Some states impose canceled PPP loans
The PPP was designed to help small businesses, including those in the cleaning industry, stay afloat during the coronavirus pandemic. This was part of the federal Coronavirus Aid, Relief, and Economic Security (CARES) law and allowed borrowers up to US $ 10 million from private lenders without collateral, personal collateral, or fees. In the first week, approximately 600,000 businesses received more than $ 5 million through 3,000 lenders. The program is scheduled to end on May 31, 2021.
In October, the Small Business Administration (SBA) began processing loan forgiveness requests for businesses that encountered eligible conditions. Businesses that met all of the requirements could end up with their entire P3 loan canceled and have no federal income tax owed.
Taylor’s English partner Christina Moore points out that some states continue to make changes to the tax treatment of PPP loans. For example, California changed course on April 28, when Gov. Gavin Newsom signed legislation that would allow most California businesses that received a canceled PPP loan to avoid taxes on canceled amounts if they can show a reduction of at least 25% in profits for at least one quarter due to the pandemic. On March 15, Virginia signed the law a bill which excludes canceled PPP loans from taxable income. This new legislation also offers specific deductions of up to $ 100,000 for expenses paid through canceled PPP loans.
However, Forbes Reports that there are nine nine states currently planning to exempt from tax PPP loans including California, Florida, Hawaii, Minnesota, Nevada, North Carolina, Texas, Utah, and Vermont.
Legal experts advise business owners to familiarize themselves with their state’s position on PPP loans and to follow any proposed legislation on this matter. Additionally, experts advise companies to understand their tax liability and plan to have funds available.