Drake Tax - NC - PPP Loan Forgiveness

Previous NC guidance required PPP loan forgiveness to be added back for the purposes of calculating NC taxable income for individual and corporate taxpayers. Session Law 2021-180 altered this guidance. Taxpayers are no longer required to make an addback to NC income for PPP loan related expenses until tax year 2023. Previously filed individual and corporate returns that included such additions must be amended to take advantage of this retroactive change.

Per the NC Notice:

"Importantly, the 2021 General Assembly retroactively amended G.S. 105-130.5(a)(32) and G.S. 105-153.5(c2)(20), delaying the State’s decoupling adjustment. As amended, a taxpayer is not required to add to federal income the amount of otherwise deductible expenses paid with forgiven PPP loan proceeds until tax years beginning on or after January 1, 2023. Because the General Assembly chose to suspend the State-level PPP addback until 2023, North Carolina conforms to the federal treatment of expenses paid by PPP loans for tax year 2020.

Taxpayers who have already filed a NC Tax Return for tax year 2020 that included a State addition for otherwise deductible expenses paid with forgiven PPP loan proceeds should file a State amended return removing this addition. The Department will not automatically adjust a taxpayer’s NC Tax Return, nor will the Department automatically refund any overpayment resulting from the delayed PPP decoupling adjustment."