It is often said that there is no such thing as a free meal. While the Federal Government tried to give businesses a free lunch, the State of Utah still wants you to leave a tip.
In a surprise announcement from of Utah, the state will be treating any forgiveness of the Paycheck Protection Program (PPP) loans as taxable income in the year the loans are forgiven. This is out of the norm for the state, as Utah and the Federal government usually dance to the same tune when it comes to tax provisions.
For those of you keeping score at home, for Federal taxes:
- PPP Loan Forgiveness is non-taxable (per the original CARES Act introduced in Mar 2020)
- Expenses paid for with forgiven PPP loan proceeds are fully deductible (initially they were nondeductible, but was overturned in Dec 2020).
This is awesome for business as it essentially lets you double dip (and it’s not nearly as scandalous as George’s Double Dip in Seinfeld)!
However, Utah isn’t following suit. Instead, for Utah taxes:
- PPP Loan Forgiveness IS TAXABLE 1
- Expenses paid for with forgiven PPP loan proceeds are fully deductible.
Don’t plan on this changing as there hasn’t been any serious movement on the State level. What this means for you is that if your business received PPP forgiveness this year, plan on stashing away an extra 5% of that forgiveness amount come tax time.
What other tax or accounting questions do you have? Drop us a line at Tyler@SpecialtyBK.com and we can set up a time to chat!
1 – This is due to the Presidents signing of HR 133 in December 2020 along with the state’s SB 6005 signed by the governor in August 2020.