According to data released by the Small Business Administration, the Am Law 200 Firms receiving PPP loans during 2020 aggregated $370 million, with the median loan being $8.2 million.
While the average of the amount of law Firms taking PPP money came to about 4.8% of the average firm annual revenue, some of the borrowing firms ended up with a loan amount that surpassed 7% of their annual revenue, according to ALM data.
It has been shown that almost 80 percent of small law firms, and almost half of larger firms, took advantage of the payroll protection program loan.This, combined with significant cost-cutting at the start of the pandemic, is resulting is very strong growth in profits at most firms.
While PPP income is tax free and expenses are deductible from a federal income tax perspective, it should be noted that the federal tax treatment of PPP income and expenses does not necessarily apply for state income tax purposes. It will be a challenge for many law firm controllers or their tax professionals to determine the proper state tax treatment on their state K-1’s or on the composite returns, leaving many to grapple with an evolving set of rules as tax season marches on. For more information on state income tax considerations related to PPP funds, please see our article here.
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