mhkdgal
Level 4
‎03-09-2022 05:02 PM

Does the CA Form 4197 ONLY apply to cannabis businesses?   Spidell's CA Taxletter makes it sound like it applies to any business that had a PPP loan forgiven.   That would apply to a lot of CA businesses.  I completed an S-corp return for a client that did receive PPP loan forgiveness, and Lacerte did not generate the Form 4197.   See below from Spidell...

Did your client receive COVID-19–related benefits?

If so, you may have one more new form to fill out.

By Sandy Weiner, J.D.

Beginning with the 2021 tax year, taxpayers that benefited from the California exclusion from gross income from various loans or grants must complete and file Form FTB 4197, Information on Tax Expenditure Items, as an attachment to their tax return.

Under California law, the FTB is mandated to collect specified information regarding all new tax expenditures to determine whether these new tax exemptions are meeting their stated goals. Form FTB 4197 is part of this data collection effort.1

While no one likes to file one more form, the good news is that the information required is extremely simple.

Who must file?

New for the 2021 tax year, taxpayers who “benefited” from the following loans and/or grants must complete Form FTB 4197:

  • Paycheck Protection Program loan forgiveness (Code PPP);
  • “Other” loan forgiveness provided under Sec. 1109 of the CARES Act (essentially PPP loan forgiveness provided under the authority of the U.S. Department of Treasury, the Farm Credit Administration, and specified other federal agencies other than the Small Business Administration) (Code OLF); and
  • EIDL advance grants (Code EIDL).

As before, taxpayers operating a cannabis business must also complete Form 4197.

Although nowhere on the form does it define “benefited,” we believe taxpayers that claimed the exclusion must complete the form, even if they were unable to deduct expenses paid for with the forgiven PPP loan amounts.

 

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