Today, the Minnesota Senate passed a critical PPP tax conformity bill that will provide substantial relief to small businesses by ensuring they are not penalized for keeping their employees on payroll through the COVID-19 pandemic. Last year, the federal government passed the Paycheck Protection Program (PPP) to be an emergency measure to help small businesses keep their employees on payroll. Unfortunately, struggling business owners are now facing large state tax bills on these loans. Senator Julia Coleman (R-Chanhassen) voted for the bill and released the following statement:
“PPP loans have proven critical to keeping our small businesses alive during the pandemic,” said Senator Coleman. “We cannot take our small businesses for granted. Many businesses have already closed and will never recover. Let’s deliver this lifesaving relief so we can get our economy back moving again.”
Last year the federal CARES Act established the PPP program for small businesses experiencing hardship and revenue losses resulting from the COVID-19 pandemic. Under the program, loans would be forgiven if they were utilized to fund qualified costs and 60% of the loan proceeds were used for payroll costs. The federal government made it clear that forgiven PPP loans were not considered taxable income at the federal level, but they are at the state level according to Minnesota Law.
This bill will bring Minnesota into federal tax conformity so that these forgivable loans are not subject to state taxes. Additionally, the bill will give some small businesses greater flexibility to file as C-corporations which will help reduce their tax burden. If the bill is not signed into law, Minnesota small businesses will be forced to pay millions on PPP loans that were meant to keep businesses alive. Without action, many of these struggling small businesses will have sizable state tax bills due on March 15th. Twenty-five other states, led by Governors of both parties, have already acted on PPP tax conformity.
In addition to small business PPP tax relief, the legislation will provide tax relief for struggling Minnesotans who received expanded federal unemployment benefits. This added relief will be good news to the thousands of Minnesotans left unemployed during the pandemic through no fault of their own.
“The expanded unemployment benefits have been a lifesaver for so many here in Carver County,” said Coleman. “Many of our friends, family, and neighbors have been left unemployed through no fault of their own. I am glad to be able to work with my Senate colleagues to deliver this critical tax relief. I urge the House and the Governor to follow the Senate’s lead and move quickly to make this needed relief a priority.”