Does my business have to pay taxes on a grant?
Consequently, economic development grants received by all entities including corporations are now taxable income. This amendment generally applies to grants made after December 22, 2017, the date of enactment of the Act. Apr 24, 2019
🆘Change in the Law🆘
Prior to the Act, the law provided that economic development grants received by partnerships and LLCs were taxable for federal income-tax purposes, but grants received by corporations or REITs (which are generally treated as corporations) were not. This disparate treatment was more of a historical accident than a policy-driven decision. Because tax-return preparers were often unaware of this disparate treatment, it is likely that many economic development grants received by partnerships and LLCs in the past were not reported as taxable income.
Grant recipients should have their legal advisors review their grant application history to see if a case can be made for the grant to be grandfathered.
Keep in mind that even if the grant is grandfathered, it will be taxable unless the grantee is a corporation. Partnerships and LLCs expecting grandfathered grants need to consult their legal advisors regarding their structure to keep these grants from becoming taxable. More info: https://www.jdsupra.com/legalnews/economic-development-grants-good-news-69754/