Firms that have cut federal paycheck protection program loans and Minnesotans who received additional weekly unemployment insurance benefits last year could see tax breaks based on a proposal pieced together in the legislation.
The Senate Tax Committee on Tuesday gave the go-ahead to an amendment to a compliance law that would allow taxpayers receiving an additional $ 600 weekly unemployment benefit to deduct a portion of that amount from their taxable income. The addition was a priority for Democratic lawmakers in the Capitol and could be a step forward in getting a compromise plan through the split legislature.
More than 100,000 companies received PPP loan funds last year and used the help to keep employees on their payroll despite the decline in business caused by COVID-19 and government efforts to contain the decline in business.
“We are at an unusual time, we need to get this bill going,” said Carla Nelson, Chair of the Senate Tax Committee, R-Rochester, who supports the implementation of an amendment that exempts some of the extra unemployment benefits. “We have 67 senators who I believe are focused on helping their constituents recover.”
Members of the panel said they are also considering pooling additional funds for programming summer schools with the bill, which they will hopefully pass earlier this month. Governor Tim Walz and Democratic leaders said funding is critical to rebuilding lost study time as students move into distance learning models.
The bill is now going to the entire Senate, but Nelson and bill author, Senator Tom Bakk, I-Cook, indicated that more changes may be on the way as Senate Majority Leader Paul Gazelka, R-East Gull Lake, and House Speaker Melissa Hortman, DFL-Brooklyn Park, are trying to negotiate a bill that could get it through the Republican-led Senate and DFL-controlled House of Representatives.
“I am confident that Leader Gazelka and Speaker Hortman can find an additional provision to this law that really makes it non-partisan,” said Bakk. “I really want to get this bill to the governor’s desk by March 15th, and unfortunately this committee cannot do this on its own.”
Some business owners have a March 15 filing deadline with no state intervention to keep state tax codes in line with federal ones. And lawmakers were under pressure to change policy in good time to avoid problems.
Paul Marquart, chairman of the House Tax Committee, DFL-Dilworth, put forward a compliance bill in January reflecting Bakk’s original bill and said Tuesday he was confident the move would lead to an agreement.
Marquart said he is recommending lawmakers find ways to provide targeted assistance to the hardest hit businesses, including those who took out the loans and reported net operating losses over the past year. And he urged them to exonerate Minnesotans receiving unemployment benefits.
“We have to take measures to comply with the PPP, but I also want to make sure that we help all businesses and the unemployed,” said Marquart. “I don’t want to leave any of the companies that are being hurt.”
Under the Senate’s amended bill, individuals could deduct up to $ 1,500 in additional unemployment benefits from their taxable income. And shared filers could have exempted up to $ 3,000. The waived taxes could cost the state between $ 30 million and $ 50 million, according to an analysis.
The greater tax compliance for companies that have received PPP loans translates into a cost of around $ 440 million in the next fiscal cycle. News of a projected budget surplus of $ 1.6 billion last week helped accelerate talks on the use of one-off funds.