October 27, 2021

Rhode Island PPP Loan Forgiveness Income Tax Assessments

By Paul Graney, Partner, Tax & Business Services

Rhode Island PPP Loan Forgiveness Income Tax Assessments Paycheck Protection Program

Under recently enacted legislation, Rhode Island will seek to tax retroactively, for the 2020 tax year, PPP loan forgiveness amounts that exceed $250,000.

The legislation requires that amounts of loan forgiveness in excess of $250,000 be reported as income for Rhode Island tax purposes. Affected taxpayers are required to make payment for any additional income tax due by March 31, 2022.

The Division of Revenue has created a new form, RI-PPP, that will be mailed automatically, with instructions, to taxpayers who have loan forgiveness amounts in excess of $250,000 reflected on their 2020 returns. The forms will be mailed on or about November 1, 2021, and will be due December 15, 2021. While payment may be delayed to March 31 without penalty or interest, taxpayers are advised to include payment with the completed and signed form returned to the Department of Revenue by December 15. Any payments not made by March 31, 2022, will be open to full application of penalties and interest.

There will be two versions of the form, one for entities and one for individuals. Only the entity forms will be mailed. Individuals will be required to file on their own if the pass-through entity does not pay on their behalf.

Entity forms will be mailed to both corporations and pass-through entities (PTE). Corporations will be able to complete the form and make payment to the Division to satisfy the statute. PTEs will have the option of paying the tax due on excess PPP loan forgiveness at the entity level and may do so by filing the RI-PPP and submitting full payment. If the PTE chooses to have the partners or shareholders of the entity make the payment themselves, it is required to complete and file Form RI-PPP and then provide a copy of the completed form to each owner. Each owner will then have to complete their own Form RI-PPP–Individual and file and pay the amount due to the Division of Revenue.

For questions regarding your PPP loan or whether this provision will affect your 2020 state tax filings in Rhode Island, please contact your Marcum State and Local tax advisor.