california ppp loan forgiveness spidell california ppp loan forgiveness spidell

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. REV. 4 See P.L. 116-260. The new legislation supersedes AB 1577. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. 10 CAL. 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. 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. & TAX. Multistate Tax alert | September 30, 2020. Friday, September 18th, 2020. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. 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. YWFjZWQ2YzBhMWI1ZWY2ZDgwYmYxYzVmNDY5OTYxYTNkOTUyMTJlNzk0YTZk Please enable JavaScript to view the site. Your ERM needs to cover new gaps and drive new value. 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, A.B. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. Now, your competitors are following an automation roadmap to save work and weather economic turbulence. It is unclearhowbusinesses that changed entity types during 2020will apply2019 gross receiptstoqualify for the PPPexpense deduction. Retroactively effectivefor tax years beginning on or after January 1, 2019,AB 80allowsindividuals andbusinesses todeductcoveredexpenses paid for with forgivenPPPloansorEIDLadvances and targeted grantsreceived under theCARES Act and the CAA. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 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. 1577) into law.1 A.B. View the list of archivedMultistate Tax alerts. 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. & TAX CODE 24271. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. No calculations required. 162, 163; CAL. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi 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. 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. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 (209) 527-4247 (fax). 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. People are having a hard time making ends meet. 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. 276 0 obj <> endobj You will then receive an email that helps you regain access. Cybersecurity can never rest. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. A.B. Review the site's security and confidentiality statements before using the site. How we work matters as much as what we do. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. 18 A.B. Immediate Relief for Small BusinessesQuadrupled. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 1577 and how these changes impact their California tax liabilities. KServicing stated they were 1.) April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. There's more to consider. SB 113 also allows the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers for SVO and RRF grants. Fullwidth SCC. 2020), A.B. 39 (A.B. 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. MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 CODE 17131.8(g)(3); 24308.6(g)(3). Learn how were making the game more inclusive for all. If you think you have been blocked in error, contact the owner of this site for assistance. GTIL refers to Grant Thornton International Ltd (GTIL). x000K@4CgCGt@1: L%v5Fo- j-YW v %%EOF Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 636(a)(37)(A)(iv)(I)(bb). 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)). 16 See I.R.S. ZjM4OTJmMjgzYWNmN2I1NzQzMDI5YzFkNDg0ZGEwZGY0Zjk4ZTVmOTczYzhi 80. 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. Copyright 2023 BDO USA LLP. 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). The Multistate Tax alert archive includes external tax alerts issued byDeloitte Tax LLP's Multistate Tax practiceduring the last three years. The agreement provides $600 in one-time relief to households receiving the California EITC for 2020. Notice 2020-32 (available here). You can count on us to prioritize and complete work to the best of our ability based on these changes. 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. Access from your area has been temporarily limited for security reasons. of research and economic analysis. The agreement provides an additional $24 million for financial assistance and services through Housing for the Harvest a program providing support for agricultural workers who have to quarantine due to COVID-19. Drivers, key risks and opportunities from our leaders and Nareits senior v.p. Digs with Dignity is on a mission to provide those transitioning from homelessness with custom, fully furnished living spaces that feel like home. 2 Under the Consolidated Appropriations Act, 2021, as referenced in A.B. 80 is not a complete conformity bill, and there are some key distinctions to be made from the federal treatment of PPP loans. 4 CAL. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. Golf is better when were all playing together. Modesto, CA 95350, (209) 527-4220 (phone) 80 has been satisfied to avoid being classified as an ineligible entity.. 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). YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. Rul. Who should lead the charge? 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. On September 29, 2022, AB 158 was enacted to add an operative date of January 1, 2019 for the PPPEA to ensure taxpayers that had loans made during PPPEA would be eligible for the income exclusion and other applicable tax treatment. 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. 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 SESS., 1 (see new CRTC 17131.8(c)), 2 (see new CRTC 24308.6(c)). This message will not be visible when page is activated. 1577) into law. document.write(new Date().getFullYear()) California Franchise Tax Board. 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. 1 Ch. California law does not conform to this expansion of PPP eligibility. Our goal is to provide a good web experience for all visitors. 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 Sec. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 Dana is based in San Jose, California. 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. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. If you have questions regarding A.B. 6 P.L. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. Specifically, A.B. 1577 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. A.B. NDZkZjRjZDY4ODVjMjk3OGE5MjViODBjYjExOTliZWFhNzgwY2FjMTkzYjll These pages do not include the Google translation application. 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. 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. Sec. For forms and publications, visit the Forms and Publications search tool. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. (CAL. 9 Note that the statutes originally applied to taxable years beginning on and after January 1, 2020. :D 8 61; CAL. OTc5MjdiOWVmNjcwMzYzYTRjZjhmOWI1YmQzZDczMDNkYzZmYjk2Mzk2ZWJi REV. 0 1557 to provide some relief.6, On March 27, 2020, the federal government enacted the CARES Act in response to the COVID-19 pandemic.7 Sections 1102 and 1106 of the CARES Act amend section 7(a) of the Small Business Act to create the PPP, through which up to $349 billion in funding was provided to businesses through federally guaranteed loans. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. California taxpayers canalsofully deduct expenses paid with EIDL fundssince this thresholddoes not apply toEIDL grants. 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. Do not include Social Security numbers or any personal or confidential information. Read about the challenges and opportunities that could lie ahead. 2 A.B. 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. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. 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. 1577, 2019-2020 REG. 8 CAL. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. 3 P.L. Please search again using different keywords and/or filters. The agreement also provides a combined $35 million for food banks and diapers. Our response tackles the human and the economic impacts of COVID in a way that echoes President Bidens American Rescue Plan and will help those who are hurting most. 1577, 2019-2020 REG. Drive maximum value across your supply chain. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. REV. 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. At Grant Thornton, we dont just understand your business. How does ESG fit into business strategy? 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. However, they were amended to apply to taxable years beginning on or after January 1, 2019. 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. As a result, it provided no California tax relief for fiscal year taxpayers whose tax year began before January 1, 2020, but who obtained a PPP loan after January 1, 2020. 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. This isnt the tech you know. In September 2020, California enacted AB 1577, which conformed to the CARES Act exclusion from gross income for PPP loan forgiveness. 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 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. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy MWM2OTQ4NmFlOWMzMjAzOGE0OWFjNWI2NmU3ZmQ0MjU3Y2U0ZDcwMWMxYWU1 Friday, September 25th, 2020. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk Overview. 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. 102-1125) on February 3, 2023, that makes significant enhancements to a variety of Illinois credit and incentive programs. Due to the timing of A.B. REV. All rights reserved. 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. Be ready to demonstrate diligence for the FCPA. Although businesses who do not qualify for an exclusion may fully deduct expenses paid with forgiven PPP loan amounts on their California return, the taxability of the PPP forgiveness will come as a big surprise for many California businesses. News Spidell's California Minute . 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). L. No. A custom solution allowing banks and their customers to calculate SBA PPP loan amounts based on unique business characteristics. 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 11 See 15 U.S.C. 1577. But yesterday, the Calfornia Senate approved AB 80, which would make forgiven PPP loans tax-deductible - and give businesses a breather. Osborne Rincon CPAs | 79245 Corporate Centre Drive, La Quinta, CA 92253 | 760-777-9805 | Copyright 2018 Osborne Rincon. hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G 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. MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? 17 A.B. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. Find out how to manage the business risks behind data. Specifically, the new law states that [a]ny credit or deduction otherwise allowed under this part [(Part 10 for the PITL and Part 11 for the CTL)] 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.19. 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. GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. Podcast: Should borrowers submit PPP loan forgiveness applications early? The agreement provides roughly $6 million to support outreach and application assistance to University of California, California State University and California Community College students made newly eligible for CalFresh the state-administered federal program for supplemental food assistance. 80, deductions for expenses paid using PPP loan proceeds are allowed even when the loan is forgiven provided the taxpayer is not an ineligible entity. Under the legislation, an ineligible entity is a taxpayer that either: (i) is a publicly-traded company; or (ii) does not experience a 25% reduction in gross receipts in an applicable quarter of 2020 as compared to the same quarter in 2019.2, The PPP was created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides forgivable business loans when the recipient meets certain eligibility criteria.3 Under the PPP, qualifying borrowers can apply to have some (or all) of their loan forgiven to the extent it was used for certain expenses such as rent, utilities, mortgage payments, and employee payroll. 1557 generally conforms California to federal law allowing an exclusion from gross income for covered Paycheck Protection Program (PPP) loans that are forgiven as a part of the federal Coronavirus Aid, Relief, and Economic . On February 9, 2022, Senate Bill (SB) 113 (Economic Relief) was enacted to allow an income exclusion for Shuttered Venue Operator (SVO) grants provided under CAA for tax years beginning on or after January 1, 2019 and for Restaurant Revitalization Fund (RRF) grants provided under ARPA for taxable years beginning on or after January 1, 2020. ~A=.d XmtLY RLqg! U When policy shifts, our insights and analysis can help you plan and respond. hVkkF+qe6 Al+vji"3{gYiSZ2e):t z$/=N,zG&F0ihH&h jucN^#VBOZ.fY+n?1o%?}j-]drM5~j?oZQ~|f)?gV~R,.jz2,QzOu"JY[#M}K3_OO^6b^,#lYu7O. REV. Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000. 80 amends California law to operate more consistently with the federal CAA regarding the permissibility of deductions for expenses paid with forgiven PPP loan proceeds. 1577 which had previously denied the deductibility of expenses paid with forgiven PPP loan proceeds. Your business does not meet PPP loan forgiveness requirements. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw MzA1NjUwNDUyNzBkY2M0YTcxMWY2NGYzZjRhMzk3NGVkODkwNWRlNjQ0YWY2