Montana received $1.25 billion in funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed March 27, 2020, to use for necessary expenditures related to the COVID-19 pandemic. Among other things, Montana created several business grant programs with this funding to aid Montana businesses with the costs and financial losses that occurred because of the pandemic.
Montana law states that Montana Adjusted Gross Income is derived from Federal Adjusted Gross Income. Unless expressly exempted by federal or Montana law, grant income to businesses is included in a business’s federal taxable gross income and, therefore, included in Montana taxable income. As of the printing of this article, the IRS has not exempted Montana business grant funds from gross income and reminds taxpayers and preparers to include these amounts on 2020 business income tax returns. It should be noted that while a grant recipient is required to include the grant in its gross income, it can deduct and/or capitalize the business expenses it paid for with these grant funds.
Grant recipients can expect to receive a Form 1099-G with the amount of grant funding it received by January 31, 2021.
For more information regarding reporting of grant income, see the IRS’s FAQs regarding CARES Act state-funded grant programs here: https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions.