Jan. 18, 2021
On behalf of the Virginia Society of Certified Public Accountants (VSCPA), I would like to draw your attention to the important tax conformity legislation currently under consideration by the General Assembly. Specifically, I ask that you support Sen. Howell's tax conformity bill (SB 1146) as it was passed in the Senate, which includes the income exclusion for forgiven PPP loans and expense deductibility of up to $100,000 for PPP loans and Rebuild Virginia grants.
Much of the discussion about conformity this year has dealt with whether to allow the deductibility of expenses paid for with PPP funds. As you consider this in your deliberations, I’d like to draw your attention to a few important points:
- When Congress passed the CARES Act in March of 2020, it was their intent to both exclude forgiven loans from income AND to allow the deductibility of expenses paid for with PPP funds. However, U.S. Treasury interpreted the language not to allow both, which was consistent with prior law and existing tax policy for similar situations. As a result, every subsequent version of additional stimulus legislation included provisions to allow taxpayers to both exclude the income from taxation and maintain the expense deductibility.
- But for the PPP loan program, many Virginia businesses would have been forced to lay off more employees and/or close entirely. The PPP program allowed these businesses to continue to pay their employees, which allowed Virginia to collect both payroll and withholding taxes. In addition, the availability of PPP funds also likely reduced the number of Virginia taxpayers who otherwise would have needed to file for unemployment.
The VSCPA has joined with a growing group of the business and association communities in support of the Senate’s version of tax conformity legislation and we now ask that you support this version of the legislation as well. Now that tax season has officially begun, it is critically important for the General Assembly to come together to avoid further delay in passage of conformity legislation. Virginia taxpayers cannot adequately file their state taxes each year until the General Assembly addresses conformity. Any additional delay in the effective date of this critical legislation will have cascading effects that will increase the complexity, delay and, potentially, cost of filing tax returns. A speedy resolution to this issue and inclusion of an emergency clause will greatly ease such burdens, allowing tax returns to be filed more quickly. This will allow Virginia to more quickly collect revenue, taxpayers due refunds to more quickly receive their checks, and limit the number of returns needing to be amended.
Thank you for your time and consideration.
Emily Walker, CAE
Vice President, Advocacy