Section 278(b) of Division N of the federal Consolidated Appropriations Act, 2021, enacted on December 27, 2020, provides in part that certain Economic Injury Disaster Loan (EIDL) Grants under CARES Act section 1110(e) and Targeted EIDL Advances under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Title III of Division N of the federal Consolidated Appropriations Act, 2021) shall not be included in the recipient’s gross income, and no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of that income exclusion.
Application to Iowa: For any tax year beginning on or after January 1, 2020, Iowa is conformed with the income exclusion for certain EIDL grants and Targeted EIDL Advances, as well the other provisions of section 278(b). In other words, for tax year 2020 and beyond, a taxpayer’s income tax treatment of EIDL Grants and Targeted EIDL Advances and related expenses should be the same on their Iowa tax return as it is on their federal tax return.
For tax year 2019 (fiscal-year filers), Iowa does not conform with section 278(b), so to the extent a taxpayer received an EIDL grant during a tax year beginning before January 1, 2020, those grants must be included in the taxpayer’s Iowa income to the same extent they would have been included in federal income prior to the enactment of the Consolidated Appropriations Act, 2021, and related expenses may only be deducted in computing Iowa income to the same extent they would have been deductible prior to the enactment of the Consolidated Appropriations Act, 2021. These required nonconformity adjustments, if any, should be made on the taxpayer’s IA 101 Nonconformity Adjustments form, line 12, for tax year 2019.
Section 278(c) of Division N of the federal Consolidated Appropriations Act, 2021, enacted on December 27, 2020, provides in part that subsidies received for certain covered loan payments under CARES Act section 1112(c) shall not be included in the recipient’s gross income, and no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of that income exclusion.
Application to Iowa: For any tax year beginning on or after January 1, 2020, Iowa is conformed with the income exclusion for subsidies received for certain covered loan payments under CARES Act section 1112(c) and the other provisions of section 278(c) of Division N. In other words, for tax year 2020 and beyond, a taxpayer’s income tax treatment of subsidies received for certain covered loan payments under CARES Act section 1112(c) and related expenses should be the same on their Iowa tax return as it is on their federal tax return.
For tax year 2019 (fiscal-year filers), Iowa does not conform with section 278(c), so to the extent a taxpayer received a subsidy for certain covered loan payments under CARES Act section 1112(c) during a tax year beginning before January 1, 2020, those subsidies must be included in the taxpayer’s Iowa income to the same extent they would have been included in federal income prior to the enactment of the Consolidated Appropriations Act, 2021 and related expenses may only be deducted in computing Iowa income to the same extent they would have been deductible prior to the enactment of the Consolidated Appropriations Act, 2021. These required nonconformity adjustments, if any, should be made on the taxpayer’s IA 101 Nonconformity Adjustments form, line 12, for tax year 2019.
Section 278(d) of Division N of the federal Consolidated Appropriations Act, 2021, enacted on December 27, 2020, provides in part that grants for shuttered venue operators made under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Title III of Division N of the federal Consolidated Appropriations Act, 2021) shall not be included in the recipient’s gross income, and no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of that income exclusion.
Application to Iowa: For any tax year beginning on or after January 1, 2020, Iowa is conformed with the income exclusion for these shuttered venue operator grants, and the other provisions of section 278(d) of Division N of the Consolidated Appropriations Act, 2021. In other words, for tax year 2020 and beyond, a taxpayer’s income tax treatment of subsidies received for shuttered venue operator grants provided under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and related expenses should be the same on their Iowa tax return as it is on their federal tax return.