PPP Taxable in Utah and Other States

PPP Taxable in Utah and Other States

The federal government waived taxes on PPP loans, but Utah requires businesses to pay taxes in most situations. Specifically, it is taxable if the PPP/Grant money was used to pay for deductible expenses in addition to being forgiven. If the forgiven money was taken as a draw, or used to pay down debt principal, or left in your bank account, then it is not taxable in Utah.

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 PPP Loans in these situations.

Federal ruling

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.

Other States

As of March 25, 2021, Tax Foundation has provided a list of State PPP Loan taxation. Please check with your Haynie CPA concerning your state and local taxes on PPP loans.