On June 30, 2022, AB 194 was enacted which allowed an income exclusion for covered loan amounts forgiven pursuant to the Paycheck Protection Program Extension Act of 2021 (PPPEA) (Public Law 117-6). 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. MWZiNjQ1YjdmYjEyZDUzZDUyNTVjODI0OGMzN2YyM2YxMWYxNGNmYTA3Yzk2 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. 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. N2QwYTc0NzQ2ZDg0NGM3YzhhYTM2YWM5N2IwZWUzODM5NzI2OTlkODM5M2Q5 %PDF-1.6 % 0 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. 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. 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 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. Businesses allege Bank of America pressured them to take out bigger PPP 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. Please search again using different keywords and/or filters. AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. To be eligible, businesses must have: Employed 50 or less full-time employees Had gross revenue of less than $5 million in 2019 Principal, SALT Services April 29, 2021 Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. Our audits ensure confidence in our clients financial information. 2 A.B. 636(a)(37)(A)(iv)(I)(bb) was added by Section 311 of Division N of the CAA. & TAX. If you do not qualify for deductions under AB 80, California follows the Rev. Y2ZjZmQ1NzgyYTlkZmE1NGZmOTRmOTU2ZWE5M2Y5OWRlZTY2NTU3M2QxNmJh & TAX CODE 24344; 24344.5; 24344.7. 1577), Laws 2020. California law does not conform to this expansion of PPP eligibility. 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. 12 CAL. SESS. California Partially Conforms to Federal PPP Forgiveness - Moss Adams 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. MjhlMTk5ZGY1MzFiNTZlYzQ5N2ZlMTAyOGIwYzZhZDAwOGU4ZDQ5N2U4Nzlj 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 $50 million for cultural institutions. SESS. hVkkF+qe6 Al+vji"3{gYiSZ2e):t z$/=N,zG&F0ihH&h jucN^#VBOZ.fY+n?1o%?}j-]drM5~j?oZQ~|f)?gV~R,.jz2,QzOu"JY[#M}K3_OO^6b^,#lYu7O. All businesses that took out loans of $150,000 or less would be able to maximize their deduction for state purposes. On September 9, 2020, California's Governor Newsom signed Assembly Bill 1577 (A.B. Grant Thornton LLP is a member firm of GTIL. Find out how the technology, banking and asset management sectors are adapting their strategies to handle todays threats. Businesses are struggling. Jamie Yesnowitz, principal serving as the State and Local Tax (SALT) leader within Grant Thornton's Washington National Tax Office, is a national technical resource for Grant Thornton's SALT practice. 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. 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. Banks face new challenges on regulation, ESG, mortgages, digital assets, audit, tax or digital transformation in 2022. A.B. Assembly Floor Analysis for A.B. Our goal is to provide a good web experience for all visitors. If you have any questions related to the information contained in the translation, refer to the English version. 1577 attempted to do, A.B. 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. The information contained herein is general in nature and is based on authorities that are subject to change. MzZiNmY3MzJiY2FhODEyYjI2YzU5MzE4ZWE1NTYxNjAxZmVkNTg1ZjYyYzVh Learn how were making the game more inclusive for all. Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday - Friday, 8 a.m. - 8 p.m. EST. 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. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this 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. 1 A.B. N2Y5N2FjOGU2ZGVmZWI4MDRhNTg4NjNjZjgxYjA2MzBlYjU1MmMzNDY0NTY1 You can also read the documentation to learn about Wordfence's blocking tools, or visit wordfence.com to learn more about Wordfence. Mr. Grossman specializes as a subject matter expert in California Corporation Income or Franchise Tax matters. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. Credit: Spidell Tax, Analysis, and Education, 200 West Roseburg Avenue 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. You meet the 25% gross receipts reduction qualifications. Due to the timing of A.B. 2 A.B. Please enable JavaScript to view the site. These subsidies/grants are subject to California tax, but expenses are fully deductible on the California return. 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. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 It is worth noting that A.B. 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 $150,000 in expenses covered by the PPP loan. 9 For additional details relating to the federal Flexibility Act, please refer to the Deloitte Tax News & Views Capitol Hill Briefing, dated June 12, 2020 (available here). hb```b``V``e``[ ,@QR40 Mjy{zf9sUnhRn(=vl&G99I\@V7?$vt0Ft 0AU:\l0 c`\=H$X$BCA~'YlxH/t>x L. No. For California purposes, forgiven PPP loans, SVO grants, and RRF grants are excluded from gross income. & TAX CODE 17024.5(a); 23051.5(a). Watch industry leaders discuss advice on innovation. There has been no activity, and we can't get good information on when and if it will pass, and what will actually be included in the final bill. REV. 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. The new federal resources will extend care for children of essential workers through June of 2022, and funds increased access to subsidized child care for more than 8,000 children of essential workers and at-risk children who are not currently served in the system through June of 2022. California Conforms to Federal PPP Loan Forgiveness Rules 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. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. Access from your area has been temporarily limited for security reasons. SACRAMENTO Governor Gavin Newsom, Senate President pro Tempore Toni G. Atkins and Assembly Speaker Anthony Rendon today announced that they have reached an agreement on a package of immediate actions that will speed needed relief to individuals, families and businesses suffering the most significant economic hardship from the COVID-19 Recession. In particular, Californias definition of an ineligible entity borrows its 25% diminution in gross receipts test from the qualification (i.e. Proc. Friday, September 18th, 2020. If you are a WordPress user with administrative privileges on this site, please enter your email address in the box below and click "Send". You will then receive an email that helps you regain access. 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. 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. Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000. 1577, 2019-2020 REG. 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. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. 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- 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. At Grant Thornton, we dont just understand your business. 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. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. 1577, 2019-2020 REG. 15 See e.g., I.R.C. Drive maximum value across your supply chain. Rul. MzA5NDZkYmY0ZWFjYTU3MzIyNjAzOGFiNmVmZGQxMTc2MGUxN2VkYTMxNTZi Fill the form below and we'll contact you to schedule an appointment: Grimbleby ColemanCertifiedPublicAccountants,Inc. California Conforms to Federal PPP Loan Forgiveness Rules. Automation used to be a possibility a goal for the future. 80 provides much needed guidance clarifying Californias treatment of deductions for expenses paid with forgiven PPP loan proceeds. This box/component contains JavaScript that is needed on this page. NDEyZDM0YmQ2MzdjM2I1OTg1YmYxMTdhYzE2OWE5MWEyMjJkYTM5ZTg4ZjYw 7 Ch. 5 IRC Sec. If you think you have been blocked in error, contact the owner of this site for assistance. 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. 13 Specifically, A.B. Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. L. 116-260) was enacted. (HTTP response code 503). PPP Loans and Forgiveness Accounting and Financial Reporting - Spidell DTTL (also referred to as "Deloitte Global") does not provide services to clients. CLASS ACTION LAWSUIT AGAINST KSERVICING/KABBAGE for PPP LOAN - reddit Spidell Publishing one of Californias leading continuing education organizations is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. California Conforms to Federal PPP Loan Forgiveness Rules Specifically, A.B. Please see www.deloitte.com/about to learn more about our global network of member firms. To help guide planning, weve highlighted key topics under focus from regulators worldwide and what those developments could mean for business. By: Pedro T. Rincon, CVA, Partner Osborne Rincon CPAs. 116-260. 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. Friday, September 25th, 2020. Digs with Dignity is on a mission to provide those transitioning from homelessness with custom, fully furnished living spaces that feel like home. 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. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. For taxpayers other than ineligible entities, A.B. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. US affiliates to deem to elect waters edge, California legislature allows group returns for international business travelers. 1 Ch. Read about the challenges and opportunities that could lie ahead. 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). 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. Together with PitchBook, we give you the focused insights to take advantage of the trends. Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. 1577, A.B. If you make an election under Rev. (CAL. Sec. 80. This isnt the tech you know. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. 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. Your access to this service has been limited. Modesto, CA 95350, (209) 527-4220 (phone) 19 A.B. MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy Note that the citation to the federal law presumably should be 15 U.S.C. 2 Under the Consolidated Appropriations Act, 2021, as referenced in A.B. 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 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. Governor Gavin Newsom has signed Assembly Bill 80, to amend the law. 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. 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. 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. Taxpayers that have already filed their 2019 and 2020 returns should consider amending these returns to incorporate the adjustments allowed by AB 80. GTIL and each member firm of GTIL is a separate legal entity. Paycheck Protection Program (PPP) loan forgiveness | COVID-19 - California We are building an economic foundation for the recovery of jobs, small businesses and, indeed, our everyday lives, said Speaker Rendon. 297 0 obj <>/Filter/FlateDecode/ID[<681772630396424DB877BF5F6FFE419B>]/Index[276 36]/Info 275 0 R/Length 98/Prev 155748/Root 277 0 R/Size 312/Type/XRef/W[1 2 1]>>stream If you have any issues or technical problems, contact that site for assistance. ZjM5OWM1NmRhZmIzYzYxY2VlZmY4NDExYjhjMDA0YmRlOThjMjBhYjk3Nzkz The agreement also provides a combined $35 million for food banks and diapers. 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 . 1 A.B. 1577) into law. 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. 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). For a complete listing of the FTBs official Spanish pages, visit La esta pagina en Espanol (Spanish home page). If this reduction threshold is not met, the expenses cannot be deducted on the California tax return. 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. We strive to provide a website that is easy to use and understand. 20 See A.B. National Tax Office Leader. All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. California has NOT passed AB 80: the PPP forgiveness bill - Spidell 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. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. Your ERM needs to cover new gaps and drive new value. On June 30, 2022, AB 194 was enacted which allowed an income exclusion for covered loan amounts forgiven pursuant to the Paycheck Protection Program Extension Act of 2021 (PPPEA)(Public Law 117-6). NWE3NWRjN2NhODFhNjkyOWNiYzZhZWJjN2U5M2FhYjEzNTQ3YTVhMDA5MzNi 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. 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. Under the express terms of the CARES Act, forgiven loan amounts are excluded from the borrowers gross income.4 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. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. 2020-27. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. 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. 116-136, 1105(i). & TAX CODE 24271. GTIL does not deliver services in its own name or at all. AB 80 generally conforms to the federal treatment of PPP loan forgiveness and EIDL grants, with one major exception. hb```"{ CODE 17131.8(g)(3)(B); 24308.6(g)(3)(B). You can count on us to prioritize and complete work to the best of our ability based on these changes. For additional information on the RRF grants, visit Section 5003 of the ARPA, RTC 17158.2(a), and SBA guidance. Cybersecurity can never rest. Be ready to demonstrate diligence for the FCPA. SESS., 1 (see new CRTC 17131.8(a)), 2 (see new CRTC 24308.6(a)). This message will not be visible when page is activated. Podcast: Critical new considerations for September 15 estimated tax payments. Partner, State and Local Tax West Region Leader. 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. The authors of this alert would like to acknowledge the contributions of Lauren Kim to the drafting process. 1577. MDNjMzZlZmIzYWQ3NjYxMjhiZjg0Y2U1MzE0MjUyMjBhNWEwMzJlYzUwZjc0 Modesto, CA 95350, (209) 527-4220 (phone) How does ESG fit into business strategy? Manufacturers need a two-pronged approach to manage risks. California legislation on PPP loan expenses | Crowe LLP To stay logged in, change your functional cookie settings. Do not include Social Security numbers or any personal or confidential information. This is important new information that needs to be shared with businesses immediately and it will likely come as a surprise to many. -----END REPORT-----. 2020) (available here). CODE 17131.8(g)(3); 24308.6(g)(3). Any differences created in the translation are not binding on the FTB and have no legal effect for compliance or enforcement purposes. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue 311 0 obj <>stream People are hungry and hurting, and businesses our communities have loved for decades are at risk of closing their doors. California: Update to Paycheck Protection Program Loan Conformity 3 P.L. Not-for-profit organizations and higher education institutions, Transportation, logistics, warehousing and distribution, Operation and organizational transformation, Blockchain, digital assets & Web3 solutions, Do not sell/share my personal information. If youd like to discuss tax implications that may be facing your business, contact Osborne Rincon at (760) 777-9805. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. Supreme Court questions Biden student loan debt forgiveness 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 Sept. 9, 2020, which was after the IRS released Notice 2020-32 but before the CAA was signed, California enacted legislation, A.B. On April 29, 2021, California Gov. We understand you. 8 CAL. 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. Below are key provisions of the Immediate Action Agreement: Direct Relief to Individuals and Families. Yjk1NTlhZjUzMmI3ODFlN2VlZDM3OWQ5OWM1ZDgzYmM3NTgyMWVkZjViZTQy 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. We are excited to finally have clarity on California's PPP loan forgiveness stance. On April 29, 2021 Governor Newsom signed California A.B. In addition, the following provision is included in the agreement: The agreement restores previously enacted reductions, effective July 1st, for the University of California, California State University, the Judicial Branch, Child Support Services and for moderate-income housing. 80 has been satisfied to avoid being classified as an ineligible entity.. 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. 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

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