businesses are struggling. Energy companies can get ahead with fiscal discipline, ESG disclosure preparation and attention to cybersecurity, 2022 Energy Symposium speakers say. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G Y2ZjZmQ1NzgyYTlkZmE1NGZmOTRmOTU2ZWE5M2Y5OWRlZTY2NTU3M2QxNmJh 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. Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. If you have any questions related to the information contained in the translation, refer to the English version. California businesses have been down to the wire this tax season, up against paying state taxes on their Paycheck Protection Program loans. 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. For additional information on the RRF grants, visit Section 5003 of the ARPA, RTC 17158.2(a), and SBA guidance. OTQyYWYwNjA5N2Y5ZTg1YTcwMGMzNTUyNjE3NjcyYWIzNzk2NzI3OGM4MzM1 Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. 636(a)(37)(A)(iv)(I)(bb). 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. ZmU1YzEwNzA1MTAyYzc0ODZiODFlZjZkNTUzYmQ2YzFmNmVlOTA2M2JlM2Y3 9 Note that the statutes originally applied to taxable years beginning on and after January 1, 2020. SESS. 17 (A.B. Review the site's security and confidentiality statements before using the site. US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj Mr. Grossman specializes as a subject matter expert in California Corporation Income or Franchise Tax matters. 636(a)(37)(A)(iv)(I)(bb) was added by Section 311 of Division N of the CAA. and CTL purposes. Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. 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. You will then receive an email that helps you regain access. Friday, September 25th, 2020. 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. 1577. You meet the 25% gross receipts reduction qualifications. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. Podcast: New hiring credit enacted for small businesses. 1 A.B. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. See how. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. 17 A.B. Fill the form below and we'll contact you to schedule an appointment: Grimbleby ColemanCertifiedPublicAccountants,Inc. California Conforms to Federal PPP Loan Forgiveness Rules. In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. 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. MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. Consult with a translator for official business. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. 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. 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. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Executives are advised to pay special attention to emerging trends that will shape how boards and investors talk about ESG in 2021. 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. Your business does not meet PPP loan forgiveness requirements. The agreement also provides $20 million to reengage students who have either left their community college studies because of the pandemic or to engage students at risk of leaving. See Terms of Use for more information. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. People are hungry and hurting, and businesses our communities have loved for decades are at risk of closing their doors. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. 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. 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 211 0 obj <> endobj The agreement also partially conforms California tax law to new federal tax treatment for loans provided through the Paycheck Protection Plan, allowing companies to deduct up to $150,000 in expenses covered by the PPP loan. 1577 which had previously denied the deductibility of expenses paid with forgiven PPP loan proceeds. 1577 added new corporate and income tax statutes providing that [a]ny credit or deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section.8, A.B. GTIL does not deliver services in its own name or at all. By showing up as I am, Im elevating my career. tax guidance on Middle Class Tax Refund payments, General information for the Middle Class Tax Refund, Paycheck Protection Program (PPP) loan forgiveness, FAQs for Paycheck Protection Program (PPP), Coronavirus Tax Relief for Businesses and Tax-Exempt Entities, Revenue and Taxation Code (RTC) section 17131.8(g)(3)). The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj & TAX CODE 24344; 24344.5; 24344.7. 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. We are building an economic foundation for the recovery of jobs, small businesses and, indeed, our everyday lives, said Speaker Rendon. This box/component contains JavaScript that is needed on this page. No Results Found. Exceptional organizations are led by a purpose. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. People are having a hard time making ends meet. 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 make an election under Rev. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi To qualify for expense deductions, basis adjustments, and lack of reduction of tax attributes related to AB 80, you must meet the following qualifications. hVkkF+qe6 Al+vji"3{gYiSZ2e):t z$/=N,zG&F0ihH&h jucN^#VBOZ.fY+n?1o%?}j-]drM5~j?oZQ~|f)?gV~R,.jz2,QzOu"JY[#M}K3_OO^6b^,#lYu7O. Together with PitchBook, we give you the focused insights to take advantage of the trends. Be ready to demonstrate diligence for the FCPA. Do not include Social Security numbers or any personal or confidential information. %%EOF The SBA offered banks, and later fintech companies, processing fees based on the size of loans, which ranged from 5% for loans of $350,000 or less to 1% for loans of $2 million. Automation used to be a possibility a goal for the future. document.write(new Date().getFullYear()) California Franchise Tax Board. 636(a)(37)(A)(iv)(I)(bb).10 Generally, to satisfy the gross receipts requirement, a taxpayer must have experienced a 25% or greater reduction in quarterly gross receipts for the first, second or third quarters of 2020 as compared to the same quarter of 2019.11 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. SESS., 1 (see new CRTC 17131.8(c)), 2 (see new CRTC 24308.6(c)). Certain services may not be available to attest clients under the rules and regulations of public accounting. Assembly Bill 80 (AB 80) allows qualifying taxpayers to exclude from California gross income Paycheck Protection Program (PPP) loans that have been forgiven, and advance grants provided under the Economic Injury Disaster Loan (EIDL) program. 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, 2020 set a new high in annual PE software deal value. However, California disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. This tax treatment would also extend to the Economic Injury Disaster Loans as well. hb```"{ CODE 17131.8(g)(3)(B); 24308.6(g)(3)(B). Due to the timing of A.B. 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. This Google translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. These loans are not forgivable. of research and economic analysis. ~A=.d XmtLY RLqg! U Podcast: Critical new considerations for September 15 estimated tax payments. Onlyagross receiptsreduction inone quarterin2020mustmeet this25%thresholdtoqualifyforthe PPP loan expense deduction, assuming the entity is notpublicly traded. A.B. REV. Otherwise . Podcast: Should borrowers submit PPP loan forgiveness applications early? 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. On April 29, California Gov. ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz 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). 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. endstream endobj startxref 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 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. endstream endobj 212 0 obj <>/Pages 210 0 R/StructTreeRoot 12 0 R/Type/Catalog/ViewerPreferences 230 0 R>> endobj 213 0 obj <>/MediaBox[0 0 612.12 792.12]/Parent 210 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 214 0 obj <>stream Proc. 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. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 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. Additional Aid for Individuals and Families. 1577, 2019-2020 REG. The agreement also provides a combined $35 million for food banks and diapers. 116-136. 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. 276 0 obj <> endobj 1577 and how these changes impact their California tax liabilities. 1577) into law. 16 See I.R.S. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. The potential is great what to know before taking action. This isnt the tech you know. 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) into law.1 A.B. 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. On April 29, 2021, California Gov. 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. Ultimately, this will make tax planning for 2021 essential if a business received loan forgiveness during the year, as this nonconformity was not anticipated. 250 0 obj <>stream 20 See A.B. Our goal is to provide a good web experience for all visitors. Ineligible entities are either publicly tradedcompanies orentities that do not meet the requirements of 15 U.S.C. Follow our normal amended return procedures to claim any deduction or adjustment related to PPP loans. 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. 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 . 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. Under the express terms of the CARES Act, forgiven loan amounts are excluded from the borrowers gross income.4 CalFresh Student Outreach and Application Assistance. MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 Connecting with our core purpose through a renewed lens. On April 29, 2021 Governor Newsom signed California A.B. The measure awaits the governor's signature. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Illinois Governor J.B. Pritzker signed new legislation (P.A. Below are key provisions of the Immediate Action Agreement: Direct Relief to Individuals and Families. Ataxpayercannot combinetwo or more2020quarterly losses to arrive at thisthreshold. 2020-27. N2Y5N2FjOGU2ZGVmZWI4MDRhNTg4NjNjZjgxYjA2MzBlYjU1MmMzNDY0NTY1 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. 1577, 2019-2020 REG. California aligning with fed PPP loan treatment. GTIL and each member firm of GTIL is a separate legal entity. Additionally, A.B. The agreement provides $600 in one-time relief to households receiving the California EITC for 2020. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses.
