SALT Alert: Texas Margin Tax Update Paycheck Protection Program (PPP) Loans

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On May 5, 2021, the Texas Governor signed into law House Bill 1195, which excludes federal PPP loans forgiveness as revenue for Texas Margin Tax (the “Margin Tax”).

In response to the COVID-19 pandemic, the U.S. Congress enacted legislation providing economic relief to businesses through the paycheck protection program , which allowed businesses to secure forgivable loans and grants in order to continue paying employees while operations were impacted due to the pandemic. While PPP loans may be forgiven under the program, the business receiving the PPP loans or grants would still be taxed on the amount of money received as part of its total revenue subject to the Margin Tax.

House Bill 1195 seeks to ensure that businesses that sought federal aid to stay afloat during the pandemic and continue to pay their employees are not subjected to a tax penalty for that effort by providing for the exclusion of qualifying PPP loans and grants from the calculation of total revenue for Margin Tax purpose.

House Bill 1195 also allows a taxable entity to include expenses paid using qualifying loan or grant proceeds in the entity’s determination of cost of goods sold or determination of compensation if such expenses were allowable under the law.

House Bill 1195 is effective for Margin Tax reports that are due after January 1, 2021.


State and Local Tax Services 

Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues. 

At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3000 to discuss your Texas Margin Tax concerns and questions.