Utah Paycheck Protection Loans Tax Guidelines
Learn about the tax implications of forgiven PPP loans in Utah, including deductions and taxable amounts for non-profit entities and federal loans unrelated to the PPP program. Stay informed on recent legislative changes affecting loan forgiveness taxation.
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Presentation Transcript
Paycheck Protection Loans Chairman John L. Valentine May 13, 2021 Utah State Tax Commission
Timeline March 27, 2020: CARES Act passed with PPP loan forgiveness as nontaxable. May 2, 2020: Notice 2020-32 issued by Treasury and IRS, announcing PPP loan forgiveness as nontaxable, while expenses paid with such loans are nondeductible. August 31, 2020: SB 6005 signed by Governor with PPP loan forgiveness as nontaxable to the extent that deductions are disallowed, consistent with Treasury s announcement. PPP Loan Changes November 19, 2020: Treasury and IRS issue a formal Revenue Ruling 2020-27 confirming that PPP loan forgiveness is nontaxable while expenses paid with such loans are nondeductible. (SB 6005 still consistent) December 27, 2020: President signs HR 133, reversing Treasury s position, allowing double dipping with both loan forgiveness as nontaxable and expenses paid with such loans as deductible.
PPL Forgiveness SB 6005 (2020)
Payroll costs Certain employee benefits related to healthcare Expenses covered by forgiven PPP loans are not Tax Deductible in Utah in Utah (but deductible federally) Interest on mortgage obligations Rent Utilities not Interest on any other existing debt obligations
Updated state tax form instructions with addendums and changes to line-by-line instructions related to federal changes. Tax Commission Response Created an online FAQ to assist taxpayers and preparers: https://incometax.utah.gov/whats-new. The Tax Commission website now includes PPP loan Utah taxability scenarios.
Q: What is the Utah tax status of forgiven PPP loan amounts that were used by non-profit entities to pay for expenses that are deductible against unrelated business income? Taxable in Utah? A: Generally taxable (addition to adjusted income, non-profit organizations are taxed in Utah on Utah unrelated business income).
Q: What is the Utah tax status of forgiven federal loans that are unrelated to the Paycheck Protection Program if the forgiven amounts are used to pay expenses that are deductible for federal tax purposes? Taxable in Utah? A: Generally taxable (if considered part of federal unadjusted income and are taxable in Utah).
Q: What is the 2020 Utah tax status for forgiven payments, interest, and loan fees associated with a PPP loan or similar loan if the taxpayer uses the forgiven amounts to pay for federally deductible expenses? Taxable in Utah? A: Generally taxable (must be reported as an addition to income on the taxpayer s Utah return).
Q: What is the Utah tax status of a PPP loan or similar loan that is not forgiven by the federal government but where the loan amount is paid by a grant from the state or a local government? Taxable in Utah? A: Generally NOT taxable (although the grant itself may be taxable).
Q: What is the Utah tax status of a PPP loan or similar loan that is not forgiven by the federal government if the taxpayer uses it to pay for federally deductible expenses? Taxable in Utah? A: Generally NOT taxable (as the loan is not forgiven).
Q: What is the Utah tax status of a forgiven PPP loan if the forgiven amount was used to pay deductible expenses in other states? Taxable in Utah? A: Generally taxable (as an addition to income, apportioned based on the taxpayer s business activities in the state).
