HEGAR & GEREN: Certain COVID-Related Loans Forgiven by Federal Govt. Won't be Considered Income for Franchise Tax Reports

Texas businesses facing taxes on COVID loans that kept employees on payrolls during pandemic receive relief

Texas Insider Report: AUSTIN, Texas – "I’m proud the Comptroller's Office was able to assist the Legislature and Gov. Abbott by acting swiftly to prevent Texas businesses from facing taxes on COVID relief dollars that kept employees on payrolls and helped prevent further economic damage during the worst of the pandemic,” said Texas Comptroller Glenn Hegar, after a bill related to the treatment of such loan dollars was passed by the Legislature and signed by Gov. Abbott.

As a result, Texas businesses that have received COVID-related relief loans, and have subsequently had them forgiven by the federal government, do not have to report those loan proceeds as income on their 2021 Franchise Tax Reports.

House Bill 1195, authored by State Rep. Charlie Geren of Ft. Worth (right,) applies to franchise tax reports originally due on or after Jan. 1, 2021.

Forgiven loan proceeds from certain federal relief programs are not included in total revenue. Furthermore, expenses paid using those loan proceeds may be claimed as a cost of goods sold or as compensation, if eligible under current law, in the franchise tax calculation.

In 2020 and 2021, Congress passed a number of COVID-related relief packages, including the:
 
  • CARES Act,
  • the Paycheck Protection Program, and
  • the American Rescue Plan.
The federal government will forgive loans granted to businesses included in these laws, without requiring repayment if they meet certain requirements.

“Under the law prior to the signing of HB 1195, forgiven loan proceeds generally were included in an entity’s total revenue,” Hegar said. "This inclusion could increase the amount of franchise tax an entity owed.

"I’m proud my agency was able to assist the Legislature and Governor Abbott in acting swiftly to prevent Texas businesses from facing taxes on relief dollars that kept employees on payrolls and helped prevent further economic damage during the worst of the pandemic.
Comptroller Glenn Hegar by N/A is licensed under N/A
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