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what are preparers doing with state and local grants received. taxable ? non taxable ?

mpasseck
Level 2
 
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BobKamman
Level 14

Code Section 61, "Except as otherwise provided in this subtitle, gross income means all income from whatever source derived..."

So look for an exception that Congress has enacted.  State and local governments can't except their "grants" from federal tax.  

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BobKamman
Level 14

For example?

 

IRonMaN
Level 15

Yes and no.  Some are taxable and some aren't.  Kinda depends on where the money is coming from.

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mpasseck
Level 2

does anyone have some method for determining which are taxable and which are not ?  seems like both of my update seminars glossed very quickly over this issue.

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BobKamman
Level 14

Code Section 61, "Except as otherwise provided in this subtitle, gross income means all income from whatever source derived..."

So look for an exception that Congress has enacted.  State and local governments can't except their "grants" from federal tax.  

View solution in original post

qbteachmt
Level 15

Have you read the IRS guidance:

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

I assume you are asking about State and Local grants because of the Cares funding. Examples include Mental Health service provider given a grant for PPE (business adaptation grant); a theater given a grant for rent and overhead to keep their building (live entertainment grant); towns getting county grants for Ag; food bank/food pantry; etc.

I've had this webpage open for nearly a year, now:

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

 

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qbteachmt
Level 15

Oh, here:

"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. However, a grant made by the government of a federally recognized Indian tribe to a member to expand an Indian-owned business on or near reservations is excluded from the member's gross income under the general welfare exclusion."

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