Sec. 278. Clarification of tax treatment of certain loan forgiveness and other business financial assistance
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/bill/116/hr/133/eah/section-278A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
For purposes of the Internal Revenue Code of 1986— no amount shall be included in the gross income of a borrower by reason of forgiveness of indebtedness described in section 1109(d)(2)(D) of the CARES Act, no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and in the case of a borrower that is a partnership or S corporation— any amount excluded from income by reason of paragraph
(1)shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986, and except as provided by the Secretary of the Treasury (or the Secretary’s delegate), any increase in the adjusted basis of a partner’s interest in a partnership under section 705 of the Internal Revenue Code of 1986 with respect to any amount described in subparagraph
(A)shall equal the partner’s distributive share of deductions resulting from costs giving rise to forgiveness described in section 1109(d)(2)(D) of the CARES Act. For purposes of the Internal Revenue Code of 1986— any advance described in section 1110(e) of the CARES Act or any funding under section 331 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act shall not be included in the gross income of the person that receives such advance or funding, no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and in the case of a partnership or S corporation that receives such advance or funding— any amount excluded from income by reason of paragraph
(1)shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986, and the Secretary of the Treasury (or the Secretary’s delegate) shall prescribe rules for determining a partner’s distributive share of any amount described in subparagraph
(A)for purposes of section 705 of the Internal Revenue Code of 1986. For purposes of the Internal Revenue Code of 1986— any payment described in section 1112(c) of the CARES Act shall not be included in the gross income of the person on whose behalf such payment is made, no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and in the case of a partnership or S corporation on whose behalf of a payment described in section 1112(c) of the CARES Act is made— any amount excluded from income by reason of paragraph
(1)shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986, and except as provided by the Secretary of the Treasury (or the Secretary’s delegate), any increase in the adjusted basis of a partner’s interest in a partnership under section 705 of the Internal Revenue Code of 1986 with respect to any amount described in subparagraph
(A)shall equal the sum of the partner’s distributive share of deductions resulting from interest and fees described in section 1112(c) of the CARES Act and the partner’s share, as determined under section 752 of the Internal Revenue Code of 1986, of principal described in section 1112(c) of the CARES Act. For purposes of the Internal Revenue Code of 1986— any grant made under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act shall not be included in the gross income of the person that receives such grant, no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and in the case of a partnership or S corporation that receives such grant— any amount excluded from income by reason of paragraph
(1)shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986, and the Secretary of the Treasury (or the Secretary’s delegate) shall prescribe rules for determining a partner’s distributive share of any amount described in subparagraph
(A)for purposes of section 705 of the Internal Revenue Code of 1986. Except as otherwise provided in this subsection, subsections (a), (b), and
(c)shall apply to taxable years ending after the date of the enactment of the CARES Act. Subsection (d), and so much of subsection
(b)as relates to funding under section 331 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, shall apply to taxable years ending after the date of the enactment of this Act.