Certain loans forgiven by Federal Government

Texas businesses that had COVID-related relief loans forgiven by the federal government do not have to report those loan proceeds as income on their 2021 franchise tax reports, the Texas Comptroller’s office announced today after a bill related to the treatment of those loan dollars was passed by the Legislature and signed by Gov. Abbott.

House Bill (HB) 1195 applies to franchise tax reports originally due on or after Jan. 1, 2021. Forgiven loan proceeds from certain federal relief programs are not included in total revenue. Furthermore, expenses paid using those loan proceeds may be claimed as a cost of goods sold or as compensation, if eligible under current law, in the franchise tax calculation.

In 2020 and 2021, Congress passed a number of COVID-related relief packages, including the CARES Act, the Paycheck Protection Program and the American Rescue Plan. The federal government will forgive loans granted to businesses included in these laws, without requiring repayment, if they meet certain requirements.

“Under the law prior to the signing of HB 1195, forgiven loan proceeds generally were included in an entity’s total revenue,” Texas Comptroller Glenn Hegar said.