TX passes HB 1195 making forgiveness of PPP loans non taxable for the Texas Franchise Tax

Texas makes PPP Forgiveness non taxable for Franchise Tax

The Texas legislature just passed on the morning of April 23, 2021, HB 1195, making the forgiveness of PPP loans non taxable for the Texas Franchise Tax. The bill originated in the House and, initially, only included the Paycheck Protection Program. When it went to the Senate, the bill was amended to specifically include the Restaurant Revitalization Fund. I believe it will also include Employee Retention Credit funds as well, but I can’t confirm this yet.

The bill was passed by more than 2/3 of both the Texas House and the Texas Senate, so the bill becomes law immediately and there’s no need to wait for Gov. Abbott to sign the legislation. We can watch for updates from the Texas Comptroller about this, how to implement it, what to do about returns already filed, and related items. In the meantime, businesses that are subject to the Franchise Tax should consult with your tax professional to update any estimates that included these funds as part of taxable gross receipts or limited their payroll expenses when calculating payroll or Cost of Goods Sold deductions.

The text of the bill can be found here: https://capitol.texas.gov/BillLookup/History.aspx?LegSess=87R&Bill=HB1195

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