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Do I need to include my PPP loan or HHS Provider Relief funds when calculating OH CAT?

Question: Do I need to include my Payroll Protection Program (“PPP”) loan or HHS Provider Relief funds when calculating Ohio Commercial Activity Tax (CAT)?

Answer from Jennifer Bryant, Healthcare and Accounting Services Team:

Many Ohio businesses received funding from both the Payroll Protection Program and the HHS Provider Relief Funds that were part of the CARES Act, the sweeping legislation designed to infuse the American economy with much needed liquidity. As these businesses file their Commercial Activity Tax (CAT) returns, it is important to understand how the State of Ohio is treating the receipt of these funds.

Ohio specifically addresses the HHS Provider Relief funds, stating that these funds are not excluded from a taxpayer’s gross receipts for purposes of the CAT. But, there is an exception. If the healthcare provider is a nonprofit organization (as that term is defined in Ohio Administrative Code 5703-29-10), that nonprofit organization is excluded, and therefore not subject to CAT.

In regard to the PPP funds, the Ohio General Assembly modified the definition of “gross receipts” to specifically exclude all forgiven PPP loans from Ohio CAT. Those forgiven PPP loans have been excluded from federal gross income under §1106(i) of the CARES Act. In other words, forgiven PPP loan principal will be excluded from the tax base for federal income tax purposes and Ohio Commercial Activity Tax. 

Should your organization have any questions regarding this issue, please reach out to your GJM advisory team for help.

(Jennifer picture)

Jennifer Bryant is a supervisor in the firm’s healthcare department. She came on board with Gilmore Jasion Mahler in January of 2002. A member of the firm’s Healthcare and Accounting Services Team, she works closely with clients to ensure that their healthcare practices run smoothly, handling monthly financials and often fielding questions and offering guidance on a variety of client issues. Jennifer’s areas of expertise include ambulatory surgery centers, physician practices and dental practices.    

A graduate of Davis College, Jennifer is a member of the Ohio Society of Certified Public Accountants (OSCPA).

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.  

PPP Loan Forgiveness: Waiting for Answers

PPP Loan forgivenessJust over a week ago, the Internal Revenue Service (IRS) released an opinion on the deductibility of expenses relating to the forgiveness of Paycheck Protection Program (PPP) loans (IRS Notice 2020-32).  When Congress passed the CARES Act in March establishing the PPP, the legislation stated that any portion of the loans that were forgiven would be non-taxable income for taxpayers.

Many of us speculated that the IRS would follow their statutes and rule that though the forgiven income is non-taxable, the payroll, health and retirement benefits, rent, utilities and interest expense that qualify for the loan forgiveness would be deemed non-deductible. Indeed, this is exactly how the IRS ruled in the notice, stating that, as the expenses would relate to non-taxable income, they would in turn not be deductible.

Along with many taxpayers, several legislators in Congress are very upset about the ruling and feel that it is not in line with their legislative intent. They would like Treasury Secretary Steven Mnuchin to reverse the IRS position. In the alternative, the legislators plan to introduce legislation to mandate these expenses be allowed as tax deductible, as their intent was to make this program very generous. This would also be consistent with the tax treatment of an alternative option in the same law, the employee retention credit.

We will wait and see in the coming months how this plays out. In the meantime, it is expected that within the next week or so, we should be receiving some much-needed guidance from the Small Business Administration (SBA) on numerous PPP loan forgiveness questions. Among them are the following.

  1. Will costs such as payroll only be allowed if paid during the 8-week period after loan funding or will we be able to include payroll paid after the 8-week period that relates to work done during the 8 weeks?
  2. For loans funded after May 6th, will taxpayers be able to extend their 8 weeks beyond June 30th?
  3. Will any restrictions be made on self-rental properties?
  4. How are FTE’s (full time equivalent employees) being calculated?
  5. What exactly does it mean to have your workforce restored by June 30th if they were not restored during the 8-week period in order to get loan forgiveness? How long do they need to stay on the payroll?
  6. Are there any restrictions on hiring and paying family during the 8-week period?
  7. Is interest on non-mortgage debt allowed?
  8. What retirement benefits will be allowed? Do they need to be paid during the 8-week period in order to be forgiven? Will payment of an accrued liability from the prior year qualify for loan forgiveness?

These are just a few of several questions that have been asked with no clear guidance on PPP loan forgiveness. Hopefully, we will have that soon. We continue to recommend that PPP borrowers make a good faith effort in determining cost eligible for forgiveness. 

As new information comes forth, its critical that you work closely with your trusted advisors so you’re able to make the best decisions to position your business to emerge from the pandemic in as healthy a position as possible.

Kevin GilmoreGilmore Jasion Mahler Managing Partner Kevin Gilmore provided this blog. For more information on the impact of the pandemic on your business, we encourage you to visit the GJM COVID-19 Resource Center.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Welcome Back to GJM, Lauren

Lauren Webber Gilmore Jasion MahlerA familiar face has returned to Gilmore Jasion Mahler. Lauren Webber is back on board as a Tax Supervisor and member of GJM's Construction Specialist Team and Manufacturing Specialist Team. Enjoy this Q&A. Welcome back, Lauren!

When did you start employment at GJM? 10/28/19 – formerly employed 2015-2017

Why did you choose the accounting industry? I like working with people and numbers.

What do you like best about accounting? Helping people solve problems/reach goals.

Are you from the Toledo area originally? If not, where are you from? I am from Toledo.

What do you like about living in Northwest Ohio? I love the greater Toledo area!  It’s a community-minded and engaging place to be.

Anything you’d like to share about your past professional experience? I am proud to have been the Owens Corning Volunteer of the Year in 2018.

Do you have any pets, hobbies, family? I have way too many pets- cats, dogs, fish, reptiles, small mammals, you name it.

How do you like to spend your free time? With pets/family/friends.  I also enjoy running, painting, reading, playing piano.

Favorite song or music? That’s too hard to pick!

Favorite book or movie? Book- A Prayer for Owen Meany by John Irving | Movie- Donnie Darko

Are you involved in any community organizations, do any volunteer work? I am the treasurer for Paws & Whiskers Cat Shelter and for Toledo Streets Newspaper.

What is something people may be surprised to find out about you? I hope to have farm animals one day.   

Sweeping Changes to Retirement Planning

Required Minimum Distributions Change 2020Sweeping change is coming to the way you plan for your retirement. Congress passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act as part of a huge government spending deal at the end of 2019. Gilmore Jasion Mahler is already getting questions from clients wondering how they’re affected by the changes.  

While the SECURE Act includes a number of changes that will impact retirement planning, the change with perhaps the most immediate impact involves the age at which individuals need to start taking required minimum distributions (RMDs) from their retirement accounts. As of the year 2020, that age has been changed to 72 years old from the former age of 70-and-a-half years old. Here’s an important note: If you were 70-and-a-half at the end of 2019, you are not impacted by the law change, and will still need to start taking your RMDs at 70-and-a-half years old.

The SECURE Act brings other retirement planning changes as well, including:

  • Increasing restrictions on how non-spouse beneficiaries stretch out RMDs from a loved one’s retirement account
  • Allowing people who work past the age of 70-and-a-half to contribute to an IRA (with some restrictions)

What should you do?

The SECURE Act could change how you plan for your retirement in a number of ways. It is important that you consult with your GJM tax advisor to understand the impact as it relates to your personal situation. You can learn more about GJM's tax experts and our team capabilities here.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.  

GJM’s Mary Jo Pitzen Promoted to Partner

Gilmore Jasion Mahler’s (GJM’s) Mary Jo Pitzen, CPA has been promoted to partner with the firm. Mary Jo has been with GJM for over 12 years. She is a member of the firm’s Construction Specialist Team. Mary Jo provides tax planning, compliance and business advisory services for individuals and all types of businesses in a variety of industries, including manufacturing, construction, healthcare, and professional services.

“This is a very well-earned promotion. Mary Jo provides great client service and has done an excellent job in helping to continue growth in our construction practice,” says GJM Managing Partner Kevin Gilmore.

Mary Jo is a member of the Construction Financial Management Association (CFMA) Northwest Ohio chapter. She is also a member of the local chapter of the National Association of Women in Construction (NAWIC), holding a board position with the organization for the last four years.

A graduate of The University of Toledo, Mary Jo joined GJM upon graduation and has been with the firm ever since.

“I love who I work with, both within the firm and the clients we serve. We have a great group of people at all levels who work well together, share and encourage each other to grow. I love our team-oriented atmosphere.”

Mary Jo is also a graduate of Leadership Toledo and will soon be a graduate of the Partner Development Program (PDP) through the RSM US Alliance. The program offers training to improve leadership skills.

“My biggest take away from PDP is a better understanding of who I am. It will make me a better coach for young people coming up in the firm and allow me to better serve my clients as well.”

Mary Jo lives in Waterville with her husband and 6-year-old son.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. GJM’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.