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Tax Impact of PPP Loan Forgiveness in Your State

Recently, the American Institute of CPAs (AICPA), published a reference chart on the state tax treatment of Paycheck Protection Program (PPP) loan forgiveness as taxable income as well as whether a state allows expenses paid with PPP loan amounts to be deducted as provided for federal tax purposes by the Consolidated Appropriations Act, 2021 (CAA).

Below please find the current guidance from Delaware, Florida, New Jersey and Pennsylvania.

Delaware

  • Taxability of CARES Act PPP loan forgiveness: Specific guidance has not been issued.
  • Deductibility of expenses paid with PPP loan proceeds as provided by the CAA: Specific guidance has not been issued.

Florida*

  • Taxability of CARES Act PPP loan forgiveness: Specific guidance has not been issued.
  • Deductibility of expenses paid with PPP loan proceeds as provided by the CAA: Specific guidance has not been issued.

New Jersey

  • Taxability of CARES Act PPP loan forgiveness: Not taxable (if introduced legislation is enacted). Assembly, No. 4186 was introduced on June 1, 2020. The bill provides that a loan forgiven pursuant to Sec. 1106 of the CARES Act shall not be included in the calculation of income subject to tax.
  • Deductibility of expenses paid with PPP loan proceeds as provided by the CAA: Deductible (if introduced legislation is enacted). Assembly, No. 5149 was introduced on Dec. 14, 2020 but is not yet enacted. The bill would allow a deduction from tax of certain expenses when a taxpayer’s federal PPP loan is forgiven and excludes those forgiven loans from gross income tax.

Pennsylvania

  • Taxability of CARES Act PPP loan forgiveness: Loan forgiveness is not taxable.
  • Deductibility of expenses paid with PPP loan proceeds as provided by the CAA: Forgivable expenses paid with PPP loan proceeds are deductible.

*While 41 states impose a personal income tax, seven states do not (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming).

Please note: States are continuously updating their information as it pertains to how taxes will be determined in conjunction with the PPP. We recommend that you consult your tax advisor to make certain you have the most up-to-date information in order for you to make the best decision based on your individual situation.

Questions?

If you have questions about states that are not listed in this article, or your current situation, please contact us at any time.

DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.