May 11, 2021 – Paycheck Protection Program Loan Update

Texas Franchise Tax PPP Forgiveness Exclusion

On May 8, 2021, Governor Abbott signed HB 1195, which excludes forgiven Paycheck Protection Program (“PPP”) loans from total revenue for Texas franchise tax purposes. To qualify for the exclusion, the forgiven PPP loan proceeds must not be included in a Taxpayer’s gross income for federal income tax purposes. The legislation applies immediately but only for Texas franchise tax reports originally due on or after January 1, 2021.

The revenue exclusion also applies to proceeds from other federal assistance programs including shuttered venue operator grants, microloan program recovery assistance grants, and restaurant revitalization fund grants.

Expenses paid with PPP loan or grant proceeds may be deducted as Cost of Goods Sold (“COGS”) or compensation for franchise tax purposes if those expenses are otherwise deductible as COGS or compensation in determining taxable margin

PPP Funding No Longer Available

Last week, the Small Business Administration (“SBA”) announced that available PPP loan funding had been exhausted. Due to the lack of available funding, the SBA has stopped accepting new applications from most lenders. The SBA has set aside approximately $6 billion in funding for previously submitted loans that are currently under review. In addition, approximately $8 billion of funding remains available for minority depository institutions and community development financial institutions.

For more information please visit the Small Business Administration’s website.

Whitley Penn is continually monitoring the tax and economic developments related to the coronavirus pandemic and will send out additional alerts in the future. In the interim, please contact your Whitley Penn tax advisor if you have any questions or require any additional information.

For more information regarding new developments in tax law, please click here to view our Tax Alerts on the Whitley Penn website.