Texas Exempts Forgiven PPP Loans and Other COVID-19 Related Grants From Franchise Tax

Texas Exempts Forgiven PPP Loans and Other COVID-19 Related Grants From Franchise Tax

Businesses will not have to pay Texas franchise tax on forgiven PPP loan amounts and other COVID-19 related grant proceeds. They may exclude qualifying loan and grant proceeds from total revenue on franchise tax reports originally due on or after January 1, 2021.

Qualifying Loan and Grant Proceeds

Proceeds from the following may be excluded, if excluded from income for federal tax purposes:

• a loan or grant under the under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), as amended by the Paycheck Protection Program Flexibility Act of 2020 (116-142), the Consolidated Appropriations Act, 2021 (P.L. 116-260), the American Rescue Plan Act of 2021 (P.L. 117-2), and the PPP Extension Act of 2021 (P.L. 117-6);
• a shuttered venue operator grant under the Consolidated Appropriations Act, 2021, as amended by the American Rescue Plan Act of 2021;
• microloan program recovery assistance under the Consolidated Appropriations Act, 2021; and
• a grant from the restaurant revitalization fund established under the American Rescue Plan Act of 2021.

Deductions for Expenses Paid for With Loan or Grant Proceeds

Businesses may include otherwise deductible expenses paid for with qualifying loan or grant proceeds when determining their deductions for:

• cost of goods sold; or
• compensation.

H.B. 1195, Laws 2021, effective May 8, 2021, and applicable as noted

About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.