PPP loan forgiveness will not result in increased Ohio commercial activity taxes

Buckingham, Doolittle & Burroughs, LLC

Photo of Male accountant calculations and analyzing data with calculator, Financing, Accounting, Doing finance, Economy, Savings Banking Concept. Close up, business man or lawyer accountant working on accounts using a calculator and writing on documents while sitting on his desk in modern office.To provide some taxpayer relief in the wake of COVID-19, Ohio is excluding forgiven PPP loan amounts from Ohio’s commercial activity tax (CAT). While generally debt forgiveness is treated as taxable gross receipts for CAT purposes under R.C. 5751.01(F), forgiven PPP loans will be specifically excluded under recently passed H.B. 481. The Ohio General Assembly modified the definition of “gross receipts” for Ohio CAT purposes to specifically exclude from the CAT base all forgiven loans that are excluded from federal gross income under §1106(i) of the CARES Act. Accordingly, the forgiveness of PPP loan principal will be excluded from the tax base for federal income tax purposes and Ohio commercial activity tax.

Any amount excluded from gross income for federal income tax purposes is similarly excluded from the Ohio CAT.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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