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Taxability of state and local government COVID grants

11Buster
Level 3

Does anyone have any updated reliable information regarding the above as there seems to be a lot of differing opinions out the there as to what is taxable under current tax law for fed and CA?

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qbteachmt
Level 15

"and most likely on state return"

See if your client is on this list:

https://static.business.ca.gov/wp-content/uploads/2021/09/SBCRG-Final-Awards-List-as-of-9-17-21.xlsx

 

If so, that's the grant they got. The earlier link I gave:

https://gpwcpas.com/grant-credit-loan-and-other-relief-comparison-chart/

 

Tells you:

These grants are taxable for Federal.
Any expenses paid with this grant are deductible.

These grants are not taxable for California.

 

Here is a Spidell forum post:

https://www.caltax.com/forums/topic/is-ca-grant-taxable-lendistry/

This link has three Funding groupings: Financial Assistance, Loans and Grants:

https://www.sco.ca.gov/covid19ReliefAndAssistanceSM.html

Here is the link for Kings County:

https://www.countyofkings.com/home/showpublisheddocument/24041/637316316900500000

Here is the grant notice flyer:

https://www.countyofkings.com/home/showpublisheddocument/24045/637316343600670000

Here is the notice of availability:

https://www.countyofkings.com/home/showpublisheddocument/24041/637316316900500000

 

And: "Lendistry has been designated by the state to act as the intermediary for the Program to disburse the grant funds."

https://www.grants.ca.gov/grants/california-small-business-covid-19-relief-grant-program-round-5/

 

https://hanfordsentinel.com/news/lemoore-offers-small-business-assistance-grant/article_6f4b945d-a41...

 

All of this helps you know what sort of grant they got and what it is for and how it is treated, because now you have the sources and the facts.

 

 

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qbteachmt
Level 15

There hasn't been a lot of change, since the grants were released in 2020. It really depends on the specific grant and who issued it.

I bookmarked this:

https://gpwcpas.com/grant-credit-loan-and-other-relief-comparison-chart/

 

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11Buster
Level 3

This is fine as same article I had read, however, we have clients who received "COVID-related" local (city) grant money here in CA, so confusing, as usual.

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qbteachmt
Level 15

"we have clients"

Business? Individual? School? Medical professional?

"who received "COVID-related" local (city) grant money here in CA,"

City grant funds through the State? What for? The client applied, and the city granted, and all of this is Named, and Specified. That's how this works and has worked, all this time.

Example: Medical professionals got grants for PPE.

Schools got grants for HVAC.

Your CA client might be getting the Golden State payment.

You need to get, and/or give us, the missing details. Then you would know what to search on. In general, as you likely have already found, these are Taxable unless you can find the specific exclusion.

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qbteachmt
Level 15

Here is the explanation of the most common grant under what you asked, given that your client has CARES grant and not an ARP:

https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-government...

 

And here's what the IRS tells you:

https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

 

And here are links for some of the other grants:

https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-government...

 

For example, the timeliness of SBA grants or USDA grants are not CARES grants, but people get the confused.

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11Buster
Level 3

Thanks but unfortunately I have already viewed these links as they really say nothing about receiving local COVID related grant money.

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qbteachmt
Level 15

"Thanks but unfortunately I have already viewed these links as they really say nothing about receiving local COVID related grant money."

Yes, they do. They specifically cover the $150 billion given to the States to give through their various governmental departments and organizations, to businesses. They state everything.

And you can always read the CARES Act yourself.

And you still haven't told us what this grant was for, nor what sort of entity applied for and received it. That means you keep telling us the resources are not good enough, but you never state Why it isn't good enough or what you can't find about your specific grantee.

 

We really cannot help without more details.

 

For instance, I have had this website bookmarked for this very reason:

https://commerce.mt.gov/Coronavirus-Relief/Awarded-Grants

 

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qbteachmt
Level 15

Here is a copy of some specific text found in the IRS links you've been given:

Q. If governments use Fund payments as described in the Fund Guidance to establish a grant program to support businesses, would those funds be considered gross income taxable to a business receiving the grant under the Internal Revenue Code (Code)?

A. Yes. The receipt of a government grant by a business generally is not excluded from the business's gross income under the Code and therefore is taxable.

 

It doesn't get plainer than this. But, again, some of the purposes are tax exempt explicitly, such as the SVO (Shuttered Venue Operators). These are distributed and administered by SBA, and are non-taxable grants. RRF (Restaurant Revitalization Fund) is also administered by SBA, and is non-taxable.

 

Which is why I asked who issued the grant. You stated City and County, but is that City? County? City Health Department? County Health Department? Public Works, such as Water grant?

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11Buster
Level 3

They are funds received by both the city and county in which the business is situated under an allocation form the CARES Act to the "City of Lemoore/Kings County COVID-19 Small Business Assistance Program.

 

Per what you have provided below, appears fully taxable to federal and most likely on state return.

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qbteachmt
Level 15

"and most likely on state return"

See if your client is on this list:

https://static.business.ca.gov/wp-content/uploads/2021/09/SBCRG-Final-Awards-List-as-of-9-17-21.xlsx

 

If so, that's the grant they got. The earlier link I gave:

https://gpwcpas.com/grant-credit-loan-and-other-relief-comparison-chart/

 

Tells you:

These grants are taxable for Federal.
Any expenses paid with this grant are deductible.

These grants are not taxable for California.

 

Here is a Spidell forum post:

https://www.caltax.com/forums/topic/is-ca-grant-taxable-lendistry/

This link has three Funding groupings: Financial Assistance, Loans and Grants:

https://www.sco.ca.gov/covid19ReliefAndAssistanceSM.html

Here is the link for Kings County:

https://www.countyofkings.com/home/showpublisheddocument/24041/637316316900500000

Here is the grant notice flyer:

https://www.countyofkings.com/home/showpublisheddocument/24045/637316343600670000

Here is the notice of availability:

https://www.countyofkings.com/home/showpublisheddocument/24041/637316316900500000

 

And: "Lendistry has been designated by the state to act as the intermediary for the Program to disburse the grant funds."

https://www.grants.ca.gov/grants/california-small-business-covid-19-relief-grant-program-round-5/

 

https://hanfordsentinel.com/news/lemoore-offers-small-business-assistance-grant/article_6f4b945d-a41...

 

All of this helps you know what sort of grant they got and what it is for and how it is treated, because now you have the sources and the facts.

 

 

*******************************
"Level Up" is a gaming function, not a real life function.

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11Buster
Level 3

As mentioned previously, these are grants given to our local city businesses by both the city and county in which they are situated.  The  funds must be spent on, similar to PPP requirements, payroll, unpaid utilities, inventory or supplies required to safely reopen their business, etc.

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TaxGuyBill
Level 15

@11Buster wrote:

we have clients who received "COVID-related" local (city) grant money here in CA,


 

That is taxable on the Federal return.  Grants are taxable unless they fall under a SPECIFICALLY exempted program, such as PPP, EIDL, and Shuttered Venue grants. 

Not sure which of the other "COVID-related" programs yours fall under, but here is an example that shows they are taxable:

https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

 

As for California, I have no idea.