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How to enter CA stimulus, PPP, & grants in Lacerte

SOLVEDby IntuitLacerte Tax469Updated February 18, 2022

This article will help you:

  • With the tax impacts of the Golden State Stimulus
  • Apply AB80 conformity for businesses
  • Understand common scenarios where income may only be taxable at the federal or state level, and how to enter them in Lacerte

California recently passed Assembly Bill 80 (AB80). In general, the bill conforms the state tax treatment for expenses paid with forgiven loans under the CARES Act or the Consolidated Appropriations Act for tax years beginning after 1/1/2019. 

Some businesses also received grants from the state that can be excluded from state income, but are taxable on the federal return. These include California Small Business COVID-19 Relief Grants, Venues Grants, and Microbusiness COVID-19 Relief Grants.

Exceptions to this federal conformity for PPP treatment include publicly traded companies and ineligible entities.

Income from SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, and Restaurant Revitalization Grants are still subject to California tax.

An entity is ineligible to deduct expenses paid with forgiven PPP funds if it didn’t have a 25% or greater reduction in gross receipts in any calendar quarter in 2020 compared to the same calendar quarter in 2019.

Note that funds received from EIDL aren’t taxable income, and aren’t subject to this 25% reduction test.

For individual returns

Where do I enter the Golden State Stimulus?

Golden State Stimulus (GSS) amounts received are not taxable to California, and unlike federal stimulus checks, were not an advanced payment of a tax credit. As such, the GSS doesn't need to be reported anywhere on the CA tax return.

The IRS hasn't issued specific guidance about including GSS payments as income for federal purposes. However, many practitioners believe that the GSS meets the conditions for the General Welfare Exclusion, and thus shouldn't be included on the federal tax return, either.

Lacerte doesn't have an input for the Golden State Stimulus. If you want to include the GSS payments as income on your client's federal return, enter them as you normally would other income (for example, using screen 14.1). Then, follow the steps below for grants to create a subtraction on the Schedule CA.

Where do I enter CA grants that are taxable on the 1040?

If the return has grants taxable to federal, but not the state:

  1. Enter the grant as income on the activity it belongs to.
    • For example, Screen 16, Business Income (Schedule C), in the Other income (Ctrl + E) field.
  2. Go to Screen 51.011, California Modifications.
  3. Scroll down to the Adjustments to Income section.
  4. Enter the grant amount as a negative number in Other subtractions (Ctrl + E), along with a description.

The adjustment will print on Sch CA, Section C, line 24z.

How do I apply A.B. 80 conformity?

Amounts you have entered in Expenses nondeductible to state related to a forgiven Paycheck Protection Program loan will still flow to the Schedule CA as an addition. You can enter this field on:

  • Screen 16, Business Income (Sch. C) in the Expenses section
  • Screen 18, Rental and Royalty Inc. (Sch. E) in the Expenses section
  • Schedule 19, Farm Income (Sch. F, 4835) in the Farm Expenses section

We introduced an informational diagnostic to remind you that your entry may need to be reduced or removed, depending on which type of funds it represents. Make sure to adjust your input to only include those items where California differs from federal law.

California has passed AB 80, which excludes EIDL Grants and PPP expenses (if receipts meet the 25% reduction threshold) from California income. An amount is present on the Schedule C screen for Expenses nondeductible to state related to a forgiven Paycheck Protection Program loan. If the amount present contains EIDL grants or PPP expenses (and receipts meet the 25% reduction threshold), these amounts should be removed from this input. Any amounts entered for SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, or Restaurant Revitalization Grants should remain as these subsidies/grants are still taxable for California Purposes.

For business returns

Relief grants that are taxable for federal purposes but excluded from California income should be reported as other deductions on the CA return. The instructions below assume you've already entered the grant as Other Income on the federal return.

Follow these steps to enter state relief grants:

Corporate:

  1. Go to Screen 47.011, California Adjustments.
  2. Scroll down to the California Subtractions section.
  3. Enter the amount and a description in Other deductions (Ctrl+E). This will flow to form 100, line 15.

S-Corporate:

  1. Go to Screen 20, Schedule K Income & Deductions.
  2. Open the Other income (loss) (Ctrl+E) field.
  3. Select K-1 Code H. Enter the grant amount as a negative number in the St. if diff. column.
    • This amount will be reported on the CA Schedule K, line 10b, column c.
  4. Go to Screen 44.011, California Adjustments.
  5. Enter the grant amount as a positive in Other additions (Ctrl+E).
    • This entry prevents the Schedule K adjustment from generating on 100S, line 7.
  6. Enter the grant amount as a positive in Other deductions (Ctrl+E).
    • This entry flows to the 100S, line 12.
  7. If the balance sheet is out of balance by the amount of the relief grant:
    • Go to Screen 32, Schedule M-2.
    • Scroll down to the Other Retained Earnings (Schedule L) section.
    • Enter the grant amount in Additions to other retained earnings.

Partnership:

  1. Go to Screen 38.011, California Schedule K.
  2. Scroll down to the California Conformity Adjustments section.
  3. Enter the amount and a description in Other California deductions (Ctrl+E). Your entry will flow to form 565, line 21, or form 568, Schedule B, line 21.

Follow these steps to apply AB 80:

We added a checkbox to the California Miscellaneous Information screen to allow you to apply AB 80 on a client-by-client basis for those who qualify. We also added a specific input for taxable SBA loans and other grants (excluding EIDL), so you can include this income on the California return without altering the nonconformity calculations on multi-state return files.

  1. Go to the California Miscellaneous Information screen:
    • Partnership screen 37.011
    • S-corporate screen 42.011
    • Corporate screen 45.011
  2. If the taxpayer qualifies, check the Apply AB 80 for PPP loan expenses (25% reduction threshold) box.

How does this change my return?

The amounts you've entered on the Income screen as expenses related to a PPP loan and EIDL and other assistance will no longer flow to the California return as other income.

Critical diagnostic ref. #55671, 55661, or 55667 may generate:

The checkbox to "Apply AB 80 for EIDL advance grant(s)" is checked and there is an amount present for EIDL advance on the Income screen. If the amount entered contains SBA subsidies paid on SBA loans, Shuttered Venue Operator Grants, Restaurant Revitalization Grants, or other taxable loans/subsidies/grants besides EIDL grants, these amounts should be entered for Taxable SBA and other loans/grants as these loans/subsidies/grants are taxable for California purposes.

To clear the diagnostic:

  1. Go to the screen for your tax type:
    • Partnership screen 38,
    • S-corporate screen 44, or
    • Corporate screen 47.
  2. Enter the non-EIDL amount of assistance in Taxable SBA and other loans/grants. Enter -1 to indicate zero, if applicable.

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