2021-5: EIDL grants are taxable to California - Spidell

2021-5: EIDL grants are taxable to California


The FTB has just clarified that EIDL (Economic Injury Disaster Loan) advance grants are taxable to California. AB 1577 (Ch. 20-39) enacted a California exclusion for PPP loan forgiveness, essentially mirroring the federal exclusion adopted by the CARES Act. However, the federal exclusion for EIDL grants was enacted by the Consolidated Appropriations Act, which California has not conformed to. California would have to enact new legislation to conform to this exclusion.

Because the grants are subject to California tax, all expenses paid with the grants would be fully deductible.

We’re also getting questions as to whether other city and local grants received by businesses are subject to tax. Absent specific federal or state legislation, these grants are subject to both federal and California tax.

Subscribe to Spidell’s California Taxletter and get the latest information on PPP conformity and other issues. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.