Podcast: Critical new considerations for September 15 estimated tax payments. Partner, State and Local Tax West Region Leader. Digs with Dignity is on a mission to provide those transitioning from homelessness with custom, fully furnished living spaces that feel like home. If your forgiven loan relates to an EIDL Grant or Targeted EIDL Advance, you are not required to meet these qualifications to deduct expenses. Assembly Floor Analysis for A.B. CODE 17131.8(b); 24308.6(b), as amended by 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- 2020), A.B. If you claimed a deduction that you do not qualify for, you must file an amended return using our normal amended return procedures. & TAX CODE 24271. The information contained herein is general in nature and is based on authorities that are subject to change. The 25% gross receipts limitation does not apply to the EIDL advance grants, so taxpayers may exclude the EIDL grants and may fully deduct these expenses even if they dont meet the threshold reduction. 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. 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. You must pay it back within either 3 or 5 years. The Multistate Tax alert archive includes external tax alerts issued byDeloitte Tax LLP's Multistate Tax practiceduring the last three years. AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. Modesto, CA 95350, (209) 527-4220 (phone) 18 A.B. If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. 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
:D 8
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). MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-136, 1105(i). ODU0M2JiMTQ1YmRhYjQ5Yjc2ZWQzNTA3Mjc4MDM1OWI3N2RmYmE4YjEzZTI3 ZGU2YzllYThlZmU0NDllMTQxZDgyMWZmZWNlNGNkNjliYzNkMjQyNTQ1YWFj Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. 636(a)(37)(A)(iv)(I)(bb). All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. Additional Aid for Individuals and Families. 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. Ataxpayercannot combinetwo or more2020quarterly losses to arrive at thisthreshold. 1577), Laws 2020. 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. Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. of research and economic analysis. Certain services may not be available to attest clients under the rules and regulations of public accounting. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. 80 has been satisfied to avoid being classified as an ineligible entity.. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. 211 0 obj
<>
endobj
This tax treatment would also extend to the Economic Injury Disaster Loans as well. Grant Thornton LLP is a member firm of GTIL. If you have questions regarding A.B. 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. 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. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. Careful consideration will need to be given to these issues, as well as the need for documentation to support that the 25% diminution in gross receipts requirement of A.B. If you do not qualify for deductions under AB 80, California follows the Rev. endstream
endobj
startxref
By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 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. 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 & TAX. Social login not available on Microsoft Edge browser at this time. For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. 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. April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". Your ERM needs to cover new gaps and drive new value. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj Generated by Wordfence at Sat, 4 Mar 2023 17:56:39 GMT.Your computer's time: document.write(new Date().toUTCString());. Now, your competitors are following an automation roadmap to save work and weather economic turbulence. ~A=.d
XmtLY RLqg! U
& TAX. 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). 2020-27. 1577) into law. 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. MzA1NjUwNDUyNzBkY2M0YTcxMWY2NGYzZjRhMzk3NGVkODkwNWRlNjQ0YWY2 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. 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. If you have any questions related to the information contained in the translation, refer to the English version. 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 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. Multistate Tax alert | September 30, 2020. 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. 12 CAL. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw SESS. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. Automation used to be a possibility a goal for the future. Do not delete! To stay logged in, change your functional cookie settings. This article provides an introduction to renewable energy tax credits and highlights several key factors that buyers and sellers of these credits should consider. 80, California Assembly, April 15, 2021. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. Friday, September 25th, 2020. (CAL. 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. 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. 2 A.B. 1577 and how these changes impact their California tax liabilities. A.B. 116-136. 80), Laws 2021. %%EOF
Our goal is to provide a good web experience for all visitors. 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. 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. 1577, 2019-2020 REG. ODE0ZjA1OTZlMmYzNGViM2E4NWJiYTMwNzQ0N2I2YmVhZTE1MDVlNWJjOTJk N2QwYTc0NzQ2ZDg0NGM3YzhhYTM2YWM5N2IwZWUzODM5NzI2OTlkODM5M2Q5 Sec. 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. DTTL and each of its member firms are legally separate and independent entities. See how we connect, collaborate, and drive impact across various locations. We are excited to finally have clarity on Californias PPP loan forgiveness stance. The agreement also provides $12 million in state funds to support associated county administrative workload. If you have any issues or technical problems, contact that site for assistance. 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. On April 29, 2021, California Gov. Mr. Grossman specializes as a subject matter expert in California Corporation Income or Franchise Tax matters. California law does not conform to this expansion of PPP eligibility. 0
1577, 1, 2; CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020 (available here); see also Coronavirus Aid, Relief, and Economic Security Act, Pub. 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. 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. Do not include Social Security numbers or any personal or confidential information. Y2NjYmFmZTQyOGZhYjViZTYxMTQ0ODRiYWY5OGVkNzNlOWI1NWY0YzU0ZDVl MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. News Spidell's California Minute . Mjg2ZDhmNTczMDFhNjc3MjY1YjcxNGU5YjlmODg2YzdmYjUyOWIyNjQ1Njhj We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Proc. A diversity, equity and inclusion video series. AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. -----BEGIN REPORT----- You can also read the documentation to learn about Wordfence's blocking tools, or visit wordfence.com to learn more about Wordfence. ZmE2MjY1MzQ2MjA0N2IxZDNmNTlhNjdhMDU1ZmY2NjQwYjZiMDRlZDRkZTBm ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. A sign calling for student loan debt relief is seen in front of the Supreme Court as the justices are scheduled to hear oral arguments in two cases involving President Joe Biden's bid to reinstate . 1577, A.B. Ultimately, this will make tax planning for 2021 essential if a business received loan forgiveness during the year, as this nonconformity was not anticipated. Credit: Spidell Tax, Analysis, and Education Go Back Print. 2 Under the Consolidated Appropriations Act, 2021, as referenced in A.B. Otherwise . 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. 2023. 10 CAL. More than 750,000 PPP loans were taken out by California small businesses. 7 Ch. No calculations required. 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. Emergency Financial Relief to Support Community College Students. YjRjOWE1NzUwNDNiNTkxY2NkYmRhODRjM2M0MzBiOWQwNjYwZjIyNDQ3NTEw document.write(new Date().getFullYear()) California Franchise Tax Board. 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. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 276 0 obj
<>
endobj
Read about their experiences and a few lessons learned along the way. View the list of archivedMultistate Tax alerts. & TAX CODE 17024.5(a); 23051.5(a). However, they were amended to apply to taxable years beginning on or after January 1, 2019. . In particular, Californias definition of an ineligible entity borrows its 25% diminution in gross receipts test from the qualification (i.e. Further, AB 1577 applied only to tax years beginning on or after January 1, 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
Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment.