An additional $310 billion of PPP loan funding was subsequently provided by the federal Paycheck Protection Program and Health Care Enhancement Act (P.L. 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. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". These new provisions provide [f]or taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to section 1106 of the [CARES Act], pursuant to the [Enhancement Act], or pursuant to the [Flexibility Act].17 For this purpose covered loan is defined as having the same meaning as in section 1106 of the [CARES Act].18 Thus, the Forgiven Loan Amount is not included in gross income for PITL or CTL purposes. 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. L. No. The payments will be provided to these households shortly after they file their 2020 tax returns. Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. 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. YjA1NTM0ZGYzOWRkOTM0Yjg0MTQ3Mzc5MzhlNzQ1Y2UwOTA0Y2ZlODFkZjdi MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh 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). 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. YjFhOWM4Y2FkNDM3NWJjM2ZmZjE2YmFmNjhlNjc3MDJjM2Q3NjJhMmE1NDgz OTFhMGFmZGQ0YThjYTRlMDNjYWE5NDNlMmI2NjY2ZTFiYTdmNzc0NGFjM2Zj AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. MmU1MjhmZWM1MzQxMzcyYmQyMmE2NGRlNTRlOGU3NDgxZjAyMDVlYmY2Mjk2 Ataxpayercannot combinetwo or more2020quarterly losses to arrive at thisthreshold. For this reason, taxpayers that have already filed or paid tax following the provisions of A.B. The documentation must clearly identify both of the reference quarters (if not using annual comparison), must Illinois Governor J.B. Pritzker signed new legislation (P.A. Specifically, A.B. SESS., 1 (see new CRTC 17131.8(a)), 2 (see new CRTC 24308.6(a)). & TAX. California taxpayers that have received PPP loans or EIDL advance grants will likely want to consider the new law when filing their 2020 California corporate and individual income tax returns. This article provides an introduction to renewable energy tax credits and highlights several key factors that buyers and sellers of these credits should consider. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 2 A.B. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. If you have questions regarding A.B. ZmE2MjY1MzQ2MjA0N2IxZDNmNTlhNjdhMDU1ZmY2NjQwYjZiMDRlZDRkZTBm 117-6). Yjk1NTlhZjUzMmI3ODFlN2VlZDM3OWQ5OWM1ZDgzYmM3NTgyMWVkZjViZTQy 1577, 2019-2020 REG. 636(a)(37)(A)(iv)(I)(bb). 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. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. View the list of archivedMultistate Tax alerts. It is worth noting that A.B. On Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. eyJtZXNzYWdlIjoiNWIzZGU0MDczYTM5MDRlMGI1ZTJmM2QxOGExOTlmZjY0 Find out how the technology, banking and asset management sectors are adapting their strategies to handle todays threats. Read about their experiences and a few lessons learned along the way. California law excludes PPP loans forgiven under the CARES Act from gross income has been saved, California law excludes PPP loans forgiven under the CARES Act from gross income has been removed, An Article Titled California law excludes PPP loans forgiven under the CARES Act from gross income already exists in Saved items. 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. CODE 17131.8(b); 24308.6(b), as added by A.B. 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. On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. and CTL purposes. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. 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. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. 11 See 15 U.S.C. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. 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 You can outsource cybersecurity, but you can't outsource your risks. For tax yearsbeginning in2019,qualifyingtaxpayers cannowexclude PPP loanforgivenessorEIDL grants fromCalifornia gross incomeanddeductallowablecoveredexpenses paid withPPP loan or EIDL grant proceeds. 636(a)(37)(A)(iv)(I)(bb). 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. AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. 80, California Assembly, April 15, 2021. ZTI5MDAwNDczOWI5MWMxY2RlNWVhNzcyY2Q3OWVmNmI2N2Y2ODEyZmM1NTYz If you make an election under Rev. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy Do not delete! 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. 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. 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. Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. 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). SBA Forgiveness Portal. NmIyYjY1ZGFjODY4OTViMmNkMGJiYjAzM2JjYTBhMDJhZDYyYThmNTg3Yjcw 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. 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. SESS. When policy shifts, our insights and analysis can help you plan and respond. ZDE5MjljNTlmOGNmNzlmYTg5MGFiZWU3MjM1M2I1Yjg2OTA3NzZmYmU3NmFi 1577, 2019-2020 REG. Onlyagross receiptsreduction inone quarterin2020mustmeet this25%thresholdtoqualifyforthe PPP loan expense deduction, assuming the entity is notpublicly traded. Copyright 2023 BDO USA LLP. REV. 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. Follow our normal amended return procedures to claim any deduction or adjustment related to PPP loans. 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. Notice 2020-32 (available here). -----BEGIN REPORT----- 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. Our audits ensure confidence in our clients financial information. Taxpayers must have a 25% reduction in gross receipts in any 2020 calendar quarter as compared to the comparable 2019 calendar quarter in order to deduct expenses paid with PPP loan forgiven amounts. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 On April 29, 2021, California Gov. 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. Podcast: Should borrowers submit PPP loan forgiveness applications early? Otherwise . -----END REPORT-----. For a complete listing of the FTBs official Spanish pages, visit La esta pagina en Espanol (Spanish home page). The agreement would provide the $600 payments to households with ITINs and income below $75,000. 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. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. California conforms to the federal gross receipts test requiring a 25% or greater reduction in gross receipts and will therefore follow the rationale of this related federal guidance. %%EOF If you have any issues or technical problems, contact that site for assistance. 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. However, AB 1577 did not allow taxpayers to deduct PPP covered expenses. (209) 527-4247 (fax). NDQyOTJlYTVmOTZkMzNjMTFiNDZlY2VjNjdlMmViOTViNWVlZmRkMzIyZWNl Additional Aid for Individuals and Families. 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. We are building an economic foundation for the recovery of jobs, small businesses and, indeed, our everyday lives, said Speaker Rendon. 4 See P.L. :D 8 OTQyYWYwNjA5N2Y5ZTg1YTcwMGMzNTUyNjE3NjcyYWIzNzk2NzI3OGM4MzM1 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. 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). 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. For additional information on the RRF grants, visit Section 5003 of the ARPA, RTC 17158.2(a), and SBA guidance. This isnt the tech you know. GTIL refers to Grant Thornton International Ltd (GTIL). On April 29, 2021 Governor Newsom signed California A.B. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 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. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. 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 Emergency Financial Relief to Support Community College Students. 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. 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. 1577 adds two identical California tax provisionsCalifornia Revenue & Taxation Code (CRTC) section 17131.8 under the Personal Income Tax Law (PITL) and CRTC section 24308.6 under the Corporation Tax Law (CTL). 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. But yesterday, the Calfornia Senate approved AB 80, which would make forgiven PPP loans tax-deductible - and give businesses a breather. x000K@4CgCGt@1: L%v5Fo- j-YW v Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. 2020), A.B. 80 has been satisfied to avoid being classified as an ineligible entity.. 10 CAL. DTTL and each of its member firms are legally separate and independent entities. ~A=.d XmtLY RLqg! U This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. Exceptional organizations are led by a purpose. 162, 163; CAL. See how. SESS. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. 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. Energy companies can get ahead with fiscal discipline, ESG disclosure preparation and attention to cybersecurity, 2022 Energy Symposium speakers say. Who should lead the charge? US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. You meet the 25% gross receipts reduction qualifications. For federal qualifications regarding income tax treatment, visit Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. Companies must focus on attracting and retaining talent, modernizing HR to serve new business needs while becoming more efficient. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 hb```"{ How we work matters as much as what we do. Sec. Your business does not meet PPP loan forgiveness requirements. Now, your competitors are following an automation roadmap to save work and weather economic turbulence. Modesto, CA 95350, (209) 527-4220 (phone) MTU3YmNhZDYyNDc5ZTczNDMyNzc0ZjU1YTI3NWRlZjg3OWVkNGRiYjAzNjUz 17 A.B. CODE 17131.8(g)(3); 24308.6(g)(3). 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. N2NiMzE4OGQyZTA0YjBmOWI5YTk3ZTg0MTJhOGY3YTVkZGIyNDllOTExZDgw Drive maximum value across your supply chain. Y2VmMzUxZjkwZWU4YmYxYWRhYTJlNWMyOTM4MTQ2NGI4MThhNDBmOGNjNmY3 The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. B expects to apply to the lender for forgiveness of the covered loan in 2021. 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. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. Cybersecurity can never rest. If you do not qualify for deductions under AB 80, California follows the Rev. 3 P.L. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi 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. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. 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. Proc. 13 See I.R.C. 116-136. 16 See I.R.S. 116-136. If you have additional questions about this article or your business qualification status, contact your GC accountant or email us at contactus@gccpas.net. The agreement provides $600 in one-time relief to households receiving the California EITC for 2020. Mr. Grossman specializes as a subject matter expert in California Corporation Income or Franchise Tax matters. Friday, September 18th, 2020. CODE 17131.8(g)(3)(B); 24308.6(g)(3)(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. SESS., 1 (see new CRTC 17131.8(b)), 2 (see new CRTC 24308.6(b)). 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. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue Watch industry leaders discuss advice on innovation. See Terms of Use for more information. 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. A.B. In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. Credit: Spidell Tax, Analysis, and Education Go Back Print. 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. Fullwidth SCC. Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. 636(a)(37)(A)(iv)(I)(bb). What will help even more is using a holistic approach to create a winning strategy. According to the legislative analysis, this date was changed to ensure that all fiscal year filers are captured. NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi Principal, SALT Services 19 A.B. 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). Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. endstream endobj startxref 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). Modesto, CA 95350, (209) 527-4220 (phone) It does not apply to SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, or Restaurant Revitalization Grants. By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 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. 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. We are excited to finally have clarity on California's PPP loan forgiveness stance. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. Sign up to receive the latest BDO news and insights. Executives are advised to pay special attention to emerging trends that will shape how boards and investors talk about ESG in 2021. 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. & TAX. 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. ZmU1YzEwNzA1MTAyYzc0ODZiODFlZjZkNTUzYmQ2YzFmNmVlOTA2M2JlM2Y3 Taxpayers that have received PPP loans should consult with their California tax advisors regarding the changes made by A.B. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. 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 . 20 See A.B. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program. 1577, A.B. This tax treatment would also extend to the Economic Injury Disaster Loans as well. However, they were amended to apply to taxable years beginning on or after January 1, 2019. The agreement also reflects fee relief for more than 600,000 barbering and cosmetology individuals and businesses licensed through the Department of Consumer Affairs. Multistate Tax alert | September 30, 2020. Mjg2ZDhmNTczMDFhNjc3MjY1YjcxNGU5YjlmODg2YzdmYjUyOWIyNjQ1Njhj In September 2020, California enacted AB 1577, which conformed to the CARES Act exclusion from gross income for PPP loan forgiveness. 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. 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. A medical researcher accelerated purchases by 45% with a new tech implementation plan. 5 INCOME TAXES: FEDERAL CARES ACT: GROSS INCOME: LOAN FORGIVENESS, JULY 8, 2020 (available here). 1577 attempted to do, A.B. PPP Loan Forgiveness for Borrowers International China Practice India Practice Latin America Practice Consulting Technology Risk & IT Compliance Strategy & Operations Transactions Specialty Technology Automation Data Analytics & BI Development & Integration Enterprise Systems Technology Products Technology Strategy Automation Don't let tax be the only deciding factor in your relocation. 1577 and how these changes impact their California tax liabilities. 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. 1577) into law. The potential is great what to know before taking action. 0 Due to the timing of A.B. 18 A.B. 1577 is effective immediately and applies to taxable years beginning on and after January 1, 2020.20 Taxpayers that have received a PPP loan should be aware that the Forgiven Loan Amount is excluded from gross income for California PITL and CTL purposes. A disallowance of the deductions effectively neutralized the benefit of the tax-exempt nature of the PPP loan forgiveness. If this reduction threshold is not met, the expenses cannot be deducted on the California tax return. ZmEwMjJhMjJhYSJ9 Californians have been hurting. 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. Gavin Newsom signed Assembly Bill 80 (A.B. MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj If you claimed a deduction that you do not qualify for, you must file an amended return using our normal amended return procedures. 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. Connecting with our core purpose through a renewed lens. 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. 80. hbbd``b`?`\@ "$@b Bq@S my S{.$4VP&F% 1FrO G You meet the 25% gross receipts reduction qualifications. 1577 or other California tax matters, please contact any of the following Deloitte professionals: Roburt Waldow, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 612 397 4487, Christopher Campbell, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 3072, Valerie Dickerson, partnerMultistate, Deloitte Tax LLP, Washington National Tax, +1 202 220 2693, Kathy Freeman, managing directorMultistate, Deloitte Tax LLP, Sacramento, +1 916 288 3392, Shirley Wei, senior managerMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 1715. ZjM5OWM1NmRhZmIzYzYxY2VlZmY4NDExYjhjMDA0YmRlOThjMjBhYjk3Nzkz AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. 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 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.