PPP Loans/Grants received differing treatments on audited financial statements for years ended in 2020. How should those amounts be reported on Form 990?
Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii). They are required to file Form 990 annually.
TBC’s VP of Finance asked us about how to report their PPP loan on the Form 990. “We reported our PPP loan as a note payable on our audited financial statements at June 30, 2020. At the time, we were unsure whether we would seek loan forgiveness because taking advantage of other programs such as the Higher Education Emergency Relief Fund (HEERF), “Families First” provisions and the Employee Retention Credit might have proved more advantageous overall.
“So, we plan to report the PPP ‘Loan’ on the 2019 Form 990, Part X, Line 24 (for the year ended June 30, 2020). However, how will we report the amount of the PPP loan that has now been forgiven in the current fiscal year? Should that be reported as Miscellaneous income on the 2020 Form 990, Part VIII, Line 11?”
“Great question. The IRS – in the 2020 Form 990 instructions – has stated, ‘Amounts of PPP loans that are forgiven may be reported on line 1e as contributions from a governmental unit in the tax year that the amounts are forgiven.’ That makes it easy for institutions that reported their PPP as a note payable – as TBC did.
“For institutions that reported their PPP loan/grant as a ‘conditional contribution’ on their 2020 audited financial statements and received PPP forgiveness in the subsequent year, the 2020 Form 990 instructions could lead to a ‘book/tax’ reporting difference. IRS EO leadership has not directly addressed this issue (yet), but in their comments appear to be averse to this form of Form 990 reporting. More to follow.”
From 2020 Form 990 Instructions, Part VII, Line 1e, “TIP”:
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) established the Paycheck Protection Program (PPP) to provide loans to small businesses as a direct incentive to keep their workers on the payroll. The loans are forgiven if all employee retention criteria are met and the funds are used for eligible expenses. Amounts of PPP loans that are forgiven may be reported on line 1e as contributions from a governmental unit in the tax year that the amounts are forgiven.
- The Paycheck Protection Program (PPP) provided great financial assistance for many institutions in 2020.
- Institutions reported PPP loans/grants in different ways on their 2020 audited financial statements – notes payable, conditional contributions, etc.
- Form 990 reporting for PPP loans/grants could produce a “book/tax” difference – but this does not appear to be what the IRS is thinking.
- PPP2 loan/grant reporting – for years ended in 2021 – should follow PPP1 Form 990 reporting for institutions – pending further IRS guidance.
The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.
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