08 Feb 2021 PPP Taxable in Utah and Other States
The federal government waived taxes on PPP loans, but Utah requires businesses to pay taxes on any portions of PPP loans that have been forgiven. Utah along with 20 other states, typically conforms with the Internal Revenue Code. However, due to the eight-month lagtime in the Federal legislation, Utah determined they will tax any part of the PPP Loan that is forgiven.
Typically, when a business receives loan forgiveness, it is treated as taxable income under Section 265 IRC. However, under the CARES Act, this income was treated as nontaxable for federal income tax purposes. Since this income was nontaxable, the Treasury Department ruled that expenses paid with PPP loans were not deductible.
For Utah state income tax purposes, PPP expenses are fully deductible, while PPP forgiven loans will be added back to taxable income in the year and to the extent they are forgiven. Learn more on the Utah State Tax Commission Website.
At the time of this writing, many states have not yet issued specific guidance on PPP taxation.
In Arizona, Colorado, Idaho, Texas, and many other states, specific guidance has not been issued on the taxability of PPP loan forgiveness or the deductibility of expenses paid with PPP loans. Please check with your Haynie CPA concerning your state and local taxes on PPP loans.