(2) Applies the safe harbor to all employers treated as a single employer under the ERC aggregation rules. (1) Excludes the amount from its gross receipts for each calendar quarter in which gross receipts for that calendar quarter are relevant to determining eligibility to claim the ERC and An employer consistently applies this safe harbor if it: Under the safe harbor, an employer may exclude from its gross receipts the amount of PPP loan forgiveness, Shuttered Venue Operators Grants, and Restaurant Revitalization Fund grants in determining eligibility to claim the ERC for a calendar quarter, if the employer consistently applies this safe harbor in determining eligibility to claim the ERC. Without the safe harbor, the IRS noted, an employer might be precluded from claiming an ERC “solely because its participation in the relief program resulted in a temporary increase in gross receipts within the meaning of the tax law.” The safe harbor While the amounts received from the other coronavirus relief programs listed above already are excluded from an employer’s gross income, they must be included in its gross receipts unless the safe harbor is used, the IRS said.Īccording to the IRS, the safe harbor is needed because Congress intended that employers be able to participate in these other coronavirus economic relief programs and simultaneously claim the ERC, provided that the same wage dollars that are paid for or reimbursed with other relief program funds are not treated as qualified wages for purposes of the ERC. The way in which gross receipts are computed is important because an employer may be eligible for the ERC if its gross receipts for a calendar quarter decline by a certain percentage as compared to a prior calendar quarter. Restaurant Revitalization Fund grants under the American Rescue Plan Act, P.L.
Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, part of the Consolidated Appropriations Act, 2021, P.L.The forgiveness of Paycheck Protection Program (PPP) loans.The amounts that can be excluded in calculated gross receipts are: If we need additional information from you to verify if your business is eligible to deduct the expenses for California, we will reach out to you directly and let you know.The IRS on Tuesday issued a safe harbor that allows an employer to exclude certain amounts received from other coronavirus economic relief programs in determining whether it qualifies for the employee retention credit (ERC) based on a decline in gross receipts ( Rev. We are still waiting to hear if California will require a statement to be filed with the tax return showing whether a business meets the gross receipts test, so we are continuing to hold on filing any returns with PPP loans at this time. California Bill AB 80 relates only to whether the expenses are deductible on your California tax return. If you need help calculating or applying for your PPP loan forgiveness, please contact your tax professional. The calculation for how much of your PPP loan will be forgiven is entirely separate and applications for forgiveness should be submitted directly with your lender. Please note this is not the same as whether your PPP loan will be forgiven. Gross receipts from Q2, Q3, or Q4 of 2020 showed at least a 25% decline compared to Q1 2020. The gross receipts for 2020 as a whole had at least a 25% decline in gross receipts compared to 2019 as a wholeįor entities that were not in business during 2019, but were in operation on February 15, 2020: Q4 of 2020 has at least a 25% decline in gross receipts compared to Q4 2019.Q3 of 2020 has at least a 25% decline in gross receipts compared to Q3 2019.Q2 of 2020 has at least a 25% decline in gross receipts compared to Q2 2019.Q1 of 2020 has at least a 25% decline in gross receipts compared to Q1 2019.
To meet the gross receipts test, the answer to one of the following must be true: This is an all or nothing test, so if an entity meets the gross receipts test, the expenses are fully deductible for California, but if it doesn’t meet the test, none of the expenses paid for with forgiven loan proceeds will be deductible. The biggest difference between Federal treatment and California treatment is that California requires meeting a gross receipts test in order to be able to deduct the expenses. On April 29, 2021, the California Governor signed AB 80, which partially conforms to the Federal treatment of the deductibility of expenses paid for with forgiven PPP loan proceeds.
NEWSLETTERS CA PPP Conformity General Assembly Bill No.
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