It occurred to me this has been info sought from the wrong source. It's not only the IRS to consider, when you want to debate this topic; it should include SSA, for SECA. And I'm tired of being asked to cite something. If the articles and the guidance on the web are not good enough, do your own research. That's how I stay current. You can, too.

For further clarity, I pulled up the SSA info for what is considered income for their purposes Here is their table (it is being kept updated as of now):

https://secure.ssa.gov/apps10/reference.nsf/lnx/07232021123646PM

The question remains, what is the citation source for all the comments and articles, that these grants to businesses are to be treated as business income and therefore, falling to the bottom line, which means subject to SECA in case of specific entities.

The answer for the IRS, for what is Gross Business Income, which would be in the bottom line affecting Net and taxable, is found in IRS section 61, of course. Read it. All of it.

One issue for a business (regardless of the entity type) comes down to the comment seen time and time again in the guidance, the articles, the research on these developing topics: The IRS has ruled: "In general, payments to businesses do not qualify under the general welfare exclusion because the payments are not based on individual or family need. See Rev. Rul. 2005-46; Notice 2003-18."

As to the issue of disaster and recovery, or gift, this is well covered here:

https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/disaster-grants-to-businesses...

No need to copy it to this forum. Please read it for yourself. It references "Disaster Grants To Businesses Aren't Excludable From Gross Income, IRS Rules.", from JUL. 1, 2005; Citations: Rev. Rul. 2005-46; 2005-2 C.B. 120. That's pretty old, but I don't find it overturned.

And since this topic was started during CARES Act ERF (Economic Recovery Funds) and now we have CAA Act ARP (America Rescue Plan) funds being disbursed, it's been mentioned more than once that you need to know the specifics of the taxpayer's grant, the agency issuing the grant, the purposes of the grant, and whether there is any Fed or State specific exclusion from Gross Business Income as contributing to taxable income for that business.

That's because a lot of people are still getting it wrong. Just because it was issued during coronavirus days, doesn't make it a CARES grant. Example: In the SSA table, they refer to the California Golden State Stimulus, and the Business Grants are not part of the GSS:

"The Golden State Stimulus is part of Governor Newsom’s California Comeback Plan, the historic $100 billion plan to stimulate the economy and address the state’s most pressing challenges. Other elements of immediate relief in the plan include:

• Largest small businesses relief program in the nation, investing $4 billion in direct grants to California’s small businesses, on top of a massive $6.2 billion tax cut.
• Largest statewide renter assistance in the country, providing $5.2 billion to help low-income renters pay 100 percent of their back-rent, and an additional $2 billion for past-due water and utility bills."

For SSA, the GSS to individuals won't be counted as income towards any limit, such as SSDI reductions. The CA stimulus grant your taxpayer's small business gets through the "Comeback Plan" isn't under the GSS, because the GSS is the part that applies to individuals.

I really hope this helps those of you who need citation source.

Have fun.