Bills › 89th General Assembly
Relating to state deductibility of federal paycheck protection program loan forgiveness
Topics:Taxes
Where it is now
- Done: IntroducedFebruary 1, 2021
- Done: SubcommitteeFebruary 8, 2021
- Stopped: Senate committeeDied when the General Assembly ended
- Next: Passes the Senate
- Next: House committee
- Next: Passes the House
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2022 session adjourned on May 24, 2022, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
This bill relates to the federal paycheck protection program. Under current law, for the tax year 2020 and later, Iowa law fully conforms with the federal treatment of forgiven paycheck protection program loans and excludes such amounts from net income and allows certain deductions for business expenses paid using those loans. For fiscal-year filers who received paycheck protection program loans during the 2019 tax year, current law excludes such amounts from net income, but does not allow certain deductions for business expenses paid using those loans.
Read the full explanation
The bill fully conforms with federal law for those fiscal-year filers who previously were excluded from such conformity and allows such filers to take business expense deductions using federal paycheck protection program loan proceeds that were forgiven.
Senate subcommittee
Named February 8, 2021. It hasn’t reported yet.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill expands a tax exemption to include businesses that do not use a calendar year but received forgiven Paycheck Protection Program loans in 2019. It is projected to reduce net General Fund revenue by $5.3 million in fiscal year 2021.2
Read the fiscal note
Description
Senate File 196 expands an existing tax preference available for the income and deductions associated with a forgiven federal Paycheck Protection Program (PPP) loan to include taxpayers who received a PPP loan within the taxpayer’s 2019 tax year (TY).
Background
Existing Iowa law provides an income tax exemption and associated expense deduction for forgiven federal PPP loans for tax years beginning on or after January 1, 2020 (TY 2020). This change extends the same benefit to taxpayers whose tax year is not the calendar year and who received PPP income in TY 2019.
Assumptions
The Department of Revenue estimates that Iowa businesses that do not have a tax year that coincides with a calendar year have a total of $107.8 million in net PPP income that will be subject to Iowa income tax under existing law. The net PPP income amounts, average marginal tax rates, and income tax reductions assumptions are shown in the following table. It is anticipated that taxpayers will file returns or amended returns for TY 2019 prior to the end of FY 2021.
Fiscal Impact
Expanding the income tax exemption to include businesses with a tax year that is not a calendar year is projected to reduce net General Fund revenue by $5.3 million in FY 2021.PPP Net Marginal Tax
Taxpayer Type Income Tax Rate Reduction
Nonprofits 19.7$ 0.0% 0.0$ C Corporations 43.2$ 6.40% 2.8$ S Corps & Partnerships 38.2$ 5.58% 2.1$ Individuals 6.7$ 5.35% 0.4$ 107.8$ 5.3$
Paycheck Protection Program Tax Exemption
Projected General Fund Revenue Reduction
Dollars in Millions
Source
- Department of Revenue
- Income Tax, Business Deductions for Paycheck Protection Program · February 15, 2021
Lobbying
5 for · 0 against · 5 undecided · Who →
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