General Assembly Approves $100,000 Deduction for PPP Loans

Date: March 03, 2021

The last day of the General Assembly Session, lawmakers approved SB 1146 and HB 1935 which conforms Virginia’s tax code to federal tax provision from the taxable year 2020. The Senate passed the legislation unanimously while the House voted 95 Yes – 2 No. 

The biggest issue of the legislation was how Virginia would treat the Paycheck Protection Program (PPP) and Rebuild Virginia loans. The House and the Senate each had their own version of Tax Conformity bills this year. Both bills allowed for a business that received a PPP loan to exclude the forgiven loan amount from their income, however each created a cap for maximum deduction to cover one’s business expenses related to their PPP Loans. The Senate version created a $100,000 cap, while the House version only allowed one to deduct up to $25,000. This issue came down to the end, where the conference committee ultimately decided to go with the Senate version of a $100,000 deduction cap.

After this legislation is signed by the Governor, businesses will be eligible to deduct up to $100,000 of business expenses related to the PPP loan or Rebuild Virginia Loan. While we initially advocated for full deductibility, it was clear at the beginning Session that was not on the table. The $100,000 cap will allow full deductibility for 80% of Virginia Small Businesses that received a PPP loan. Rebuild Virginia grants will receive the same tax treatment.

Here are the main components of the legislation:

  • Excludes PPP loan forgiveness amount from income
  • Provides up to $100,000 in deductions for business expenses paid with PPP money
  • Provides same tax treatment for Rebuild Virginia grants
  • Goes into effect immediately upon Governor’s signature to provide timely filing for individuals & businesses
  • Provides over 80% of loan recipients FULL deductibility     

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