State & Local Tax Impacts of COVID-19 for Texas – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Jun 11, 2021

Information current as of May 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Texas

  • Texas clarified that federal law excluding forgiven PPP loan amounts from gross income for tax purposes doesn’t apply to the Texas franchise tax. Because of Texas’ January 1, 2007, federal conformity date, Texas must enact legislation to exclude PPP loan forgiveness from total revenue. Regardless of whether forgiven PPP loan amounts are exempt from tax, qualifying expenses can be deducted as cost of goods sold or compensation.
    • Texas Comptroller, Tax Policy News; February 15, 2021.
  • Texas legislation exempts forgiven PPP loans from being included in total revenue for purposes of the Texas franchise tax. Other federal COVID-19-related loans and grants excluded from taxable total revenue include emergency Economic Injury Disaster Loans (EIDL) and targeted EIDL advances, small business loan payments, grants for shuttered venue operators, microloan program recovery assistance, and restaurant revitalization grants, but only if these amounts are excluded from federal taxable income. Business expenses paid with such loan or grant proceeds can be deducted as cost of goods sold (COGS) or compensation in determining taxable margin, to the extent the expense is otherwise includable as a COGS or compensation.
    • Texas H.B. 1195, effective for franchise tax reports originally due on or after January 1, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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