Thirty-three states and the District of Columbia follow the federal government in fully excluding forgiven PPP loans from taxable income while allowing expenses paid for using those loans to remain deductible.Twenty states and the District of Columbia follow the CARES Act in increasing the net interest deduction to 50 percent of modified income for tax years 20.Only 12 states limit NOL carryforwards such that they may not reduce taxable income by more than a specified percentage per year in tax years 2018, 2019, and 2020.Five additional states offer state-defined NOL carrybacks of two or three years. As of March 29, 2021, five states follow the CARES Act in allowing NOLs to be carried back up to five years for tax years 2018, 2019, and 2020.The American Rescue Plan Act (ARPA) excluded from taxable income, for qualifying taxpayers, the first $10,200 in unemployment compensation (UC) benefits received in 2020.Under the CARES Act’s Paycheck Protection Program (PPP), businesses that receive loan forgiveness are not required to include the discharged indebtedness in taxable income expenses paid for using forgiven PPP loans are deductible as usual.The Coronavirus Aid, Relief, and Economic Security (CARES) Act made temporary structural changes to the federal tax code to enhance business liquidity, including more generous treatment of net operating losses and business interest expenses. Subscribe to get insights from our trusted experts delivered straight to your inbox. Stay informed on the tax policies impacting you.
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